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Australian Unemployment Rate: Overview and Impact on the Economy

Discuss about the Jobs Surge Failing To Deliver Wage Rises.

The unemployment increment in Australia has been a major threat on this economy. The poverty rate in Australia is very high owing to a high unemployment rate. There many people is Australia seeking to be employed. Others have no jobs but are not searching as they have done so for long without success and they’ve ended up losing hope. A high unemployment rate symbolizes the fact that Australia is not healthy and that its growth is not sufficient to create sufficient jobs. The easiness of getting a job in Australia has greatly reduced. The supply for workers has gone up while the rate of job creation has fallen. The unfavorable business conditions has also weakened the demand for workers by companies. This paper shall define clearly what unemployment is and describe certain set conditions that one has to fit so as to be included in that bracket.

The various changes that have been observed in the Australian workforce will also be discussed. The analysis on the Australian states mostly affected by high unemployment rate will also be done. Here we shall discuss the various causes and unemployment types. The government policies that have been implemented to affect changes in the workforce will also be considered. This will include the implementation of minimum wages, fiscal and monetary policies intended to stimulate the economy so as to create more jobs. The paper will give a good picture of the current situation in the Australian economy. It shall also determine whether the reported unemployment rate is sufficient to give an interpretation on Australian economic Performance. Other issues such as that of underemployed and discouraged workers will be an important part of this study. The policy makers will thus be the major beneficially of this research as they may use it to gauge the effectiveness of their policies. Recommendations will be provided for both the unemployed persons, and the government.

The three forms of data was extracted from the World Bank report. The total unemployment rate as lower is 2013 where the reported value was 5.6%. On this data report, more males (% of male labor force) were unemployed compared to female (% of female labor force). In the year 2014, the unemployment rate rose to the highest rate recorded during this period. The reported rate was 6.17%; on this data, more females became unemployed compared to the male group. In 2015, the rate still remained high, but slightly lower than that of 2014. The reported rate during that year was 6.07%, still more females were unemployed compared to males. In 2016, there was a gradual fall in the rate to 5.78%. The proportion of female unemployment was still higher compared to that of males. Lastly in 2017, the rate fell further to 5.67%; still more females were employed than males. Thus as observed in the graph, females are the most impacted by the high Australian unemployment rate.

Causes of Unemployment in Australia

The contribution of high unemployment rate is related to many factors. However, there are specific factors that have been noted to contribute heavily to the Australian unemployment increment. The common causes are state-specific and others are common in the whole of Australia. The following factors are the common causes in Australia excluding the discrimination of senior and younger workers.

One is the closure of industries; Sebastian (2015) pointed out that closing down of shops is the major reason behind the high rates. There are so many people that have been left jobless after their industries have shut down. These people have added to the number of the unemployed persons. From a matter of fact, there is less industrial diversification in the South Australian state making it difficult for those who lose their job to get a newer one. Some of the industries closing down include; manufacturing, agriculture and textile industries. These industries employ a greater proportion of the total labor force. Sebastian (2015) also noted that the federal government has failed in its advanced planning on preparing the workforce on how they will switch to other jobs after the close down of Holden. The blame cannot be wholly laid on the failure of the government but also on individuals. Sebastian argued that individuals should observe the state and performance of their industry and it’s not good, they should plan ahead and start looking for a new job. The bank is blamed by some people for their failure on promoting innovation on new business startup so that the businesses might grow to employ more people.

Second, changes in infrastructure spending; the harder economic times has resulted in a decline in public and private infrastructural spending. This has led to the shifting of skilled personnel including engineers to overseas which has left so many without jobs. When the hard economic time comes to an end, these skilled personnel are not available which keeps workers out of jobs until such skills are available once again. For this reason, South Australia had been using more of Victorian workers for their major projects. The use of interstate workers prevented the picking up of work by the South Australian locals.

Third, offshoring; some years back, the western countries began receiving tax incentives from other countries to factories and jobs to their country. This force workers to adapt as many textile and manufacturing jobs were going offshore. This movement has led to the decline in the manufacturing sector such that exportation has fallen and Australia is becoming more of a service-based economy. The workers left behind lose their previously held skills and therefore a need to retrain then on other areas of business. Picking up of the manufacturing industry with thus demand more and more retraining to restore the lost skills. This would happen in any other sector that closes down and leave workers unemployed.

