Much as I don\’t like Paul Krugman\’s political views (most especially on the viability of the votestealers doing anything useful with our money) I certainly respect him as an economist (and as an intellect and much, much, more so as a writer).
But this is sad:
Jargon has its uses, in economics as in many other fields. It’s hard work, and also time- and space-consuming, to translate everything into plain English, all of the time.
But that said, sometimes jargon gets in the way of understanding, especially if the term of art sounds like something else. And that’s clearly the case with “structural unemployment.”
Here’s what economists mean by “a rise in structural unemployment”: a rise in the minimum unemployment rate you can get to before you start having inflation problems.
There’s a story behind why that might happen — it might happen because unemployed workers have the wrong skills, or they’re in the wrong places, or they can live so well off the dole that they don’t really want to work, or whatever. But the measure of structural unemployment is that worsening of the inflation-unemployment tradeoff. So, for example, the demonstration that Britain suffered a large rise in structural unemployment in the late 70s through the 80s was the way inflation took off in the late 80s, even though the unemployment rate was quite high by historical standards.
No, what he\’s just described is NAIRU (the non accelerating inflation rate of unemployment), not structural unemployment.
We can indeed say that structural unemployment is that bit that\’s left over after cyclical unemployment has been soaked up: and that thus NAIRU is a reasonable enough guide to it. But that isn\’t the definition by any means.
Wrong skills, wrong places, sure, that\’s structural unemployment: dole, benefits, that\’s NAIRU. The importance of the difference being that, well, if you\’ve got a high NAIRU it really is rather important to work out why: what do we change to lower it?
Like, just as one example, time limiting benefits. Or in the US example, not extending unemployment benefits from 26 weeks to 99: that\’s NAIRU. Having squidellymillions of carpenters and roofers out of work as a result of the collapse in construction: that\’s structural unemployment. They need to retrain for other industries.