What is structural unemployment and how does it differ from other types of unemployment?
Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills workers offer and the skills employers demand. Unlike cyclical unemployment, which rises and falls with overall economic demand, structural unemployment persists even when the economy is growing. Unlike frictional unemployment, it tends to last significantly longer and does not resolve easily through demand-side economic stimulus.
What causes structural unemployment?
Structural unemployment is most commonly caused by technological change that makes specific job skills obsolete, as well as by geographic shifts in industry driven by competition, globalization, and free trade agreements. It can also result from productivity increases that reduce the number of workers needed, political changes such as the collapse of the Soviet Union, and discrimination based on factors including race, disability, or sexual orientation.
How many U.S. jobs are at risk of automation according to structural unemployment research?
A 2013 study by Carl Benedikt Frey and Michael Osborne found that almost half of all U.S. jobs are at risk of automation. The study is frequently cited in discussions of structural unemployment driven by technological change.
What role did structural unemployment play in unemployment rates after the 2008 financial crisis?
Narayana Kocherlakota, then president of the Federal Reserve Bank of Minneapolis, said in a 2010 speech that as much as 3 percent of the 9.5 percent unemployment rate at the time could be the result of a skills mismatch. Other economists disputed this, arguing that unemployment rose across nearly all industries and demographic groups during the Great Recession, which was more consistent with cyclical than structural causes.
What is hysteresis in the context of structural unemployment?
Hysteresis, also described as path dependence, refers to the way that prolonged cyclical unemployment can cause structural unemployment to worsen over time. When workers remain jobless for extended periods, their skills and job-searching abilities become rusty, making them harder to place when the economy recovers. Sustained high demand may lower structural unemployment by keeping workers attached to the labor market before their skills deteriorate.
What does Peter Cappelli say about structural unemployment and business hiring practices?
Management professor Peter Cappelli argues that poor human resource practices contribute to the apparent shortage of qualified applicants. He points to companies replacing skilled HR workers with software that cannot match resumes exhibiting the right skills when the wording doesn't align word-for-word with a job posting. Cappelli also cites a decline in apprenticeships and internal promotion, as companies increasingly seek to hire people with existing experience rather than investing in on-the-job training.