Definition and Reasons of Structural Unemployment

Structural unemployment is one principal form of unemployment in which a mismatch between availability of jobs and the skills and locations of workers occurs.

A clear example of this form of unemployment is when a highly urbanized area has more job openings for positions that cannot be addressed by local workers due to lack of skills or training. Let us say that a city’s tourism office has decided to make use of agricultural land by converting it into a recreation center and the local people around the area has been used to raising animals or planting crops, generally managing a farm. No matter how many job openings the new business will provide to the local people, their skills will never be fit to the demands of the employers. While these local people won’t fit to do the jobs the new business will create, employers will then need to hire employees from another place. Where there are discrepancies in the abilities of accessible workers and the prerequisites of available jobs, structural unemployment is in place.

The economy will always be in dynamic conditions. Throughout history we have experienced several conditions where shifts and changes in business also create changes in the way people will have to support themselves to make a living. One example of this scenario is rapid changes in technology. Once an organization decides to keep fewer people who can manage to operate machineries and equipment for mass productions instead of keeping plenty of workers to do manual work, structural unemployment occurs.

Another reason for structural unemployment is the changing of seasons. Construction and farming for example will only take place in the summer, and so employees from both sectors may have an absence of jobs during the winter for which structural unemployment in taking place.

Geographical mismatch is also a reason for structural unemployment. When an employee is needed to transfer to another state or country where his skills can be put to good use, specific reasons may force him to turn down the job offer. It can be financial costs associated with moving or the objection to leave family behind.