HI5003 Economics for Business: Unemployment in Australia

demand causes job loss and the existing workers suffered due to termination of workers because of lower demand. The cyclical unemployment in Australia rose highly during 2008-2009 due to global financial crisis (Xu et al., 2013).During this time, the economy experienced significantly lower rate of growth resulted from a lower GDP growth.

Structural unemployment in an economy arises because of industrial restructuring particularly introduction of new technologies (Valletta, 2013). The existing workers who are unable to adapt the new technology are forced to leave the industry. When this happens in several industries at a same time then it increases the national unemployment as a whole. The structural unemployment in Australia is continuously growing putting the threat of a steady long-term unemployment for the economy.

 Transition of workers from one industry to other leads to frictional unemployment of the economy (Pigou, 2016). Frictional unemployment is largely caused due t the change in structural composition of different sectors. Frictional unemployment is not much troublesome for economy. In fact, this type of unemployment always exists in the nation. Nearly 2% of the total unemployment in Australia fall under the category of frictional unemployment (Gittins, 2017).

Another type of unemployment prevailing in Australia is hidden unemployment. These unemployment figures are not counted in official unemployment measure of the nation. Thus, without considering hidden unemployment the actual unemployment is understated. The official statistics include those who are actively seeking for jobs but cannot find the one (Watson, 2013). Sometimes even when people are employed in some industry they cannot utilize their skills. In addition, there are people who have given up finding jobs. These groups are considered as hidden unemployed group. If hidden unemployment is also counted in official statistics then this might give a completely different picture of unemployment in Australia.

When there is annual unemployment in the labor force then the economy the economy is considered as suffering from long-term unemployment. People in Australia remain unemployed in several reasons for long time. Hence, the incidence of long run unemployment is common in Australia (Zammit, 2017). Long-term unemployment among household is quite high in Australia as per industrial standard. Studies reveal the households suffering from unemployment for more than a year are mostly households with single parents, disabled persons or workers living in remote location.

The direct effect of unemployment is on poverty and inequality of the economy. Individuals as well as the whole society suffer from unemployment phenomenon. Despite having a lower unemployment rate in general, the trouble for the Australian economy is the persistent long run unemployment that is people are being unemployed for a long period (McLachlan, 2013).The long run unemployment in Australia is damaging the living standard and well-being of the people. Child aged below 15 years and those who remain unemployed for a considerable long time are exposed to an ill health condition. It is observed that they are suffering from different chronic and complex diseases that further reduce their working ability. Long term unemployment has a disastrous social impact. Persistent unemployment results in a low self-esteem and loss of self-identity. The effect of unemployment sometimes trickles down to the next generation. Children belonging to families that are experiencing long-term unemployment have a worse economic prospect than those belong to employed parents.

Unemployment situation in some major states of Australia are discussed below:

Chart Source: ABS Labor Force Survey. All data are seasonally adjusted, except for the Northern Territory and the Australian Capital Territory, which are trend data.

Figure 1: Unemployment rate in some major states of Australia

Among all the states and territories in Australia, lowest unemployment is accounted in Northern Capital Territory.("NT leads nation in employment", 2017) .More than half of the population participates in the labor force there. A major share of working population is female. In the group of employed woman, majority of them are pertaining to part time workers. The employment statistics has improved significantly as compared to past few years. Along with lower unemployment, the region has achieved commendable economic growth and prosperity. This encourages young population to attend full time education and participate in the labor force.

The next region that is discussed is Australian Capital Territory where unemployment rate is below the national average.The unemployment reduced by 0.1% point in recent year (Boddy, 2017). The  labor force participation is lower here still this region stands seconds for having a lower unemployment rate. The resulted decrease in unemployment is mainly due to the new job creation. Among the newly created jobs most is part time in nature. This gives the employer an additional edge for hiring the job seekers. On the other hand, secondary household earners are also getting more opportunities to join the labor force.

Northern South Wales comes next after the two territorial region. The region currently has an unemployment rate of 5.1% (Drew & Dollery, 2016). However, a large number of employed people are underemployed. This indicates underutilization among the working population. Jobs are highly discriminated between male and female labor force. Unemployment is greater among the female labor force. Even those who are employed are partially employed. The youth population is suffered from cyclical unemployment.  This is mostly due to the casual and part time nature of jobs.

