Structural Unemployment

12 Key excerpts on "Structural Unemployment"

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  Some International Aspects of the Business Cycle

  • Hans Neisser(Author)
  • 2016(Publication Date)
  • University of Pennsylvania Press Anniversary Collection

    (Publisher)

  1 1 Just because a certain amount of overproduction is almost inevitable and be-cause some process of adaptation is permanently going on, and because, too, a certain migration of labor occurs even in industries optimally utilized, there exists always a certain minimum of frictional unemployment which frequently is con-sidered as an inherent part of Structural Unemployment. In the text we deal only with the excess of Structural Unemployment above this minimum. 62 Structural Unemployment 63 Structural Unemployment proper arises when the physical stock of capital either in the shape of fixed capital or of working capital is not sufficient to employ the total supply of labor which, under modern conditions, depends for em-ployment on the cooperation of a certain amount of pro-ducers' goods per worker; owing to the harmony between the structure of expenditure and the structure of production, capital, but not labor, would be utilized optimally. In case of cyclical unemployment, the existing capital stock could not be utilized optimally because of the absence of adequate demand at cost price. Thus it becomes clear that cyclical unemployment may develop in due time into structural un-employment if the accumulation of capital be not sufficient to provide the necessary investment in the industries favored by demand, whereas in the meantime the excess stock of capital in the disfavored industries is also destroyed physi-cally; 2 or, it may develop in case of a purely exogenous de-flation, if and when the long continuation and aggravation of the depression brings about a physical destruction. More difficult is the classification in the case of the displacement of workers by labor-saving devices. Strictly speaking, this unemployment would be of a structural character because it is only the absence of a sufficient capital accumulation that prevents the instantaneous absorption of the displaced per-sons.

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  Modern Labor Economics

  Theory and Public Policy

  • Ronald G. Ehrenberg, Robert S. Smith(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  and if costs of occupational or geographic mobility were low, market adjustments would quickly eliminate this type of unemployment. In practice, however, these conditions may fail to hold, and Structural Unemployment may result.

  Occupational and Regional Unemployment Rate Differences

  A two-sector labor market model, represented by Figure 14.5 , can be used to illustrate how Structural Unemployment can arise. For the moment, we shall assume the sectors refer to markets for occupational classes of workers; later, we shall assume that they are two geographically separate labor markets.

  Occupational Imbalances Suppose that market A is the market for production workers in the automobile industry and market B is the market for skilled computer specialists, and suppose that initially both markets are in equilibrium. Given the demand and supply curves in both markets, (D 0 A , S 0 A ) and (D 0 B , S 0 B ), the equilibrium wage/employment combinations in the two sectors will be (W 0 A , E 0 A ) and (W 0 B , E 0 B ), respectively. Because of differences in training costs and nonpecuniary conditions of employment, the wages need not be equal in the two sectors.

  Figure 14.5 Structural Unemployment Due to Inflexible Wages and Costs of Adjustment

  Now, suppose that the demand for automobile workers falls to D 1 A as a result of foreign import competition, while the demand for computer specialists rises to D 1 B as a result of the increased use of computers. If real wages are inflexible downward in market A because of union contract provisions, social norms, or government legislation, employment of automobile workers will fall to E 1 A . Employment and wages of computer specialists will rise to E 1 B and W 1 B , respectively. Unemployment of E 0 A – E 1 A

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  Soviet Labour And The Ethic Of Communism

  Full Employment And The Labour Process In The Ussr

  • David Lane(Author)
  • 2019(Publication Date)
  • Taylor & Francis

    (Publisher)

  4 Types of Involuntary Unemployment

  While mass Structural Unemployment is not a characteristic of the USSR, one must consider the presence of other forms of unemployment and underemployment, the most important types of which are 'structural', 'seasonal' and 'frictional'. Structural Unemployment is an absence of jobs in a particular labour market. This usually occurs on a regional basis. Population grows in a given area at a faster rate than the supply of jobs. In addition, certain districts might be predominantly concerned with a particular industry having a relatively narrow and specialized pattern of skills: for instance, the mining industry recruits few women workers, in textiles men are a minority and agriculture (at least in the USSR) has a preponderance of unskilled manual workers. 'Seasonal' unemployment is linked to the cyclical nature of production or of demand. In the Soviet Union, due to the inclement winter weather, this is particularly the case with agriculture, fishing, open-cast mining and building. 'Frictional' unemployment occurs when workers are idle between jobs or statuses. School-leavers or demobilized military may not wish, or may be unable, to find suitable work immediately. If workers are hierarchically or geographically mobile there may be periods of idleness between the time that workers leave one job and take up another.

