Is unemployment becoming a structural problem?

Is unemployment becoming a structural problem?

Recently published news and comments on the unemployment problem in the Western hemisphere point out some serious concerns. The number of unemployed people in France has climbed to 3 million, which is seen as a critical threshold. This means that for the first time since 1999, the unemployment rate has become 10 percent. Unfortunately, the vast majority of these people are young people who have no hope about their future. The situation is the same in Spain, Italy and Portugal, where youth unemployment rates are over 25 percent, while they might be close to even 50 percent now in Greece.

There is a discussion about the nature and causes of this recent unemployment problem both in the United States and in Europe as it has become not only the biggest social but also the biggest political threat on both sides of the Atlantic. Some have said that if the origin of the problem is correctly identified, finding a solution might be easier. For the majority of politicians, the main reason for unemployment is so obvious that all these discussions are meaningless: a slowdown in global economic growth prevents the creation of new job opportunities everywhere and, as a result, halts any improvement in employment. However, it is not as simple as this.

As mentioned above, even though there are some numerical differences, this is a worldwide problem. In some countries such as the United States, unemployment might be cyclical as it responds positively to stimulus packages, if only slightly from time to time. However, in some other countries such as Germany and France, there has been a rise in unemployment, even if no serious austerity measures have been implemented. Is it because of the changing nature of unemployment which has become structural instead of cyclical? If this is true, this new phenomenon separates the relation between economic recovery and employment growth.

There might be several reasons for that change. First of all, the pace of technological progress is so rapid nowadays that it is very difficult for people that have unemployed for two or three years to adapt to new technologies even if there are new job opportunities available to them. Another important factor in terms of technological progress that limits employment growth is the increase in efficiency that it creates. This makes hiring new workers unnecessary. All these are quite logical ideas, yet they do not explain why unemployment still seems partly cyclical in the United States, a country which faces near-similar problems created by technological progress.

Another problem might be the preference of business elites in developed countries to exploit cheap labor and other opportunities in developing countries. It is called the “firing here and investing and hiring there” policy. This fact increases not only unjust competition in international trade but also in the international labor market. But again, the practices of big and important business leaders in the United States are almost the same, but unemployment is still not seen yet as absolutely structural but partly cyclical.

If the unemployment problem has become mainly structural even in some European countries which do not face serious deficit and debt problems and, as a result, do not need to implement harsh austerity measures, a new approach is needed to create new job opportunities. It is not possible to fight against that kind of unemployment merely through macroeconomic policies. The problems of countries such as Greece, Italy and Spain seem more serious. They face both cyclical and structural unemployment. If the cyclical one is not solved in the foreseeable future, their unemployment problem might become mainly structural.

Unfortunately, there is no short cut to solutions to this serious problem, which is not only economic but also social and political. In addition, most of the policies to be designed and implemented can only be effective in the long run, such as effecting a change in the education system, thus further promoting small businesses and growth industries.

However, even if new policies are effective only in the long run, this must not discourage implementation. Otherwise, the volume of unemployment could reach irresolvable heights in almost every industrialized country within a decade alone. The unemployment problem is obviously a very serious crisis now, and people are expecting some short-term remedies.