Structural Unemployment

What it is

Structural unemployment is a long-lasting form of unemployment that occurs when there is a persistent mismatch between the skills, location, or attributes of workers and the requirements of available jobs. Jobs exist, but workers either lack the required skills, live far from where jobs are concentrated, or cannot easily transition into the new roles the economy demands.

Key takeaways

• Structural unemployment arises from fundamental changes to the economy, not from short-term business cycles.
• It often persists for years or decades unless addressed by significant adjustments (retraining, mobility, or policy).
• Technological change, globalization, and shifts in demand are common drivers.
• It is typically more difficult to resolve than cyclical, frictional, or seasonal unemployment.

How it works

Structural unemployment is driven by long-term shifts in how goods and services are produced and delivered. When industries adopt new technologies, relocate production, or change their skill requirements, displaced workers may find their existing experience and education no longer match employers’ needs. Unlike cyclical unemployment, which rises and falls with economic activity, structural unemployment can remain even during economic expansions and raises the economy’s “natural” unemployment rate.

Common causes

• Technological change: Automation, digitalization, and artificial intelligence can make certain jobs obsolete or change the skills employers require.
• Globalization and competition: Offshoring and international competition can eliminate domestic jobs in some sectors.
• Skills gaps: Inadequate training systems or slow adoption of new education limits workers’ ability to retrain.
• Geographic mismatch: Jobs may concentrate in regions different from where displaced workers live, and relocation may be costly or impractical.
• Regulatory and institutional factors: Labor market rigidities, overly restrictive hiring rules, or weak incentives for employer-provided training can hinder transitions.

How to reduce structural unemployment

Individual actions
* Continuous learning and reskilling: Pursue training in growing fields and update technical skills.
* Market research and career planning: Monitor industry trends to anticipate skills in demand.
* Network and seek referrals: Professional networks can open opportunities in adjacent roles or sectors.
* Consider relocation when feasible to access more job opportunities.

Policy and employer responses
* Invest in workforce development programs and accessible retraining.
* Encourage partnerships between employers, schools, and apprenticeship programs.
* Support mobility (housing, relocation assistance) and policies that lower barriers to labor reallocation.
* Promote flexible labor markets and incentives for employer-provided upskilling.

How it differs from other unemployment types

• Cyclical unemployment: Caused by downturns in aggregate demand; tends to be temporary and tied to the business cycle.
• Frictional unemployment: Short-term, voluntary unemployment associated with job search or career moves.
• Seasonal unemployment: Predictable, short-term joblessness tied to seasonal demand patterns.

Structural unemployment is typically deeper and more persistent than these other types because it requires changes in skills, location, or industry structure.

Consequences and challenges

• Long-term joblessness can erode skills and employability, making reentry harder.
• Reduced geographic mobility (e.g., due to housing losses or costs) can lock workers into local labor-market mismatches.
• The cost of retraining and time required to transition may be high for individuals and governments.
• Persistent structural unemployment can raise social and economic inequality and reduce potential output.

Impact of COVID-19

The COVID-19 pandemic produced both cyclical and structural effects. While many job losses were temporary, the crisis accelerated automation, remote work, and changes in consumer behavior—creating longer-term shifts in some industries. Some workers voluntarily exited the labor force, and others faced the need to retrain for different roles, increasing the risk of structural unemployment for certain groups.

Real-world examples

• Manufacturing decline: Over recent decades, automation and offshoring reduced large numbers of manufacturing jobs in advanced economies. Workers unable to transition to new sectors or retrain experienced persistent unemployment.
• France (case study): Structural rigidities in the labor market contributed to elevated long-term unemployment. Reforms aimed at increasing labor-market flexibility and incentivizing hiring helped lower unemployment rates over time, illustrating that policy changes can reduce structural unemployment when combined with training and labor-market reform.

Frequently asked questions

What is a clear example of structural unemployment?
A classic example is the decline of landline telephone technicians after the rise of mobile phones—workers with skills tied to the old technology who did not retrain faced long-term unemployment.

What mainly causes structural unemployment?
Major, lasting changes in how goods and services are produced or delivered—technological shifts, globalization, and changing consumer demand—are primary causes.

Is cyclical unemployment preferable to structural unemployment?
Generally yes: cyclical unemployment is typically shorter and resolves as the economy recovers, whereas structural unemployment requires retraining, relocation, or policy intervention.

Why is structural unemployment particularly harmful?
Because it often requires significant effort, time, and expense to overcome—workers may need new education, to move, or to change careers—making the recovery process slower and costlier than for other unemployment types.

Bottom line

Structural unemployment reflects deeper mismatches between labor supply and demand caused by long-term economic changes. Addressing it requires coordinated action: individuals must update skills and adapt, employers should invest in training, and policymakers need to support mobility and workforce development to realign workers with evolving job opportunities.