  Frictional Unemployment

  In any modern economy, however perfectly organized, there are likely to be periods of'friction' when school-leavers come onto the market or when employees voluntarily change jobs. Instantaneous individual adjustments which would be necessary to equilibriate supply of (and demand for) labour even in a perfectly free market are impossible to achieve: in any labour market there are always some jobs vacant and some people seeking work. This is illustrated in Figure 4.1 . At wage W, ONi is demanded, but only ON is employed. The frictional level of unemployment is N-Ni.1

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  Economics of Structural and Technological Change

  • Cristiano Antonelli, Nicola De Liso(Authors)
  • 2002(Publication Date)
  • Routledge

    (Publisher)

  The various models examined, developing either partial equilibrium analysis or general equilibrium analysis, seem to share the vision according to which economic growth, itself induced by technical progress, does not necessarily guarantee the reabsorption of the labour force displaced by the adoption of new technologies. Technological unemployment, in fact, can emerge either because of insufficient growth of aggregate demand compared with potential productive capacity growth or because of changes in the sectorial composition of demand for goods and labour with respect to the existing productive capacity structure. In both cases, automatic market mechanisms do not seem to be strong enough to guarantee a growth equilibrium path, implying therefore a macroeconomic disequilibrium and/or a sectoral disequilibrium.

  2 TECHNOLOGICAL UNEMPLOYMENT VERSUS KEYNESIAN AND Structural Unemployment

  Studies of technological change do not appear to have given a sufficiently clear-cut definition of the concept of technological unemployment, compared with other categories of unemployment such as Keynesian unemployment or Structural Unemployment (Standing, 1984). In some cases, in fact, it is associated with unemployment due to scarcity of effective demand, while in other cases its structural nature is emphasized. In the first case, unemployment is explained by an insufficient aggregate demand growth compared with the potential supply of goods allowed by innovations which increase the productivity of labour. In the second case, unemployment is seen as determined, given technical progress, by structural changes in the productive capacity of the economic system; changes which manifest themselves, for example, in a physical capital structure incompatible with the full employment of the available labour force. However, these possibilities are not alternative, for they could occur together. In fact, given the low growth rate of demand and technical progress leading to changes in the composition of the demand and of the production structure, unemployment can emerge with both Keynesian and structural characteristics. The prevailing characteristics will depend on the relative intensity of different compensation effects which determine the reabsorption of the labour force initially unemployed as a consequence of the adoption of labour-saving innovations. If the compensation effects principally operate by stimulating the aggregate demand, technological unemployment will assume mainly structural characteristics when there are relevant changes in the composition of the demand and the supply of goods; on the other hand, if the stimuli to the demand due to technical progress are not strong, and there are compensation mechanisms instead which do not trigger the appearance of structural constraints or which actually lead to the overtaking of these possible constraints, technological unemployment will mainly assume Keynesian characteristics.

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  Modern Labor Economics

  Theory and Public Policy - International Student Edition

  • Ronald G. Ehrenberg, Robert S. Smith, Kevin F. Hallock(Authors)
  • 2021(Publication Date)
  • Taylor & Francis

    (Publisher)

  A workers would be created in the short run.

  If automobile employees could costlessly become computer specialists, these unemployed workers would quickly move to market B, where we assume wages are flexible, and eventually, unemployment in sector A would be eliminated.24 Structural Unemployment arises, however, when costs of adjustment are sufficiently high to slow or even prevent such movements. The cost to displaced individuals, many in their 50s and 60s, may prove to be prohibitively expensive, given the limited time in the labor market that they have to collect returns. Moreover, borrowing funds to finance the necessary job training might be difficult for them.25 The economic and social costs of prolonged unemployment can be significant and not confined to older workers, as seen in Example 14.2 .

