What characterizes structural unemployment?

Structural unemployment is characterized by a mismatch between the skills that workers possess and the skills that are in demand in the labor market. This type of unemployment often results from broader economic changes such as industrial reorganization, shifts in consumer preferences, and advancements in technology. For example, if a new technology is introduced that renders certain jobs obsolete, workers who have the skills for those obsolete jobs may remain unemployed until they can retrain for different roles that are in demand.

This differs from other forms of unemployment. Unlike cyclical unemployment, which typically arises during economic downturns or recessions, structural unemployment persists even when the economy is doing well, as it stems from fundamental shifts in the marketplace rather than short-term economic conditions. It is also distinct from frictional unemployment, which is related to individuals’ choices as they transition between jobs or careers. Additionally, structural unemployment can be longer-lasting and more widespread than temporary unemployment, making it more challenging for affected workers to find employment without acquiring new skills or re-entering educational programs.