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What Is a Structural Change?

Jobless recovery is a recent term that describes economic recovery without job creation.
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  • Written By: Daphne Mallory
  • Edited By: O. Wallace
  • Last Modified Date: 03 October 2014
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A structural change is a fundamental shift in the way an economy functions. This type of change completely alters the way an economy previously functioned, and can have both positive and negative effects on the individuals and companies involved in the change. A structural change can also cause an economy to become more robust and profitable, or to decline into a less profitable economic system. Factors that can affect an economy in terms of its structure include the availability or scarcity of goods and labor, technological advances, war, natural disasters and various other factors.

Technological advances led to a structural change in national economies during the Industrial Revolution. Factory jobs replaced the subsistence economies that existed in many nations, and people often moved from rural areas to cities to work in factories for higher wages. Likewise, the development of the Internet caused widespread changes in the way economies function. Companies often use the Internet to facilitate communications and the transfer of goods and services, whereas those tasks were previously completed using technologies that were slower and are now outdated or no longer used. The concept of a jobless recovery is a more recent example. As companies outsource jobs to other regions or countries, they are able to maintain profit margins. At the same time, local economies are altered because workers are still unable to find jobs.

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A structural change to an economy can be intentional or unintentional. A modern example of an attempt at intentional structural change is the push by governments to shift nations to alternative forms of energy. If the petroleum industry were to be replaced by alternative technologies, it could lead to widespread structural changes in how economies function, particularly in advanced nations. An example of an unintentional change is a lengthy drought that causes crop failures. If a region is unable to grow enough food to support its populace, the economy could shift so that more trade goods are produced to import food, and more individuals could attempt to grow their own food to make up for the scarcity.

Labor mobility can cause a structural change to an economy. Workers often choose to move to another region if it will benefit their economic or career situation. High property taxes, high cost of living and expensive goods often make it attractive for workers to move to a new location. If this happens often enough, it can cause labor shortages in the originating city or region. This in turn can force companies to change the way they do business, and eventually structural change happens as the economy adjusts to the shortage and businesses take on new modalities of operating.

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