  EXAMPLE 14.2 Structural Unemployment as a Threat to Social Well-Being

  One source of Structural Unemployment in recent years has been the loss of jobs in manufacturing industries owing to technological change and foreign import competition. The loss of job opportunities in manufacturing was felt particularly among less-educated men, many of whom were not well prepared to train for higher-skilled occupations. Those who lost manufacturing jobs (which were relative well paying) were therefore faced with either nonemployment or jobs with lower pay, both of which reduced their economic security and their social stature.

  Joblessness has devastating social consequences. One study of areas in the United States that lost manufacturing jobs owing to import competition from 1990 to 2014 found that among the young men studied was a marked increase in idleness (i.e., they were neither working nor in school or in educational programs). Marriage rates dropped as young men became less economically secure, and there was an increase in births out of wedlock and the fraction of children being raised in poverty. Drug and alcohol abuse among young men rose, and associated with such abuse was an increase in their mortality rates.

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  Managing Mixed Economies

  • Francis G. Castles, Franz Lehner, Manfred G. Schmidt(Authors)
  • 2019(Publication Date)
  • De Gruyter

    (Publisher)

  According to a wide va-riety of studies of labour market developments in OECD-nations, structural factors have been of major importance in amplifying or, conversely, miti-gating the imbalance between supply of and demand for labour in the 1970's and early 1980's (see for example Boltho, 1982; Grubb et al. 1983; O E C D 1984 b; Therborn 1984 b; O E C D Secretariat 1985). For example, the follow-ing constellation of structural factors poses difficult problems for the mainte-nance of full employment: — low growth rates of real GDP, and, in particular, the presence of a GDP-productivity gap; — heavy external dependence of the national economy, and hence a greater vulnerability to external shocks; — strong growth rates in labour supply, and hence, other things being equal, a larger imbalance between the supply of and the demand for labour; — concentration of employment in the industrial sector, and hence a higher vulnerability to cyclical and technological unemployment; — low levels of wage flexibility and wage differentiation, and hence, a some-what more muted response of employment to economic growth; and — the presence of industries with heavy adjustment problems. While it can be argued that full-employment oriented policy is impeded by structural circumstances, such as weak economic growth and large increases in labour supply, it should be emphasised that structures do not dictate a par-ticular solution. It remains an empirical question whether, and to what ex-tent, structural problems generate mass unemployment. The exact nature of The Politics of Labour Market Policy 11 the relationship between structures and labour market outcomes depends on the presence or absence of intervening political variables. Empirical analysis of the data that was collected for the present paper serves to illustrate this point.

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  Tackling Unemployment

  • Richard Layard(Author)
  • 1999(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  As Abraham and Katz (1986) show, this is not what happens when we see a short-run rise in the turbulence index. Instead unemployment rises and vacancies fall. Thus the notion that business downturns are typically initiated by structural demand shifts is implausible. However over the longer term the degree of turbulence in industrial structure is clearly an important factor affecting unemployment. But for this purpose we need to take a moving average of the index. If we do this, as we have said, we find that industrial turbulence in the 1930s was double its postwar average in both Britain and the United States, and the same was true of Britain in the 1920s. Thus it is quite appropriate to blame a part of interwar unemployment on the 'problems of the declining industries'. Mismatch: A Framework for Thought 189 Table 7.17 Unemployment rates and registered vacancy rates by occupation, region and industry: Britain, 1982 (relative to national average) uju Vi/V Occupation Managerial and professional Clerical and related Other non-manual Skilled manual Other manual Region South-East South West East Midlands West Midlands Yorkshire and Humberside North West North Wales Scotland Industry Agriculture Mining and quarrying Manufacturing Construction Gas, electricity and water Transport Distribution Services Public administration 0.32 0.80 0.84 0.87 1.87 0.73 0.89 0.92 1.24 1.11 1.24 1.39 1.30 1.17 0.94 0.88 1.03 2.13 0.33 0.68 0.86 0.53 0.68 0.49 1.05 1.93 0.84 1.31 1.10 1.30 0.92 0.67 0.74 0.77 0.85 1.22 1.24 0.31 0.12 0.66 1.03 0.31 0.48 1.31 1.36 1.31 Notes: Unemployment data relate to previous occupation and industry of unemployed registered at Job Centres. Vacancy rates relate to vacancies registered at Job Centres. Source: Occupation Department of Employment Gazette (June 1982), Tables 2.11 and 3.4 (Employment figures from Labour Force Survey). Region Vacancies: Department of Employment Gazette (December 1985), Table 3.3.