Unemployment in Western Australia is slightly higher, unemployment rate being 6%. However, the rate is lower as compared to 6.9% in the previous year. Nearly 1.3 million people in Western Australia are employed in different sectors. Among them 918,000 are doing a full time job ("'Green shoots' for WA economy as unemployment falls", 2017). The incidence of underemployment is quite high in this region. Many people in the labour force want a full time job but are currently engaged in part timework.  Additionally, the number of job seekers in Western Australia is increasing. As a result, the unemployment rate remains significantly high despite increase in job opportunities.

Tasmania, an island state in the Commonwealth of Australia has successfully reduced its unemployment rate. The unemployment rate has reached to 5.9%. This is the lowest ever rate that this region experienced in the last few years ("Unemployment rate falls to 5.9%", 2017).The unemployment rate reflects growth of different sectors in the economy. Major jobs are created in sectors like tourism and hospitality, building and construction business and retail markets. However, concerns remain because of lower participation rate and abolition of full time jobs from the job market. Along with this, the long-term unemployment in the region is significantly high. Roughly, 1.9% of the total labour force remains unemployed for a long time.

The proportion of unemployed labour force in Greater Victoria is at considerably low level. Recent studies show the rate being 3.8% .The numbers of both full time and part time jobholders have increased (Holden & Sparrman,2016).New job opportunities have been created in all most every sectors of the economy including hospitality, technology, and construction and so on. Employers are increasingly participating in job fairs to hire labourers. Use of social media for attracting workers has proved beneficial here. Recently job fair organised by tourism industry at Ogden Point has recorded highest visitors for the season. The incidence of employment is increasing among the youth (15 to 24 years) and middle aged (25 to 54 years) group of population. This is a good indication for economy’s growth.

The unemployment condition is gradually worsening in Queensland. The rate climbed up to 6.7%, a rate higher than that prevailing in Victoria and New South Wales (Basin, 2016). To combat unemployment the state government has focused in new job creation in different sectors. For example, business houses are encouraged for hiring more workers. The stable government policies are expected to bring more investment and this will create new employment opportunities. The successful implementation of government policies can improve the employment scenario in near future.

The maximum numbers of jobless are accounted in South Australia. The unemployment rate (7.3%) overstates the nation’s  average unemployment rate. (Kahn et al. 2012). It is the only state in Australia that records considerable decrease in employment. Moreover, those who are employed are mostly underemployed leading to underutilisation of potential skills of the labourers. All these combine together to result in a persistent problem of unemployment. The government has taken several strategies to control sky rising unemployment but nothing proves fruitful yet. More focus has to be given to reduce the accounting cost of production. As a consequence of decreasing cost output will be increased and stimulate export growth.

Unemployment is not desirable for any economy. Government interventions are needed to reduce all types of involuntary unemployment. In order to achieve full employment the Australian government has given some major policy prescriptions. Governmental policies are broadly classified in two categories- fiscal policy and monetary policy (Afonso & Sousa, 2012). Fiscal policy works through adjustment in either government expenditure or tax rates whereas monetary policy uses direct instrument of money supply. The Australian government uses both fiscal and monetary policy to deal with unemployment condition. Here, the government has taken expansionary fiscal policy by increasing government spending in different fields and reducing the tax rate simultaneously. Apart from that, there is a cut in nation’s interest rate in order to boost productive investment. This is the part of stimulatory monetary policy. Focus has also given to the growth of aggregate wage for industrial workers. Standard wage is maintained through minimum wage policy or industrial relation policy. Full employment in an economy requires efficient allocation and utilization of resources. In this context, policies of microeconomic reform are undertaken to put all the resources in productive use (Mishra, 2014).

In Australia, different sets of policies are prescribed to tackle unemployment. The policy recommendations are based on the nature of unemployment. For example, to counteract cyclical unemployment policies that help to increase the aggregate demand is considered. While for structural unemployment jobs that match the skills of unemployed labourer are created or training programme are arranged to improve skill (Andersen & Svarer, 2012).

