Discuss about the Demand and Supply of Labor in Australia.
Labor is an important resource in the production of goods or services in an economy (Rouse, 2011). It is therefore essential for the policy makers to ensure that there is sufficient supply of labor. The Australian economy has been challenged with the issue of bringing its unemployment level to manageable level since it is very high (Valenzuela, 2013). This means that the demand for labor in Australia exceeds its supply. Demand for labor is given by the workers who are looking for both full time and part time employment; the number of unemployed persons in Australia is high. Despite the fact that the economy is experiencing growth in the current years, this has not been reflected on the labor market; businesses are not expanding and thus are not demanding additional labor (McGrath, 2014). In this paper, some of the factors that are responsible for increasing the labor demand will be identified and also some factors that are discouraging supply. In the article “Unsustainable labor challenges leave Australia's vegetable supplies to rot” obtained from the Sydney Morning Herald written by Anna Patty in 2017, the writer is showing us that wage is one of the factors that discourages supply of labor. This report will thus be important to the unemployed people to understand the reasons for the persistence of unemployment. It will also help the employers in making wise employment decisions as it will acquire knowledge on how to improve the workers productivity. The government will also be able to make policies towards addressing some of the problems that will be identified to accelerate the unemployment problem.
The article notes that labor is an important resource for promoting production. In this article, it is noted of the many farmers that have experienced great losses owing to the insufficiency of laborers. The losses have been incurred because the workers who are supplied in these farms are lower than the labor demand. The sustainability of the agriculture industry is at risk because they will not be able to produce more as they will be afraid that they won’t be able to get enough laborers to pick, package and get the fruits to the market. The productivity is also undermined because the businesses cannot expand as additional workers may be required for the same. One of the major solution introduced to help solve the challenge of low labor supply is that of facilitating the Working Holiday Maker (Martin, 2017). These young people from countries neighboring Australia are allowed to offer their low skilled labor in an industry like the horticultural industry (Moir, 2017).
The reliance of this Working Holiday Maker is becoming a major challenge as some of the farmers are unable to recruit the low-skilled workers and end up leaving their fruits unpicked. The duration period for such visas is 88 days and these workers are not willing to be committed to continue working after these days are over. The article noted that these workers are not willing to extend their visas as it leads to exploitation. This industry is an important contributor to the Australian GDP, insurance on food security and the earning of foreign exchange from the exportation of these products (Patty, 2017). The most important factor for inadequacy of laborers in this industry is payment of low wages and difficult working conditions. The Australians thus claims that this is a low status job that they cannot engage in. they also notes that there is no job security from involvement in such a job.
The article also noted that even the Working Holiday Makers are not enough; the reason given was that these workers are limited to flow from certain countries and restrictions on others. It is proposed by the horticultural farmers that the government should lower such restrictions and allow more laborers to from many countries to give a sufficient supply. The policies by the government are also discouraging the flow; the government has increased tax on these workers; farmers argue that the tax should be lowered so as to attract more workers.
Fig: Underutilization of labor in Australia
Source: Somasundaram: Business Insider Australia (2017)
Fig: Australian Unemployment Rate
Source: Somasundaram: Business Insider Australia (2017)
According to Jacobs (2017), underutilization of labor is experienced in the Australian labor market in addition to the high unemployment rate as shown in the two graphs above respectively.
Unemployment problem has been a major challenge for this economy. There are many workers without jobs in Australia, thus, the idea of promoting the flow of Working Holiday Makers is not a good idea. The government should address the problem facing the horticultural industry and improve their working conditions; regulation of this industry would help in addressing these problem. The increment in tax for this workers should be raised since the importation of labor add to the labor force and this explains the high unemployment rate. The government should also ensure that wages offered in this industry are fair so as to stimulate the Australians to work in this industry. This could be achieved by lowering the corporate tax for the horticultural farmers to lower their production costs and thus facilitate a payment of higher wages. The personal tax on Australians working in the industry should also be lowered. Discouragement of the Working Holiday Makers will also create a shortage of supply and thus the horticultural farms will accept the Australian workers at a higher wage.
Australian economy’s unemployment rate is high and thus the policy makers are expected to find a solution. The flow of workers from other countries to Australia is contributing to an excess supply of labor. These workers are in most cases underpaid so as to improve the profit level for the firms. The ability to import workers who can work at lower wages is at a disadvantage to the economy as it discourages the domestic workers from these industries and contributes to the rising unemployment rate. It is unfair to employ an alien whereas there are unemployed domestic workers. Further research should be carried out as the factors discouraging labor supply and demand are many.
Jacobs, S. (2017). The RBA minutes show it's thinking differently about the labor market. Business Insider Australia. Retrieved 29 August 2017, from https://www.businessinsider.com.au/the-rba-minutes-show-its-thinking-differently-about-the-labour-market-2017-5.
McGrath, P. (2014). Labor shortage predicted to hamper economy. ABC News. Retrieved 29 August 2017, from https://www.abc.net.au/news/2014-08-04/labour-shortage-predicted-to-hamper-australian-economy/5647196.
Moir, A. (2017). Don't expect backpackers to do backbreaking work without fair wages. The Sydney Morning Herald. Retrieved 29 August 2017, from https://www.smh.com.au/comment/smh-letters/dont-expect-backpackers-to-do-backbreaking-work-without-fair-wages-20170514-gw4tos.html.
Martin, P. (2017). Citizenship rules make no sense since most of us come from somewhere else. The Sydney Morning Herald. Retrieved 29 August 2017, from https://www.smh.com.au/comment/citizenship-rules-make-no-sense-since-most-of-us-come-from-somewhere-else-20170725-gxir3d.html.
Patty, A. (2017). Unsustainable labor challenges leave Australia's vegetable supplies to rot. Smh.com.au. Retrieved 29 August 2017, from https://www.smh.com.au/business/workplace-relations/unsustainable-labour-challenges-leave-australias-vegetable-supplies-to-rot-20170512-gw3bjt.html.
Rouse. (2011). The Australian Economy: The labor market. Mrrouse.com. Retrieved 29 August 2017, from https://mrrouse.com/2011/05/24/labourmarket/.
Somasundaram, N. (2017). It's tough times ahead for Australia's labor market. Business Insider Australia. Retrieved 29 August 2017, from https://www.businessinsider.com.au/its-tough-times-ahead-for-australias-labour-market-2017-5.
Valenzuela, R. (2013). Wages down to supply and demand. The Sydney Morning Herald. Retrieved 29 August 2017, from https://www.smh.com.au/national/education/wages-down-to-supply-and-demand-20131004-2uyno.html.