Structural Unemployment

Structural Unemployment

1. Causes

   • 1. ⃤ In demand for skills
     • b. ⃤ in CA
       • Low-cost competitors emerge
         • Countries lose CA & focus on developing other sectors
           • Sectors previously with CA declines, wkrs retrenched
             • Struc UE occurs due to mismatch between worker's skills & needs of economy
         • e.g. China & India with relative abundance of low-skilled labour
     • a. Tech Innovation
       • Automation
         • Substitutes low-skilled workers
           • e.g. Self-Ordering Machines
         • Creates Dd for skills req. to operate & maintain these machines
           • But many lack these skills
     • c. . ⃤ In csr T&P affecting Dd for g&s
       • e.g. Increased popularity of online shopping for groceries
         • ↓ DD for cashiers, ↑ DD for management skills online
   • 2. Mismatch betw location of indy & workers
     • Geog immobility
       • High costs of relocation
         • Family ties, long transport duration , housing costs, etc.
           • e.g. In UK, unemployment rate in South Wales is high despite available job vacancies in London
   • 3. Labour mkt rigidities
     • e.g. Laws restricting hiring & firing , Min wage
       • Surplus = UE

2. Worst type of UE ?

   • Can lead to LT UE as difficult to solve
     • Workers may lose morale & exit lab. mkt
       • ↓ Qty of labour , ↓ LRAS ↓ Potential Growth
     • Heightens negative emotions e.g. anxiety , stress
       • May lead to ↑crime rate
         • Non MSOL ↓
     • Long gestation period, strains gov budget, workers unreceptive, etc..

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