Definition
The term structural unemployment refers to an underlying shift in the availability of jobs that make it difficult for some workers to find employment. Structural unemployment can result from a shift in the economy or a mismatch between the job requirements of employers and the experience of workers.
Explanation
Structural unemployment is similar in concept to frictional unemployment; however, structural unemployment is thought to be more permanent. It can occur for a number of reasons, including economic conditions that cause a long term shift in the supply of jobs at a given level of wages. For example, competitive pressure can lead companies to lower the rate of pay offered to employees. While the industry may still be willing to hire new employees, out-of-work individuals are unwilling to accept the lower wages.
Structural unemployment can also result from technological advances. For example, the adoption of online banking and email has reduced the need to send mail through the United States Postal Service. This structural change in the way consumers conduct business will result in a permanent decrease in the need for postal workers and mail sorting. The agricultural industry saw a similar decline in the need for workers, as automation replaced what were traditionally task performed by hand.
The decrease in manufacturing jobs in the United States is another example of structural unemployment. As these jobs moved to countries with lower wages, the demand for the skills these workers possessed permanently declined.
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