Structural Unemployment Flashcards
What is structural unemployment?
Structural unemployment occurs when there is a long-term mismatch between workers’ skills and the demands of the labour market.
This type of unemployment can persist even during economic growth.
What are some causes of structural unemployment?
Structural unemployment can result from:
* Technological progress
* Globalisation
* Sectoral shifts
* Labour market rigidities
These factors can lead to a persistent skills gap in the workforce.
How does structural unemployment differ from cyclical unemployment?
Structural unemployment persists even in economic upturns, while cyclical unemployment is related to the economic cycle and typically decreases during recovery.
Affected workers lack the skills required for available jobs.
What is structural unemployment?
A type of unemployment caused by long-term changes in the economy leading to skill mismatches.
Who believed unemployment would self-correct through wage flexibility?
Classical economists.
What does David Ricardo’s comparative advantage theory imply?
Workers in declining sectors would be displaced.
What term did Karl Marx use to describe technological unemployment?
“Reserve army of labour”.
What did Alfred Marshall acknowledge regarding technological changes?
They could lead to long-term skill mismatches.
What type of unemployment did John Maynard Keynes focus on?
Demand-deficient unemployment.
What structural shift did Keynes recognize could leave workers permanently jobless?
Deindustrialisation.
What did William Beveridge develop to distinguish between types of unemployment?
The Beveridge Curve.
What two types of unemployment did Paul Samuelson separate?
Cyclical and structural unemployment.
What economic concepts did the Phillips Curve (1958) suggest a trade-off between?
Inflation and unemployment.
Who introduced the concept of NAIRU?
Milton Friedman & Edmund Phelps.
What does NAIRU stand for?
Non-Accelerating Inflation Rate of Unemployment.
What did Friedman and Phelps argue regarding structural unemployment?
Part of unemployment is structural and cannot be eliminated without causing inflation.
What did David Card & Alan Krueger study in the 1990s?
Minimum wages and labour market frictions.
What recent factors have become a focus concerning structural unemployment?
Labour market rigidities, automation, AI, globalisation, and geographical mismatches.
Fill in the blank: The concept of structural unemployment emerged as economists sought to distinguish between different types of _______.
unemployment.
True or False: Alfred Marshall believed that technological changes would have no impact on employment.
False.
What impact do Automation & AI have on the demand for labor?
Reduce demand for low-skilled labour while increasing demand for high-tech skills
A 2024 report by the IPPR estimated up to 8 million UK jobs at risk due to AI.
What is a key effect of Globalisation & Trade on jobs?
Jobs move to low-wage economies due to outsourcing and international competition
The Port Talbot steelworks faced mass layoffs due to competition and automation.
What are Sectoral Shifts in the labor market?
Changes in consumer preferences can make certain occupations obsolete
The closure of Ratcliffe-on-Soar coal power station in 2023 marked the end of UK coal power.
What are Labour Market Rigidities?
Minimum wages, strong unions, and employment protection laws that prevent wage flexibility
Spain and Italy have high youth unemployment due to rigid labour laws.
What is Geographical Mismatch in the labor market?
Jobs are created in different regions from where unemployed workers live
Former industrial towns like Hartlepool, Wolverhampton, and Hull suffer persistent unemployment.
Fill in the blank: Automation & AI reduce demand for _______ labour.
low-skilled
Fill in the blank: The closure of _______ coal power station in 2023 marked the end of UK coal power.
Ratcliffe-on-Soar
True or False: Strong unions can contribute to wage flexibility in the labor market.
False
What example illustrates the impact of Globalisation & Trade on employment?
Port Talbot steelworks faced mass layoffs due to competition and automation.
What is a consequence of Labour Market Rigidities in Spain and Italy?
High youth unemployment
Fill in the blank: Jobs moving to low-wage economies is a result of _______.
outsourcing
What does the Beveridge Curve illustrate?
The relationship between job vacancies and unemployment
A rightward shift suggests increased structural unemployment, indicating high unemployment despite job openings.
What does a rightward shift in the Beveridge Curve indicate?
Increased structural unemployment
This means there are high unemployment rates despite the presence of job openings.
What does NAIRU stand for?
Non-Accelerating Inflation Rate of Unemployment
NAIRU is the level of unemployment that exists when the economy is at full capacity.
What does the Long-Run Phillips Curve show?
Structural unemployment as part of the natural rate of unemployment
Policies that reduce unemployment below NAIRU can lead to inflation.
What happens when unemployment is reduced below NAIRU?
It causes inflation
This is a key implication of the Long-Run Phillips Curve.
What does the Wage Rigidity Model demonstrate?
Structural unemployment when wages do not fall to equilibrium
This can be due to unions, minimum wages, or efficiency wages.
What creates excess labour supply according to the Wage Rigidity Model?
Wage floors
These are often established by minimum wage laws or union agreements.
What does the AD/AS Model show regarding structural unemployment?
It occurs when LRAS shifts left, reducing potential GDP
Even with higher aggregate demand, unemployed workers may lack the necessary skills to fill available jobs.
What does a leftward shift in LRAS indicate?
A reduction in potential GDP
This can lead to structural unemployment, as the economy’s capacity to produce goods and services decreases.
What is a consequence of globalization according to the World Supply Model?
Jobs shift abroad, leading to permanent unemployment in high-wage economies
This model illustrates the impact of global labor dynamics on domestic employment.
What is a key strategy to address structural unemployment?
Invest in human capital to improve adaptability
This includes initiatives such as education and training programs.
What is an example of a successful education and training initiative?
Germany’s apprenticeship system reduces skill mismatches
This system helps align skills with job market needs.
What is meant by labour market flexibility?
Reducing employment protection to encourage hiring
This approach can lead to more dynamic job markets.
What model exemplifies labour market flexibility while maintaining job security?
Scandinavian ‘flexicurity’ model
This model balances job security with flexibility for workers.
How can regional development help with structural unemployment?
Encouraging job creation in struggling regions
This can be achieved through targeted policies and investments.
What is an example of a regional development policy?
UK’s ‘Levelling Up’ policy
This policy aims to reduce regional disparities in economic opportunities.
What are wage subsidies used for?
To encourage firms to hire displaced workers
These incentives help reduce unemployment rates.
What is an example of a wage subsidy program?
US Work Opportunity Tax Credit
This program provides tax incentives to employers for hiring certain groups of workers.
What is structural unemployment?
A persistent macroeconomic issue requiring long-term policy solutions
Structural unemployment occurs when there is a mismatch between the skills of the workforce and the needs of the job market.
What are the main drivers of structural unemployment?
Technological change, globalisation, sectoral shifts, and rigidities in the labour market
These factors can lead to a mismatch between available jobs and the skills of job seekers.
What must governments focus on to mitigate structural unemployment?
Education, flexibility, and regional investment
These strategies can help align workforce skills with market demands and improve job opportunities.
True or False: Structural unemployment is a short-term economic issue.
False
Structural unemployment is considered a long-term issue that requires sustained policy efforts.
Fill in the blank: Structural unemployment is driven by _______.
[technological change, globalisation, sectoral shifts, rigidities in the labour market]
