AS Economics and Business
Structural change
Unit 2b
Mrs Hilton for revisionstation
Lesson Objectives
• To be able to identify all 3 sectors
• To be able to identify structural change in the
sectors in UK business over time
• To be able to discuss structural unemployment
• To be able to answer a sample AS level
question on structural change and structural
unemployment
Starter
• When you think of business in the UK what do
you think of?
Car making?
Shipbuilding?
Definition of structural change from
Edexcel
• Structural change involves permanent or semipermanent changes in the composition of an
economy as areas grow or dwindle
• Structural change is closely linked to changes in
patterns of demand. (As demand for coal
dwindled the coal industry collapsed)
Sectors
• Business can be divided up into 3 sectors:
• Primary – dig it
• Secondary – make it
• Tertiary – sell it
• Structural change is about a shift in sectors in
the UK over time
Primary Sector
• The primary sector – includes activities directly
related to natural resources, e.g. farming, mining
and oil extraction.
Dig it
Secondary Sector
Make it
•The secondary sector – covers all the other goods production in the
economy, including the processing of materials produced by the
primary sector. Manufacturing is the main element in this sector which
also includes construction and the public utility industries of gas, water
and electricity.
Tertiary Sector
Sell
it
•The tertiary sector – includes all the private sector
services, e.g. Shops, distribution, insurance, banking and finance, and
all the public sector services, such as health and defence.
Structural Changes over time
Causes of structural change over time
• Over time UK has seen a decline in primary and
secondary sector employment and output
• Over time it has also seen a rise in the
employment and output of the tertiary sector
Causes of secondary decline
• Industrial revolution and the factories
flourished employing 1000’s of workers
• 1900 half of all UK workers were employed in
the secondary sector
• After 1900 and Mechanisation meant that less
people were needed in manufacturing. A
machine could do the work of many of
workers.
Decline of shipbuilding
• So what went wrong for this once mighty industry?
• The reality is that British shipbuilding has been in trouble
since after the Second World War.
• Some say it was industrial strife between management and
unions.
• Others blame lack of investment in new equipment and
cost effective manufacturing techniques.
• But the general consensus is that our ships were too
expensive and that huge new shipyards in the emerging
economies of Japan and South Korea, were simply
producing cheaper ships by the 1970s.
• But leading shipbuilding expert Dr Martin Stopford, who
worked in the industry for decades, said the crunch for
commercial British shipbuilding came in the 1980s with a
double whammy of world recession and a strong pound
making our ships too expensive. Source / Video / video 2
Other causes
• Low wage competition from other countries –
emergence of China as an industrial nation and
their change from a planned economy into a
market economy.
• Demographic changes – living longer so those over 75
has increased and with it an increased demand
for healthcare services
• Incomes have risen and therefore a rise in consumer
demand for; tourism, entertainment and finance
all tertiary activities
• Technological change –obsolescence of a type of
industry will mean there are whole groups of
workers who no longer have the right skills for
the market place.
Typesetters at work creating a
newspaper by hand – modern
machinery means this is a lost skill
Farm fruit pickers, many
workers now replaced by
one machine – productive
efficiency but at a cost of
employment
• Technological change and mechanisation in the
primary sector has meant fewer workers are
needed
Increase in tertiary sector
• Rise of the knowledge economy
• Our resources used to be; land labour capital and
enterprise. Now our main resource is knowledge
• Rise of ICT based jobs
• Rise of R&D jobs
• Rise in science jobs
• Definition (from wiki) an economy in which growth is
dependent on the quantity, quality, and accessibility of
the information available, rather than the means of
production.
Definition of structural unemployment
from Edexcel
• Structural unemployment is caused by structural
change within an economy caused by the
decline of traditional industries or
technological change.
Structural unemployment
• Mismatch between skills
and work available
• Lack of demand for a
product causes
unemployment
• Technological change
causes change in demand
for a product. Example
videos now obsolete and
everyone buys DVD or Blue
ray, those skills and jobs
are lost.
• For example a shipbuilder
made redundant will not
be able to fill a vacancy for
a maths teacher.
Sample question 1
• Which one of the following businesses is most
likely to be associated with Structural
Unemployment in the UK?
•
•
•
•
A Food Retailing
B Hairdressing
C Shipbuilding
D Catering
Answer question 1
• – (C) Shipbuilding
Structural unemployment is caused by structural change within an economy
cause by the decline of traditional industries (1 mark) or technological
change. (1 mark).
• Structural unemployment exists where there is a mismatch between their
skills and the requirements of the new job opportunities. (1 mark) e.g.
their skills are not needed in other industries
• Shipbuilding has declined over recent years and is a traditional industry in
the UK (1 mark).
• Structural unemployment tend to be long term due to the need for
retraining (1 mark)
• Many ships are now made abroad due to cheaper labour (1 mark).
• Food retailing, hairdressing and catering are more likely to be associated
with demand deficiency (cyclical) unemployment rather than structural
unemployment because they are linked to a drop in Aggregate Demand (1
mark).
Sample question 2
• Structural change in an emerging economy
such as China is likely to involve all of the
following except
•
•
•
•
A changing patterns of demand.
B a decline in certain industries.
C a reduction in uncertainty.
D new industries expanding.
Answer question 2
• C – a reduction in uncertainty
Some understanding of what is meant by structural change e.g. Structural
change involves permanent or semi-permanent changes in the composition
of an economy as areas grow or dwindle (1 mark)
Some industries in China will decline and others will flourish and grow (1
mark) e.g. growth in toy manufacturing
The transition is likely to involve greater uncertainty (1 mark)
There may be uncertainty due to the changing nature of industries (1 mark)
as employees fear job losses in the future (1 mark)
Structural change is closely linked to changes in the patterns of demand (1
mark) and China will have changes to the patterns of demand within the
economy.
Revision Video