Structural unemployment occurs when workers lack the skills necessary to get the jobs that are available in the labor market. This type of joblessness generally persists for an extended period, which can lead to long-term unemployment for large groups of people. The shift in economy that causes structural unemployment is usually due to technological advancements and changing markets. Companies tend to hire machines and automated processes instead of labor-intensive jobs that require manual labor. This can result in a major mismatch of skills in the workforce and creates a situation in which certain types of jobs are simply no longer needed, while the required skills to perform certain other jobs are no longer in demand.

Frequently, this type of unemployment develops gradually over several years as industries become more technologically advanced and the economy shifts. In fact, the most common form of structural unemployment originates from new technology and automation eliminating traditional jobs in certain industries, such as manufacturing. This can contribute to high rates of unemployment in certain regions and restrict people in affected areas from re-entering the labor market without obtaining new, employable skills.

In addition, other aspects such as global outsourcing, immigration, and cycles in technology, government regulations, and consumer preferences can all serve to displace prior kinds of jobs and lead to structural unemployment.

Structural unemployment can be extremely damaging for communities, individuals, and the overall economy. While those who lose their jobs may be eligible for social safety nets such as unemployment benefits, this only provides a stopgap measure and cannot replace income indefinitely. Chronic structural unemployment, especially in rural and economically disadvantaged areas, can have a lasting, negative economic impact.

In order to reduce the impact of structural unemployment, governments and businesses should focus on retraining and re-educating current workers to make them more adaptable, as well as providing more opportunities for out-of-work individuals to gain the skills they need to be successful in the new economy. Governments also need to ensure that workers are given additional support and assistance if they need to relocate for work. At the same time, companies should consider and use new training methods, especially for manual labor jobs that are in short supply, to keep the economy running smoothly and ensure job stability for their employees.