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  Introducing a New Economics

  Pluralist, Sustainable and Progressive

  • Jack Reardon, Maria Alejandra Caporale Madi, Molly Scott Cato(Authors)
  • 2017(Publication Date)
  • Pluto Press

    (Publisher)

  In solving a problem it is imperative to conceptualise it, discuss the reasons for its existence, engage in dialogue with others to get different points of view, and then develop an effective solution. And, once this is implemented, to regularly monitor the problem: ‘Are we making progress or should we go back to the drawing board?’ In a dynamic economy some unemployment is normal: future expectations are not perfect and there will always be a disconnect between available jobs, information and the supply of workers. And, ironically, the more dynamic an economy, the higher the unemployment, due to structural, frictional and voluntary reasons. Would we want to live in a society with perfect certainty?

  Table 7.3 lists the reasons and solutions for each type of unemployment. Some unemployment is normal although economists disagree on what normal is. The least serious and least bothersome type of unemployment from a policy perspective is voluntary, since this is mostly due to the volition of the worker. On the other hand, the most serious type is involuntary, signaling that the economy is unable to adequately provision for all of its members, and requires the most concerted public policy effort.

  Table 7.3 Conceptualisation of Unemployment (Based on Conventional Definitions)

  Type	Reason	Solutions
  Involuntary	Lack of aggregate demand.	Increase aggregate demand.
  Frictional	Inevitable mismatches.	Better information.
  Voluntary	Misaligned expectations; Imperfect information.	Better information.
  Frictional	Changing economy.	Worker education/training.
  Cyclical	Recessions.	Reduce severity of by government policy.

  Source: Authors.

  Box 7.3 Unemployment in Neoclassical Models

  As neoclassical economics developed, it emulated the physics of Isaac Newton and, interestingly, parried the new physics of the twentieth century. If neoclassical economics had followed the path of the new physics – particle physics, the principle of uncertainty, etc. – economics would be very different today, eschewing equilibrium and becoming much more humble and pluralistic. Alas!

  A key belief of neoclassical economics is that the economy tends towards equilibrium, and that if this is unattained, it is due to systematic interference with the laws of supply and demand, such as a trade union increasing the wage above the market-determined wage, or the imposition of the minimum wage. This belief is based on deductive reasoning –albeit, as it turns out, quite faulty: see Reardon (2006) – rather than empirical evidence. It is assumed as a matter of faith that price adjustments will guarantee full employment, and that worker and firm reactions are based on an automatic and unthinking reaction to market forces.

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  On Unemployment

  A Micro-Theory of Economic Justice: Volume 1

  • Mark R. Reiff(Author)
  • 2015(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Technological Innovation and Structural Unemployment ● 75 theory goes, then the price of labor should also drop until all those previously employed are employed once again, albeit at a lower wage. 48 But labor, unlike commodities (or at least commodities that take a relatively brief time to pro- duce), does not respond to a reduction in demand so swiftly. Those who are employed are loathe to give up hard won wage increases, and it is difficult to force them to do so, especially but not only if they are represented by unions. Which means that wages will not adjust very quickly if at all despite even a large drop in demand and that this supposed cure for unemployment will in practice take a long time to work its way through the economic system, if it is to ever work its way through at all. 49 Why not, then, ban unions and take other steps to make wages less sticky and more efficient? We could, for example, allow workers to be fired without cause or even notice or impose other limits on them and their unions’ activity. Indeed, this is exactly what many prominent neoliberal economists suggest we should do, 50 and it is what many Republican politicians are actually doing with regard to public sector and even private sector workers in states or counties they control in the United States now. 51 Similar efforts to limit workers’ rights are also currently underway in Europe and in Japan.

