The Scary Specter of Structural Unemployment

From the WSJ*, while unemployment falls, the long-term unemployed struggle.  Bad news for them and for our society:

“The diverging fortunes of the long and short-term unemployed worry many economists because it suggests the emergence of deeper, structural problems that could persist long after the rest of the economy recovers.  Rather than returning work…the long-term unemployed could effectively break off from the normal job market, ultimately forming an underclass of the more of less permanently unemployed.

“Economists generally divide unemployment into two categories.  Cyclical unemployment stems from weakness in the overall economy, which pushes down demand for goods and services, and therefore the need for the workers that provide them.  Structural unemployment reflects deeper problems, such as a mismatch between the skills workers have and the ones employers need.  Structural unemployment, unlike cyclical, doesn’t disappear when the economy improves.

“”But some economists argue that in the wake of a severe recession, the lines between cyclical and structural unemployment can become blurred.  Workers who lose their jobs because of cyclical factors…might stay out of work so long that they become effectively unemployable.  Their skills erode, they fall behind on the latest technologies and industry trends, or they become stigmatized by employers who assume there must be something wrong with anyone who has been unemployed so long.”  Emphasis added.

*”Time Not on Side of the Jobless,” Ben Casselman

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