Structural Unemployment

By: EconomyWatch   Date: 13 October 2010

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Structural unemployment takes place in response to a structural change in an industry. An industry can shift from a labor-intensive technology to a capital intensive one.

This may release the surplus labor and generate structural unemployment. Structural unemployment may also be due to a change in the tastes and preferences of the consumers. Certain goods or services may not be in demand due to technological advancements that might have taken place. Structural unemployment is most commonly seen in the shipbuilding and mining industry of UK.

The extent to which structural unemployment takes place is influenced by a lot of factors some of which are explained below:
Speed of change in the Economy

If the change in the tastes and preferences of individuals take place fast, the industries have to change faster to match up to the demand. This will further lead to an increase in the structural unemployment of the economy.


Labor mobility

In the presence of perfect information and mobility of labor, people out of job can easily find in an industry, which is in need of labor. This way, structural unemployment may be reduced.

Structure of the regional economy

If certain industries are closing down then it may so happen that industries may get concentrated in a certain part of the nation. This may make employment difficult and increase the resulting structural unemployment.

High Gross Domestic Product, it is seen, is not indicative of a low structural unemployment.

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