At the phase of downturn in business cycle, fiscal or monetary policy is largely used by the government. Both the policies have effect of raising the aggregate demand in the economy either directly or indirectly. Direct effects resulted from different tools of fiscal policy. When government cuts tax rate then it raises the disposable income of people living in the economy. Higher income increases the tendency of higher consumption. To fulfil the consumption needs of the household more goods need to be produced. Increase in government spending indirectly affects income and output demand.

Interest rate is the cost of investment. Reduction in interest rate means reduction in cost. This encourages investment and increase productivity. Increase in productivity stimulates employment. Monetary policy works through this channel. The governmental policies to boost demand  in Australia have proved beneficial to counteract cyclical unemployment caused by business cycle fluctuation (Choudhry, Marelli & Signorelli, 2012).

Unemployment from structural mismatch cannot be solved by increasing the aggregate demand. Policies pertaining to labour market reforms are more effective to tackle the situation. As Australia often experienced structural mismatch between the labour force and available jobs a different set of policies are employed to address this issue. Australia had experienced high level of structural unemployment in 2006 (Furceri & Mourougane, 2012). Huge numbers of available jobs remained vacant because of the shortage of skills of available workforce. These jobs mainly correspond to the region of Queensland and Western Australia. Both the states were then undergoing through the phase of economic boom. The structural mismatch is largely caused by lack of education, training or skills among the available workforce. To improve school level education the government has designed National Education Framework. Australian Training Authority has formed to arrange vocational training and skill improvement program. Different Apprenticeship centres are opened in Australia where employers initiate program to improve skill of apprentices. Major funding is required for implementing all these programs. Sufficient funds have been allocated in the budget for job and training program (Adams, 2012).

Long-term unemployment is another major problem in Australia. When individual remain unemployed for a longer period of time both the economy and society suffer from this. Higher tax rate sometimes refrain individual to look for jobs. In order to encourage unemployed workers to seek for casual, part time and full time jobs the personal tax rate has been reduced (Gale & Samwick, 2014)People suffers from long term unemployment mostly include young people, workers living in remote location, physically disabled persons, household with single parent. Government has created new jobs and announced incentives for encouraging participation in workforce. Special programs are arranged for targeted groups to make them aware regarding the consequence  of unemployment.

Another important policy of making job market more attractive is minimum wage policy. The Australian government has stressed on increasing the minimum wage. The minimum wage in Australia is currently set at $672.70 per week or dollar $17.70 per hour which is approximately 2.4% higher than earlier ( Belman & Wolfson,2014).When minimum wage is set it not only affects the labor market but also affects the goods markets. Increase in wage increases the labor cost of the employer. This encourages them to employ fewer workers. Whereas the higher wage makes labor market more attractive and result in excess labor supply. This excess supply of labor results in turn creates unemployment for some workers. However, the downside of this policy needs to be unveiled. The increase of wage for the existing workers increases their disposable income. As a result, they will demand more goods than before (Schmitt, 2013) .This again makes the producers to produce more to meet the excess demand. Increase in demand in the goods market increases the demand of labor. This offset the previously created unemployment to some extent. The ultimate effects of minimum wage policy depend on these two effects. In Australia the later effect dominates. The minimum wage law instead of lowering employment actually increases it by creating more demand. To understand the scenario better evaluation of both the labor market and the goods market is needed.

  The discussion so far made shows that Australia is partially successful in achieving a lower unemployment rate. The unemployment proportion in some states is even lower than the national rate. The territorial regions especially Northern Capital Territory, Australian Capital Territory has shown significant progress in overcoming unemployment. Various new job opportunities have been created in those regions. The picture of unemployment in Queensland and South Australia is different. Unemployment rate is quite higher in these two states. In every state almost participation of female workers in full time jobs is lower than that of male workers. Underutilizations of labor force, existence of long-term unemployment, hidden unemployment are some other problems in Australia. However, the government is well aware of this and takes several steps to counteract unemployment. Government uses fiscal and monetary instrument for creating job opportunities in the nation. Government organized training programs for skill improvement has helped to reduce unemployment resulted from the lack of skills. The minimum wage policy taken by the Australian government has proved fruitful for the labor force. The Australian economy is constituted an exception to other economy that employed minimum wage policy but ended with a high employment. Thus, the governmental policies helped the nation to deal with unemployment condition but participation of every state in those programs is required to overcome this problem completely.

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