America is facing increasing levels of unemployment due to mismatch in skills of workers, who are displaced due to technological advancements rendering their jobs useless. According to the article, ‘Half of low-skilled US jobs are at risk of being replaced by automation.
‘Therefore, a large group of the working population risks becoming unemployed, which carries many socio-economic costs. Society suffers due to increased crime rates, homelessness and poverty, as it performs economically at a point within their production possibility curve due to a loss of output in the form of workers. One could consider structural unemployment to be the primary reason for US’s unemployment where to completely eliminate structural unemployment, one must prevent technological progress completely. This is detrimental to the socio-economic progress of a country and thus the government must seek alternative resolutions.Structural unemployment occurs as a result of changes in demand for specific labour skills, changes in geographical location of industries and therefore jobs, and labour market rigidities. Due to technological changes over time, there is a change in the nature of work with a need for high-tech skills such as coding and programming.
As such, blue-collared workers who used to do menial jobs requiring few specialised skills will find themselves unemployed when more efficient automation replaces them, requiring a smaller group of specialised workers to handle automation. Workers must thus learn computer operations if they want to keep working in the same industry, to manage the robots doing their work.Structural unemployment worsens the country’s income inequality as older long-term unemployed workers doesn’t have the necessary technical skill to keep up with their progressive industry and face age discrimination, creating a mismatch between them and the jobs created. Secondly, unemployed citizens rely more heavily upon government services such as Social Security compared to employed citizens, causing a drain of government resources as monetary resources are reshuffled instead of other sectors due to opportunity costs, worsening the government’s record levels of debt.
There is a need for reshaping of the entire labour market, by implementing effective supply-side policies to increase this productivity such as effective training schemes which give workers more specialised skills as well as training the workforce to be more occupationally flexible so that workers can change jobs easily, so as to shift the Long run aggregate supply(LRAS) curve to the right, as seen in figure 1, where a rightward shift in the LRAS curve will lead to an eventual increase in real GDP as the aggregate demand(AD) increases. Retraining programs for adults that improve their skills are also important because it decreases US’s dependence on the blue-collared industry and makes them more hireable when technology takes over their industry. Both of these policies have high opportunity costs, forcing the government to reduce spending in other sectors such as healthcare and military. However, benefits of reducing structural unemployment outweigh the opportunity costs that arise from attempting to rectify it as the country’s natural rate of unemployment(NE) is reduced, when structural unemployment occurs on a national level. NE occurs when the economy is producing potential output, and is the sum of structural, frictional, seasonal and cyclical unemployment. As discussed earlier, with technological advancements, structural unemployment is considered the primary reason for loss of jobs, as seen in Figure2 as increased automation reduces the demand for labour from D1 to D2, creating a labour surplus which reduces the quantity demanded of labour from Qs to Qe, resulting in unemployment.
Althoughdemand for low-skilled labour would decrease, there will be an increased demandfor high-skilled jobs in high-tech industries. As such, the government canreduce structural unemployment by introducing training programs in specialisedtechnological skills, to better match their skills to the new job scope. The government shouldencourage entrepreneurship to create market demand and generate employmentopportunities and provide stronger incentives for retraining oneself to boosthuman capital in the long run so that the workforce is more employable andreduce structural unemployment as the workforce adapts even with technologicaladvancements.Thegovernment can subsidize firms that provide training for their workers.However, this policy is only effective in the long run, risking the publicbecoming impatient if they don’t witness rapid results.
However, as the benefitsof reducing structural unemployment, in the long run, ensures the NE will be lower,and the government can redirect the resources that would be used to providebenefits to this larger group of unemployed people.