Structural Unemployment—the Unemployment that Remains Even at the Peak of the Economy’s Upswings

Reading Passage Question

Structural unemployment—the unemployment that remains even at the peak of the economy’s upswings—is caused by an imbalance between the types and locations of available employment on the one hand and the qualifications and locations of workers on the other hand. When such an imbalance exists, both labor shortages and unemployment may occur, despite a balance between supply and demand for labor in the economy as a whole.

Because technological change is likely to displace some workers, it is a major factor in producing structural unemployment. While technological advance almost invariably results in shifts in demands for different types of workers, it does not necessarily result in unemployment. Relatively small or gradual changes in demand are likely to cause little unemployment. In the individual firm or even in the labor market as a whole, normal attrition may be sufficient to reduce the size of the work force in the affected occupations. Relatively large or rapid changes, however, can cause serious problems. Workers may lose their jobs and find themselves without the skills necessary to obtain new jobs. Whether this displacement leads to structural unemployment depends on the amount of public and private sector resources devoted to retraining and placing those workers. Workers can be encouraged to move where there are jobs, to reeducate or retrain themselves, or to retire. In addition, other factors affecting structural unemployment, such as capital movement, can be controlled.

Increased structural unemployment, should it occur, makes it difficult for the economy to achieve desired low rates of unemployment along with low rates of inflation. If there is a growing pool of workers who lack the necessary skills for the available jobs, increases in total labor demand will rapidly generate shortages of qualified workers. As the wages of those workers are bid up, labor costs, and thus prices, rise. This phenomenon may be an important factor in the rising trend, observed for the past two decades, of unemployment combined with inflation. Government policy has placed a priority on reducing inflation, but these efforts have nevertheless caused unemployment to increase.

“Structural unemployment—the unemployment that remains even at the peak of the economy’s upswings” - is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.
This GMAT Reading Comprehension consists of 6 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

Question 1
All of the following are mentioned as ways of controlling the magnitude of structural unemployment EXCEPT

1. using public funds to create jobs
2. teaching new skills to displaced workers
3. allowing displaced workers to retire
4. controlling the movement of capital
5. encouraging workers to move to where jobs are available

Question 2
The passage suggests that a potential outcome of higher structural unemployment is

1. increased public spending for social services
2. placement of workers in jobs for which they are not qualified
3. higher wages for those workers who have skills that are in demand
4. an increase in the length of time jobs remain unfilled
5. a shift in the government’s economic policy priorities

Question 3
It can be inferred from the passage that even when there are unemployed workers, labor shortages are still likely to occur if

1. the inflation rate is unusually high
2. there is insufficient technological innovation
3. the level of structural unemployment is exceptionally low
4. the jobs available in certain places require skills that the labor force in those areas lacks
5. the workers in some industries are dissatisfied with the pay offered in those industries

Question 4
The passage suggests that the phenomenon of combined unemployment and inflation is

1. a socioeconomic problem that can only be addressed by government intervention
2. a socioeconomic problem that can be characteristic of periods of structural unemployment
3. an economic problem that results from government intervention in management-labor relations
4. an economic problem that results from imperfect applications of technology
5. an economic problem that can be eliminated by relatively small changes in the labor force

Question 5
The passage is primarily concerned with

1. clarifying the definition of a concept
2. proposing a way to eliminate an undesirable condition
3. discussing the sources and consequences of a problem
4. suggesting ways to alleviate the effects of a particular social policy
5. evaluating the steps that have been taken to correct an imbalance

Question 6
According to the passage, small downward shifts in the demand for labor will not usually cause unemployment because

1. such shifts are frequently accompanied by upswings in the economy
2. such shifts usually occur slowly
3. workers can be encouraged to move to where there are jobs
4. normal attrition is often sufficient to reduce the size of the workforce
5. workers are usually flexible enough to learn new skills and switch to new jobs

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