Structural unemployment

• 1. Introduction

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  Structural unemployment is the kind of joblessness that doesn't go away on its own, even when the broader economy is humming. It isn't caused by a slow economy or a bad quarter. It is caused by a mismatch: workers who have skills that no one needs anymore, and employers who need skills that workers simply don't have.

  Think about what happened to manual typesetters when printing went digital. Those jobs did not slow down. They did not shift to a new city. They vanished. The people who held them were left with expertise that the market no longer valued. That is the essential mechanism of structural unemployment.

  This documentary examines how structural unemployment differs from other kinds of joblessness, why it is so stubbornly hard to fix, and what it does to individuals, to communities, and to entire economies. It also looks at the debates economists have had over how large a role it plays in persistent high unemployment, and at what thinkers like management professor Peter Cappelli say businesses themselves are doing wrong.

• 2. A Different Kind of Jobless

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  Economists distinguish three categories of unemployment. Frictional unemployment describes the normal churn of people between jobs. Cyclical unemployment rises and falls with the overall economy. Structural unemployment is the third type, and it operates by a different logic entirely.

  Cyclical unemployment responds to demand-side remedies. When consumer spending falls, governments can stimulate the economy to bring workers back. Structural unemployment does not respond to those same tools. A worker whose skills have become obsolete is not helped by a stimulus check. They need retraining, or relocation, or both.

  Because the fix requires migration or retraining, structural unemployment tends to last a long time. It is slow and expensive to resolve, for both the individual and for public institutions. When one large employer shuts down and was the only major employer in a given city, the local school systems and government agencies face a wave of people all needing retraining at once, often at exactly the moment when the local economy is producing fewer new jobs.

• 3. Why Skills Go Obsolete

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  Technological change is the most commonly cited driver of structural unemployment. New technology can make specific expertise worthless almost overnight. Manual typesetters are one example the source points to; the mechanization of agriculture is another. When farm work became mechanized, fewer workers were needed overall, and the ones who remained had to learn to operate equipment they had never trained for.

  Industrial robots offer a third example. Automation in manufacturing has displaced workers whose skills were tied to tasks that machines can now perform. A 2013 study by Carl Benedikt Frey and Michael Osborne found that almost half of all U.S. jobs are at risk of automation. That figure was not a prediction about some distant future. It was a measurement of the vulnerability that already existed.

  Technology also reshapes employment from within industries, not only across them. As digitization changes how work is done inside a given field, middle-skill positions, jobs that traditionally did not require a college degree, can be hollowed out. Workers who held those roles find that their experience no longer translates to what employers want.

• 4. Geography and Competition

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  Competition shifts jobs across geography in ways that leave workers stranded. Manufacturing jobs in the United States moved from the cities now called the Rust Belt to lower-cost cities in the South and rural areas. Workers in those Rust Belt cities could not always follow, for financial reasons, for family reasons, or because housing markets had collapsed and they could not sell their homes.

  Globalization extended that same dynamic across national borders. High-wage countries lost manufacturing jobs to low-wage countries as companies sought cheaper labor. Free trade agreements accelerated those moves when comparative advantage shifted. Political upheaval has also played a role: the collapse of the Soviet Union reshaped entire labor markets.

  The dot-com bubble illustrates how demand spikes can create structural problems in reverse. There was a sudden surge in demand for information technology workers during the late 1990s. When the bubble burst in 2000-2001, demand collapsed just as suddenly. Workers who had retrained into that field or who had built careers on that demand found themselves overexposed.

• 5. Personal Barriers to Recovery

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  From the perspective of the individual worker, structural unemployment is a set of concrete obstacles. Some workers cannot afford further education or job training. Others chose fields of study that did not build marketable skills, and now face a labor market that has no use for what they know.

  Relocation is a major barrier. The cost of moving is a genuine obstacle for many households. Housing markets compound the problem. When a real estate bubble collapses, or when the local economy has deteriorated, workers may own homes they cannot sell. They are, effectively, locked in place.

  Family ties also keep workers from moving. A spouse's job, children's schools, aging parents, or close community networks can all outweigh the economic logic of relocation. Beyond these practical barriers, the source notes that discrimination plays a role too, including ableism and factors tied to race or sexual orientation. Skills and geography are not the only reasons employers reject workers.

• 6. Hysteresis and Debt

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  Persistent cyclical unemployment can make structural unemployment worse over time. When an economy suffers prolonged low demand, workers who are out of work for extended periods begin to lose more than income. Their skills become rusty. Their job-searching skills deteriorate. Employers grow skeptical of long gaps in employment history.

  Economists have a name for this feedback loop: hysteresis, also described as an example of path dependence. The term captures the idea that the past state of an economy can leave a lasting imprint on the present one. Workers who should theoretically be employable when demand recovers may find they no longer fit the vacancies available.

  Debt makes the trap tighter. Problems with debt can lead to homelessness, and homelessness pulls people into what the source describes as a vicious circle of poverty. The implication, as the source notes, is that sustained high demand may actually lower structural unemployment over time, by keeping workers connected to the labor market before their skills and circumstances deteriorate too far.

• 7. The Debate After 2008

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  The global recession of 2007-2009 provoked significant debate about how much structural unemployment was driving the persistently high jobless rates that followed. Narayana Kocherlakota, who was then president of the Federal Reserve Bank of Minneapolis, argued in a 2010 speech that as much as 3 percent of the 9.5 percent unemployment rate at the time could be traced to a skills mismatch.

  Other economists pushed back. They pointed out that unemployment rose for nearly all industries and demographic groups during what became known as the Great Recession. A broad-based rise like that looked more like cyclical unemployment than structural mismatch. A Federal Reserve Bank of New York study found no strong evidence of skills mismatch among construction workers, a group that was frequently cited as structurally vulnerable because construction work is regional by nature.

  The minimum wage drew its own debate within this broader argument. Some economists argued it contributes to structural unemployment by setting a floor above what some workers can produce in a given job. Others countered that the state carries a responsibility to support citizens in those cases, and noted that structural unemployment exists even in economies with no minimum wage.

• 8. What Businesses Get Wrong

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  Management professor Peter Cappelli has argued that many complaints about too few qualified applicants trace back to poor human resource practices rather than a genuine shortage of skilled workers. He points specifically to the replacement of skilled HR staff with software. That software, Cappelli contends, is less capable of identifying candidates whose resumes show the right combination of skills when the wording doesn't match a job posting exactly.

  Cappelli also flags the decline of apprenticeships and internal hiring as contributing factors. Companies have pulled back from training employees on the job and from promoting from within. The preference has shifted toward hiring people who already have experience doing the same job, ideally at a competitor, in order to avoid the time and cost of training.

  When a match eventually does get made through external hiring, the source notes, this may actually turn out to be frictional unemployment rather than structural unemployment: a mismatch that resolves itself given enough time and the right employer. The line between the two categories is not always clean, which is one reason economists find structural unemployment difficult to measure with precision.