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Structural Unemployment in the United States
Structural unemployment is the mismatch between the skill level of the unemployed and the available jobs. Structural unemployment is caused by external forces rather than the normal business cycle. This type of unemployment occurs when as a result of shifting economy that makes it difficult for certain groups of people to find employment. As compared to other types of unemployment, Structural unemployment is harder to correct. It can keep the rate of unemployment high even after a period of recession is over. It can also create a higher rate of unemployed if ignored for a long time by policy makers (Chen et al 247).
By looking at the history of the structural unemployment rate in the United States one can get a clear picture of what has transpired through the years. The country experienced the highest structural unemployment rate in 2005 which was at 5.1%. Since then the rate of structural unemployment has decreased significant to 4.55% in 2015 (Querci, 347). This has been attributed to improvement employment laws and significant growth in the United States economy. In 2005 when the rate was at its higher, the country realized the need to come up with appropriate measures to promote growth of the economy and reduce the rate of unemployment among its citizens.
There are two causes of structural unemployment. One of them is significant technological advancements in various industries (Vallas, 461). In most cases this is experienced in the manufacturing industry. Unskilled employees have been replaced by robots which are more effective. These employees must learn new skills more so get trained o how to operate computer systems for them to remain in the industry. They also have to learn how to operate the robots to perform the tasks they used to do. The second cause of structural unemployment in the country is trade agreements. Some of these agreements create unfavorable environment for some businesses making some organizations to move out of the country.
For instance, technological developments in the newspaper industry have created structural unemployment in the past few years. Most advertisers now opt to promote their products through web based advertising. People can now access news online rather than reading them from a physical newspaper. This caused significant layoff of newspaper employees such as printers, delivery route workers and journalists. This group of employees had skills that focused on the traditional news distribution methods. Their skills were therefore not required in the in the new approach to reporting. They had to get training again to acquire skills of how to use the new technologies for them to qualify for a job in the same area of specialty (Vallas, 462).
Another field that was significantly affected by technological advancements is farming. Many countries came into free trade agreements. This allowed global food organizations to access markets that have traditionally been reserved for small-scale farmers. This put them out of business as they did not have enough financial muscles to compete with global food corporations that sold their products at a lower price. Such people had to abandon their farms and head to the urban areas to search for work. This created structural unemployment for a long time until they were retrained and absorbed in the manufacturing industry.
In 2008, the country experienced financial crisis which left many people without jobs. It is estimated that more than eight million people lost their jobs (Arango et al., 24). In 2009, housing was suppressed by a wave of foreclosures affecting the phase of expansion of the business cycle. This led to more than half of the jobless people to stay unemployed for more than six months. This is because their experience and skills were outdated and therefore they could not get employed. The older jobless people were the most affected by this development. While young people faced difficulties in getting employed, they were not out for long as compared to the older group.
Young people either went back to school to acquire more skills or found out low paying jobs. The unemployed duration for the young people was 19.9weeks which was bad enough but better as compared to that of older jobless people. People aged between 54 years and 65 years were out of job for 44.6 weeks which is almost 12 months. Those above this age group took a period of 3.9 weeks to get a new job (Querci et al., 348).. This forced many people in this group to get an early retirement. There are various reasons as to why older people are more affected by structural unemployment as compared to the young people.
One of the reasons was because older people worker in industries such as newspapers that were highly affected by technological advancements. Older people were also less likely to go to school and learn new skills to allow them get employed. The new job opportunities were paying less than half what they used to earn and therefore they were not willing to take them. There was also age discrimination that was unacknowledged. Employers believed in the young people because they had skills to use new technologies and were also willing to take lower pay. Older people owned their homes and therefore were less likely to move in search of a new job.
Structural unemployment affects all US citizens by increasing income inequality. This is because the older jobless people do not have adequate technical skills to secure themselves a job. The industry moved on without them leaving them in the state of unemployment. This creates a mismatch between the jobs being created and them. Multiple studies support this ideal. Most companies are unable to find talented and skilled employees. Most old people depend heavily on Medicare and social security than they would if they were employed. Most of them start drawing social security at the age of 62 rather than waiting until when they are 65. This weighs heavily on the federal budget (Chen, et al., 247).
Whenever unemployment gets high, the federal government comes up with strategies to create jobs. The major approach used by the government to create jobs is by making changes in both monetary and fiscal policies. However, politics play a major role in determining which approach should be used. The Federal Reserve Bank controls the monetary policy. The Fed helps in various ways to stimulate the economy for more jobs to be created. One way to achieve this is to lower interest rates in the overall economy making it cheaper for businesses and banks to borrow money. The main aim is to encourage business to expand and banks to banks to invest stimulating the economy creating job opportunities.
The other approach is increasing the availability or amount of money in circulation. This is normally achieved by busing and selling financial tools such as bonds or treasury bills (Chen, et al., 249). Businesses are able to hire more employees and banks are able to invest more enters the economy. If these two approaches are not able to contain the situation, the government employs various fiscal policies to be able to reverse the economy and allow businesses to be able to hire more people. Some of the things that the government can do include cutting task for businesses, hire people to provide services such as infrastructure maintenance or even increase government spending in specific sectors.
Works Cited
Arango, Luis E., and Luz A. Flórez. "Determinants of structural unemployment in Colombia: a search approach." Empirical Economics (2018): 1-34.
Chen, Jinzhu, et al. "Cyclical or Structural? Evidence on the Sources of US Unemployment." Globalization. Springer, Berlin, Heidelberg, 2017. 245-264.
Quercia, Roberto G., Anthony Pennington-Cross, and Chao Yue Tian. "Differential impacts of structural and cyclical unemployment on mortgage default and prepayment." The Journal of Real Estate Finance and Economics 53.3 (2016): 346-367.
Vallas, Steven. "The Causes of Structural Unemployment: Four Factors that Keep People From the Jobs They Deserve." (2016): 460-462.