Structural unemployment occurs when there is a permanent fall in demand for a particular type of labour. For example, when workers are mismatched for skills for the job or their geographic area limits where they want to work- if a mining site disappears, the coal miner will not be able to work in the neighbourhood bakery instead as he does not have the skills required for baking. This type of unemployment is called structural unemployment because the structure of the job is unsuited for the skills offered by the worker. Structural unemployment is especially harmful as it tends to result in long term unemployment due to occupational and geographical immobility. Introducing a skills improvement program to improve occupational mobility would be an effective way of minimising this problem. The government could introduce this by subsidising companies to offer training for their workers, or support internship or apprenticeship programs to help people acquire the necessary skills needed for available jobs. However, this policy has a high opportunity cost as the government will have to forego spending in other areas to afford these programs. The government might, in turn, implement higher tax rates to cover the cost needed to run these programs. The other problem is that these programs are effective only in the long run. It will not solve the problem of unemployment immediately; it takes time for training skills programs to be set up, or for people to acquire the skills needed. It is a solution, but not an overnight solution, it is one that requires time and money, and therefore probably would not be implemented in a recession or sudden economic downturn, as the time taken is so long, that the economic downturn would have probably recovered by the time the programs have taken its effect. Nevertheless it is an effective policy to tackle long run unemployment.
The second policy to help boost structural unemployment would be to reduce unemployment benefits. This would provide an incentive for unemployed workers to find work. By providing unemployment benefits, the government is reducing the need of the unemployed to look for work, and therefore prolonging the duration of their unemployment. If unemployment benefits were reduced, unemployed workers might be more eager to work, which would shift the ASL to the right.
By shifting the ASL to the right, the number of workers has now increased to Q2, decreasing the difference in unemployment between ASL2 and LF. Evidently, as illustrated, reducing unemployment benefits gives workers the incentive to look for jobs, and therefore lessens the unemployment gap. However, it is not possible for all workers to look for jobs, due to several factors. First, as stated in the policy above, they might not be able to find jobs due to occupational and/or geographical immobility or they might be too old or sick to find a job. In this case, the workers would be left in a dire plight, with less money, and therefore lower living standards, which widens the gap in income inequality amongst the people.
For this essay, I have only compared two policies of structural unemployment as it would not be equal to compare a policy for a type of unemployment (i.e. frictional) then another policy to help another type of unemployment (to seasonal) as the policies are dependent on their respective types. Therefore in conclusion, I think that although the first policy of skills training has its drawbacks, like being effective only in the long run, it does have great benefits in solving structural unemployment, and it does outweigh the second policy, as the negative effects the second policy might have on its people is higher, therefore I think the first policy is a more permanent solution to reducing unemployment.