Is structural unemployment something macroeconomic policymakers should be concerned about? How does it differ from cyclical unemployment?
Structural unemployment is categorically something that should be considered heavily by macroeconomic policymakers as the ramifications can last for decades and may require drastic actions to readdress the situation. (Structural unemployment, 2014) If the closing of the Geelong Ford Factory is taken as an example we can see that this will have an immense impact on structural unemployment rates for the area. With the plant currently employing over 1,500 staff, the layoffs in 2016 will see 1,200 workers lose their jobs. Unfortunately the unemployment doesn’t end there with a butterfly effect expected to branch out to other industries, such as hospitality, that relied on the patronage of the factory workers.
Persons previously employed by the plant, or in industries connected to the plant, may find themselves out of work for extended periods of time. This has a direct impact on our GDP as households tighten their purse strings and spending decreases. (Structural unemployment, 2014) To address this issue policymakers need to look at re-skilling as the market place will suddenly become flooded with people of a certain skill set with little to no ability to take jobs in other industries. This is a highly important factor in structural unemployment as workers may live in areas where jobs in their industry are not available or they simply do not have the skill set to take on other jobs their geographical area. Re-skilling and placing people in appropriate jobs as soon as possible should be a priority for macroeconomic policymakers as it would ensure little disruption to our GDP as workers shifting from one job to another would continue to spend as they always had.
Cyclical unemployment occurs in the peaks and troughs of the business cycle. When business output is low layoffs occur and the job market decreases, this may last for a number of years but it is expected to cross industries. Given this transition across industries the same workers are not expected to remain unemployed during the entire period of high cyclical unemployment, rather their employment will mirror the business cycle with peaks and troughs of its own. (Cyclical unemployment, 2014) When compared with structural unemployment we see that the main difference is a decrease in employment with cyclical and almost non-existent employment with structural, this is due in most part to a lack of skills. Cyclical unemployment rates may eventually reduce whereas the structurally unemployed may never again return to the workforce. (Layton, Robinson & Tucker 2011)
Layton, AP, Robinson, TJ & Tucker, IB 2011, Economics for today, Cengage Learning. Cyclical unemployment, 2014. Available from: http://www.investopedia.com/terms/c/cyclicalunemployment.asp Structural unemployment, 2014. Available from:
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