Structural unemployment
Caused by structural changes such that there exist:
- Cyclical unemployment: During depression, prices are too low and profit margins remain distinctively low. In this case, investment decreases and unemployment increases.
- Technological unemployment: Due to inappropriate technology. Technology is not inappropriate per se but in relation to the environment in which it is applied. In most developing countries, most production structures tend to be labour saving (capital-intensive), which is not appropriate as these countries experience high labour supply. Capital - labour ratios tend to be high in these countries implying that less labour is absorbed compared to capital in production undertakings causing unemployment.
- Industrial change: The establishment of new industries decreases the demand for the products of existing industries e.g. the rapid increase in the demand for Japanese industrial products is one reason for greater unemployment in some European countries.