The Disadvantages of Structural Unemployment

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Structural unemployment is unemployment caused by a mismatch between the amount of jobs available to workers and the number of workers with the skills necessary to perform these jobs. This differs from transitional unemployment, in which workers temporarily leave the workforce to move to another job, and cyclical unemployment, in which people are periodically placed out of jobs due to changes in the business cycle. Structural unemployment carries a number of disadvantages.

Inefficiency

  • Perhaps the main downside of structural unemployment is its inefficiency. When a large percentage of the workforce is unable to work, this means that a large amount of labor that could be used to produce goods and services is going unused. More efficient economies are able to make maximum use of their workforce, aligning the needs of employers with employees. This can be ameliorated in part by retraining workers.

Support Costs

  • Another downside to structural unemployment is the amount of money that a country must spend to support workers while they are out of a job. While some countries will spend nothing to help people who are unemployed, others will spend money on benefits to aid them financially, such as unemployment benefits. And, as people sees their incomes lowered, more make use of programs designed to offer financial support for low-income people, costing the countries more money.

Instability

  • In addition, structural unemployment increases a country's instability. While a low level of structural unemployment is generally considered a necessary product of most modern economies, a high level can cause unrest. Workers want to be employed and earning money, and being unable to may cause them to push for a change in government or, in extreme cases, violence.

Crime

  • In many economies, high rates of structural unemployment can lead to increased levels of crime. Unemployed people may be driven to crime for various reasons. For example, a person who sees his income cut drastically may resort to theft as a means of meeting his living expenses. Crime also increases the instability of a society and diverts production away from goods and services towards spending on security.

References

  • "Economics"; Roger A. Arnold; 2009
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