What is ‘structural unemployment’?

‘Structural unemployment’ is the term economists use to describe unemployment that happens because of a mismatch between the skills workers have, and the jobs that are actually available. Structural unemployment usually happens because of technological change.

When new technologies are introduced, some jobs and skills can be replaced by machines, a process known as automation. Ticket machines in train stations reduce the need for ticket officers, the internet reduces the need for travel agents, online shopping reduces the need for retail staff… the list goes on and on! People can also become structurally unemployed when new technologies kill off the demand for older technologies. For example, people who made and sold typewriters didn’t lose their jobs to automation, they lost their jobs to people who made and sold a more efficient form of typewriter – i.e. computers.

Structural unemployment can be a big problem for the stability of an economy. Moving workers from old jobs to new jobs is often a messy, long and costly business, in both economic and social terms. Large parts of the population might need to be completely retrained and re-skilled to match new technologies. And even with training programs some people typically end up unemployed for long periods of time.

Structural unemployment also tends to hurt some regions more than others. As automation (and international competition) in manufacturing has killed jobs in places like the American Midwest or the North of England, many of the jobs that replaced them were in booming economies in places like California, Texas or London. This has forced people to move to find new opportunities, disrupting communities and costing an awful lot of money.

But when you look at the really long run, economies traditionally seem to recover from waves of structural unemployment. Huge technological changes have been going on since the Industrial Revolution, but the overall unemployment rate hasn’t increased dramatically since machines started stealing jobs in the 1700s. With time, new jobs —often jobs created by the technology causing the structural unemployment—spring up to replace the old.

Some economists even argue that bouts of structural unemployment could make the economy stronger in the long term. If new technology is causing the unemployment, then the news jobs created by that technology should be more efficient and productive than the old ones. But even here there’s room for debate: more efficiency just means we can produce more stuff, and not everyone agrees that’s what we should be trying to do as a society.