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  Monetary Policy and Unemployment

  • Willi Semmler(Author)
  • 2004(Publication Date)
  • Routledge

    (Publisher)

  Part III Structuralist causes of unemployment and monetary policy 8 The structuralist perspective on real exchange rate, share price level, and employment path What room is left for money? Hian Teck Hoon, Edmund Phelps, and Gylfi Zoega The current sluggish performance of the US economy follows one of the most remarkable booms in recorded history. The late 1990s was a period of striking expansion of both output and employment, with the unemployment rate hitting 3.9 percent in 2000; productivity growth was much improved, in part because of higher utilization, though not exceptional. 1 The absence of rising inflation during this period came as a surprise to many since the level of the natural rate of unemployment was commonly estimated to be in the range of 5–6 percent by the mid-1990s. The noninflationary boom, however, reminds one of another episode where nonmonetary forces were strongly at work, namely the nondeflationary slump in Europe and elsewhere in the 1980s and 1990s, which appeared to signal a move to a higher natural rate of unemployment. The modeling of such structural slumps and booms is the task that we have tackled in a series of works in recent years, the book Structural Slumps being a milestone. 2 The theory set out in Structural Slumps is based on intertemporal nonmonetary models of the modern (thus incentive-compatible) kind and provides microeconomic foundations for a moving natural rate of unemployment. Involuntary unemployment occurs, since incentive wages and consequent job rationing are allowed, and this unemployment is structural, not a result of deficient aggregate demand. The determining structure includes tax rates and regulations, the focus of supply-side (SS) theory and includes fluctuations in technical progress, the focus of “real business cycle” (RBC) theory but includes much more

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  Industrial Unemployment in Germany 1873-1913

  • Linda A. Heilman(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  DETERMINANTS OF AGGREGATE UNEMPLOYMENT LEVELS Among theoretical explanations of the causes of unemployment, overproduction was the most frequently articulated source of trouble. Between 1873 and 1913 excess supply rather than insufficient demand was considered the primary factor in work shortages by most contemporaries. Only a few nineteenth-century observers recognized that lack of aggregate demand for goods and services also produced periodic diminutions of job opportunities. Reduced rates of economic growth such as Germany experienced in the late 1870’s and early 1890’s might have been alleviated by policies calculated to increase aggregate demand but measures such as tax cuts were not adopted during our period. In addition to explanations of unemployment which attributed the situation to imbalances between the supply and demand of goods and services, there were those who focused more directly on the labor market itself. Structural Unemployment was the result of mismatching between job seekers and job opportunities. Factors such as population distribution, urbanization, labor mobility, expectations about the terms of employment, the location of industries and the educational level of the work force came into play here. A complex of interrelated factors impinged on the job market: Employers’ demand for workers, real-wage rates stipulated by potential employees, the distribution of labor and its mobility. The relationship among these factors at any given point in time went far to determine the extent of mismatching which resulted in Structural Unemployment. This type of unemployment could be remedied by improved dissemination of information in the labor market which was the avowed function of Arbeitsnachweise after 1890. It could also be alleviated by efforts to augment the qualifications of potential employees through additional training or education

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  Unemployment: Theory, Policy and Structure

  • Peder J. Pedersen, Reinhard Lund(Authors)
  • 2017(Publication Date)
  • De Gruyter

    (Publisher)

  Deregulation, Structured Labour Markets and Unemployment 173 the effectiveness of the local appeals procedure for claimants who have been refused benefits. These changes add up to a determined effort to reduce the income of the unemployed relative to that of the employed (see Table 1), to increase work discipline by making access to unemployment pay more difficult, and to coerce the unemployed. In particular, many of the changes have been detrimental to categories of workers already disadvantaged in the labour market, especially women. Table 1. Replacement rates 1978-1984 Average R R > 0.9 RR < 0.5 RR a (%) (%) 1978 0.790 21.0 2.3 1980 0.727 12.0 8.0 1982/1983 0.597 3.2 1 28.0 1983/1984 0.600 2.9 21.0 Source: Dilmot and Morris (1983) * RR, replacement rates measure the expected ratio of income out of work to incomes in work (see Dilmot and Morris 1983). These data refer to 13-week unemployment spells. The modifications to the social welfare system which have had the effect of reinforcing the disadvantage of the disadvantaged have been accompanied by other changes in labour-market policy designed to have a similar effect. Make-work schemes and youth opportunity and training programmes designed to reduce unemployment have been widely used to provide cheap substitutes for more regular forms of employment. These measures include community work by the unemployed for pay only marginally higher than unemployment pay, a substantial subsidy paid to employers who hire young workers at rates of pay below a maximum which is significantly lower than union rates, and work experience schemes by which the government pays school-leavers for one year's work experience with an employer. These and other schemes serve to disguise unemployment and provide the opportunity to undercut union rates at a cost to the government not significantly higher than unemployment pay.

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