What is structural unemployment and how can government intervention affect the level of structural unemployment?

Structural unemployment is the permanent decrease of elimination of a specific kind of job within a 'sunset' industry, an industry that is becoming obsolete because consumers are no longer demanding this industry's products. (In a lesson I would also draw a graph and show how unemployment is represented) The government can take different actions in the short run (SR) and long run (LR) to try to diminish the amount of people affected. In the SR they have fewer option because they have to react very quickly, so they would be most likely to pursue a monetary policy. For example, they could subsidise a sunset industry in order to keep its cost from going below its shut down price, although this would be socially inefficient because the market is no longer demanding the product (at least not in the same quantities). In the LR, the government has a lot more options. For instance, they could look to implement an educational system that teaches workers more skills and therefore allows them greater job mobility when they join the labour force. Alternatively, they could provide firms with an incentive to train or specialise their workers more so that workers will be more efficient and will be productive. This incentive could be a tax break, or subsidy (this is a LR solution because teaching workers takes time, even if the government is able to provide the incentive in the SR).

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Answered by Victoria L. Economics tutor

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