Structural unemployment: Causes, examples and more

Structural unemployment is a type of unemployment created by a mismatch between the available jobs and the skills or interests of the unemployed workforce. It’s typically caused by external forces that are separate from normal, more predictable shifts in the economy. 

Learn more about what causes structural unemployment, how it differs from other kinds of unemployment and a few ways to navigate job market changes.

Key takeaways

• Structural unemployment is a long-lasting type of unemployment. It’s the result of a misalignment between the skills or interests of the unemployed workforce and what kinds of jobs are available to them. 
• Some of the main causes of structural unemployment are technological advances, lack of training, globalization, consumer demand and preferences, and policy changes.
• There are other kinds of unemployment—like frictional, cyclical and seasonal unemployment—that have different causes and impacts than structural unemployment. 

Structural unemployment happens when external forces dramatically alter the job market. These shifts are usually caused by external forces like technological advances, government policy and globalization. 

These changes create a mismatch between the available jobs and the available workforce. That might mean that the workforce doesn’t have the skills needed to work in the industries that are hiring. Or the people looking for jobs simply aren’t interested in the open jobs. 

It can also mean that an entire industry—like manufacturing, for example—moved to another location, leaving behind a workforce with specific skills that don’t align with any available jobs in their area.

How structural unemployment works

Structural unemployment doesn’t necessarily mean there’s a lack of jobs across the board. Instead, the unemployed workforce simply doesn’t have the skills required for the available jobs. And that leads to increased unemployment levels. 

Another thing that sets structural unemployment apart is that it’s typically a long-lasting type of unemployment that can go on for decades. And it may last long after an economic downturn—like a recession—ends, too.

One example of an industry connected to structural unemployment is manufacturing. In recent decades, many manufacturing companies moved out of the U.S. That meant that workers in the U.S. who specialize in manufacturing had fewer and fewer jobs available to them. 

People whose skill sets were specifically tailored to manufacturing couldn’t necessarily switch industries overnight. And that meant that structural unemployment in the manufacturing industry increased past the point of normal economic changes.

Here are a few other examples of structural unemployment:

• Newspaper printers being replaced by web-based publications
• Local farming businesses being unable to keep up with global pricing for their goods
• Retail and grocery stores replacing cashiers with self checkout 

Structural unemployment results from external factors outside of the normal business cycle. Here are some potential causes of structural unemployment:

• Technological advances: New technology—like artificial intelligence and automation—can cause some jobs to require new skills or become obsolete. 
• Lack of training: Workers may want to expand their skill set to keep up with technological advances in their industry. Or they may want to learn new skills so they can change industries. But when training programs are unavailable, inaccessible or inadequate, it may prevent workers from successfully navigating job market changes.
• Competition and globalization: The cost of doing business varies by location. For example, different countries have different regulations about minimum wage. And that can incentivize some companies and industries to move to places where they can operate at a lower cost—which can leave behind a workforce without any available jobs in their field. 
• Consumer demand and preferences: What people want to buy—and the way they want to shop—shifts over time. And that can play a part in structural unemployment. If customers are shopping online more than in physical stores, for example, it might reduce the need for retail workers.
• Policy changes: Things like trade agreements can contribute to structural unemployment. If a trade agreement makes it more financially viable for an industry to change its geographic location, that can lead to structural unemployment.

Structural unemployment is just one type of unemployment. There are many others, including frictional unemployment, cyclical unemployment and seasonal unemployment. 

Here’s how they differ from structural unemployment:

Structural unemployment vs. frictional unemployment

Frictional unemployment happens when workers voluntarily decide to leave their jobs to do things like go back to school, change industries or switch to part-time work. 

On the other hand, workers dealing with structural unemployment have not chosen to leave their jobs. Instead, larger changes have forced them out of their jobs and may have even wiped out their entire industry in their area. 

Structural unemployment vs. cyclical unemployment

Cyclical unemployment and structural unemployment are both considered types of involuntary unemployment. But cyclical unemployment is usually more closely tied to specific periods of economic decline, like recessions, or to changes in consumer demand. 

Compared to structural unemployment, cyclical unemployment typically doesn’t last as long and correlates with economic upturns and downturns. During recessions, cyclical unemployment will typically rise. And during periods of economic expansion, cyclical unemployment will decline. 

Structural unemployment vs. seasonal unemployment

As the name suggests, seasonal unemployment happens predictably and periodically throughout the year. It also tends to only affect certain jobs. 

Think of things like the extra workers that are hired to deal with the holiday shopping rush or people who work at a resort that’s busy during the warm months and closed during the cold ones. 

Unlike structural unemployment, seasonal unemployment tends to be predictable and voluntary as the worker understands the role’s fluctuations when they take the job. And while a worker may be without a job for a period of time, they know that they’ll be in demand again once peak season rolls back around.

Dealing with any kind of job loss can be extremely challenging. And structural unemployment can be particularly hard to navigate. Here are a few things that may help:

• Develop a professional network: Building relationships with people both inside and outside your current industry can be a big help when it comes time to search for a new job. That way, you have a pool of professional connections to go to for things like references and letters of recommendation.
• Consider relocating: When a geographical mismatch causes structural unemployment, it may make sense to look into moving to a place where available jobs match your skill set if that’s an option. 
• Expand skill sets: Taking the time to develop soft skills and hard skills can help workers stay on top of changes in their own industries and develop skills that can translate into other fields. 

Structural unemployment creates a misalignment between the jobs that are available and the workforce’s skills. It’s typically a result of external forces. And if it happens during an economic downturn, structural unemployment can last long after that economic downturn ends.

To learn more about dealing with a job loss or finding a new job, check out these guides on how to get a job, how to write a resume and how unemployment insurance works.