Review of Structural Unemployment(in Japanese)

Yuji Genda and Ayako Kondo

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: Understanding the nature of structural unemployment is a very important issue in employment policy. While many discussions on this important topic have taken place, there is still no clear definition of what, exactly, it is, and no accurate measurement methods have been introduced. This paper surveys what structural unemployment is, reviews some theoretical interpretations and existing methods of measuring structural unemployment, and explores new approaches in an attempt to grasp the nature of unemployment using data on the unemployed and their attitudes toward employment. In our review of existing theory, we start by clearly defining what is meant by the term structural unemployment. We also consider the many confusions surrounding the term in the literature. We focus on approaches using the UV curve and the Phillips curve to point out problems. UV analysis has some difficulty in actual measurement and lacks a theoretical background, and the use of the Phillips curve in deflation is also problematic. We use the Labour Force Survey and the Special Labour Force survey to establish a new approach that considers not only the twofold division of mismatches and demand-deficiencies but also the composite of both sides. More concretely, we first analyze the reasons why the unemployed cannot get jobs and conclude that the rise of unemployment rates in the late 1990s is mainly due to the "lack of wished-for jobs," and characterize it as the composite of mismatches and demand-deficiencies. With this result, we examined the ratio of would-be regular employees to all unemployed people and intensity of recent job search to find no visible change in the attitudes of the unemployed. The essence of structural unemployment is that changes in demand trigger changes in economic structure, which persistently generate unemployment. Distinction between mismatches and demand deficiencies is not the original purpose of grasping the nature of structural unemployment. With the acute rise of unemployment rates, the UV curve has been running upward and the Phillips curve has flattening since the late 1990s. It is necessary to see the structure of the labor market in a different light. In fact the unemployment that contains both mismatches and demand deficiencies has increased prominently since 1999. It is essential for understanding the structural side of increased unemployment to grasp the structural changes that have lasting effects on the formation of "wished for" jobs.

Pages: 40 pages
Date: 2003-08
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