Advancing a Free Society

Has Structural Unemployment Become Important in the United States?

Monday, November 14, 2011

The persistently high unemployment rate in the United States during the Great Recession has led to claims that much of American unemployment is “structural”. According to this view, the demand for workers by companies is insufficient to employ all unemployed workers because there is a mismatch between the skills possessed by many American workers and the skills required by companies. The structural advocates believe the skills demanded by companies tend to exceed or otherwise be different from the skills possessed by many unemployed workers. As a result, so goes the argument, these unemployed workers cannot find jobs and remain unemployed for a long time.

Although I will argue that not much of American unemployment is “structural” or due to such a mismatch, the structural theory is on the surface supported by the large number of long-term unemployed, the most disturbing feature of American unemployment during the Great Recession. Structural advocates claim that unemployed individuals with skills that are only weakly demanded face prospects of remaining unemployed for a long time. Since the unemployment rate rose above 9% in 2009, the fraction of the unemployed who have been out of work for over 6 months has grown to over 40%. Prior to the start of the recession in 2008, long-term unemployed were a little under 20% of total unemployment. Although long-term unemployment usually rises during prolonged recessions, the magnitude of the rise during the current recession is unusual for the United States.

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