Supply-side reforms play a critical role in addressing long term structural unemployment.

The three types of unemployment

...structural unemployment is not simply a product of economic busts. Karl Marx (who considered himself an economist) referred to a “reserve army of labour”. 

Marx argued that capitalism depended on people being out of work. The jobless, clamouring for employment, would ensure that workers were too scared to push for wage rises. Capitalists relied on the unemployed to keep their costs down. 

Marx exaggerated, though most economists would accept that a certain level of unemployment is inevitable: an attempt to achieve full employment would stoke massive wage inflation. 

Whatever its causes, governments have to understand structural unemployment. 

Economic growth alone will not be enough to get everyone into work. 

Supply-side reforms, such as job training (known by wonks as “active labour market policies”) are also needed.

Dig deeper:

- The impact of downturns on mind and body (August 2013)
- The labour market in America has suffered permanent harm (Feb 2014)
- A significant proportion of unemployment is probably cyclical (May 2012)

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