4 J.L. & Econ. 80 (1961)
Structural Unemployment: A Reconsideration of the Evidence and the Theory

handle is hein.journals/jlecono4 and id is 82 raw text is: STRUCTURAL UNEMPLOYMENT: A RECON-
SIDERATION OF THE EVIDENCE
AND THE THEORY
HAROLD DEMSETZ
University of California, Los Angeles
ALTHOUGH in recent months structural unemployment has been widely dis-
cussed, both the issues and the relevance of the evidence offered remain un-
clear. The discussants have generally failed to describe the phenomena with
which they are concerned, have not clearly specified hypotheses about these
phenomena, and, finally, have not provided adequate explanatory theories.
This paper's objectives are two: to clarify and improve the discussion in the
three respects just mentioned; to examine the evidence.
Part I attempts to formulate a hypothesis that can be used to specify tests
for structural unemployment and examines labor-force categories for which
such tests can be performed. Part II specifies and applies tests for structural
unemployment to one such labor-force category. Since the conclusions derived
from these tests run contrary to those arrived at by the Council of Economic
Advisors in the Council's statement before the Joint Economic Committee
(The American Economy in 1961: Problems and Policies), relevant parts of
the Council's statement are included in footnotes. All quotations from the
Council's statement are from Appendix B. Since the tests presented in Part II
indicate some degree of confirmation of the existence of structural unemploy-
ment, Part III presents a simple argument which implies such existence and
is consistent with economic theory.
Discussants of structural unemployment have not been clear about what
they mean by the words structural unemployment. What seems to be im-
plied is unemployment that is distinguished by its persistence in the face of
monetary and fiscal measures designed to reduce unemployment. Three re-
lated hypotheses seem to be mixed in the discussions.
(H1). Structurally unemployed keep the unemployment rate from falling below,
say, 5 per cent. Moreover, the structurally unemployed are growing in importance
so that the minimum unemployment percentage is likely to increase.
(H2). Recent increases in unemployment to a large extent are attributable to
increases in the structurally unemployed.

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