Structural Unemployment

There’s a low key debate going on among economists as to whether our high level of unemployment is structural in nature. By structural, they mean a fundamental mismatch between the skills people have and the skills employers need.

It seems obvious to me that there will always be some level of structural unemployment. Needs change and the skills businesses need will always be different from what society provides. Otherwise, businesses wouldn’t need the skills – they’d already have them. Some some degree of structural unemployment is inevitable. The question on the table is whether business needs have changed so rapidly that the skill base has not kept up. An alternative view is that the skills required have changed at a normal pace but that skill creation has lagged behind due to shortcomings in education systems. Of course, there could be a combination of both. Is it a demand problem or a supply problem?

My own guess is that a bigger contributor to unemployment comes from people having an unrealistic idea of their own value to the market. Thus the term “underemployed”. I guess I’d be sore if I had spent years getting an expensive education only to find myself waiting tables or driving a delivery van. The true structural unemployment problem may not be due to business needing new and exotic skills. The problem may be that people have acquired skills (at great expense) that are really not in demand and then they are loathe to take jobs requiring “lesser” skills (which also can’t justify that expensive education).

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