Types of Unemployment in Australia

Lastly, poor economic performance and immigration; Australia has performed poorly in the past years. A poor performance tend to make businesses to lower their costs, they achieve this by lowering the number of workers. Immigrants adds up to the labor force and they increase the unemployment rate.

This exists as an impact of the existence of a negative externality in the labor market. The externality is on the existence of information asymmetry. The jobless people and the employing firms fail to have information on the existence of each other (McEachern, 2017). However, after a period of time, these two parties will get together and the person will be employed; the issue is the time in between. Information on job vacancies only reach some people while others fail to receive such news.

This is mostly caused by technological changes where new technology kicks some workers out of the market. E.g. the introduction of robots that can do a job done by 5 people can displace many workers. Unlike frictional unemployment, the impacts of this might take many years. We discussed offshoring earlier, when an industry is not able to sustain the rising production costs (e.g. Australian textile and manufacturing industries) and finds it more profitable to move the factory to another country, many are left jobless (Amadeo, 2018). The government role in controlling this unemployment type is critical as it exists even when the creation of jobs is high.

Business cycles influence the rate of unemployment. During recessions when businesses are producing less due to demand deficiency, workers are reduced with an attempt to tighten revenues (Grimsley, 2017). Australian contractionary phase has resulted in a loss of many jobs. The workers will get their jobs back when the economy falls in an expansion cycle.

Some people are employed in sectors where the production process comes to a break at given time periods, these people become unemployed during the breaks. There are many examples of these types of jobs. E.g. In the tourism industry, during holidays, most people are employed because the flow of tourists is high (Pettinger, 2017). Goods with multiple stage production also have this type of employment especially where workers only have skills on some stages but not others. During the stage where they have skills, they have a job. However, when production moves to the next stage where they fail to have the necessary skills, they are left unemployed. However, this unemployment is only temporary as long as the seasons happens at the same period of the year.

Government Policies to Address Unemployment in Australia

Under the conditions for unemployment, there is a requirement that one should not have worked even for an hour during the survey week. Anyone who had worked at least for an hour and was paid is excluded from the unemployment bracket. Given the current hourly minimum wage, this person has earned nothing, the income is so small to meet any of the basic needs. Most of these people are in an active search for a job (Murphy, 2017). Australia is thus making a mistake for including these people in the employed bracket. Some of these people may rather prefer staying without jobs than be considered employed while they are not. The Australian government has completely ignored the underemployed.

In Australia, some citizens have no jobs and are not looking for them. The government has also ignored this group. These people in the real sense are unemployed and if they got a job they would gratefully accept the offer (Jericho, 2017). The reason for their inactiveness in job seeking is that they have become tired with the labor market; they had for long been looking for a job but have not been successful for a long period. It’s very wrong to exclude this people from the unemployment measure. This explains why the creation of jobs does not have a significant improvement in unemployment and wages. Letts (2018) noted that despite the surge in jobs, the unemployment rate still went higher and wages remained stalled.

According to Nzherald.co.nz (2018) unions in Australia are constantly pushing the government for a minimum wage increment. Before the imposition of minimum wage, at the equilibrium wage W*, Y* number of employers are demanded and supplied. A higher minimum wage will have an impact of lowering the demand because production costs increases as a result (Belman and Wolfson, 2014). This may force the hiring company either to sell the produced goods at a higher price of to lower the workforce. Raising the price also end up causing a decline in the workforce because consumers cut their demand and demand deficiency forces producers to produce less and a smaller workforce is required for that. The minimum wage raise wages but causes a fall in the number of employed workers from Y* to Yn.

As of January 2017, West Australia had the highest level of unemployment, South Australia followed closely, Queensland, Victoria, Tasmania, New South Wales, Northern territory, and lastly the least affected was the Australian Capital Territory.

Analysis of Unemployment by Australian States

Government policies towards improving the labor market always tend to fail. This is because the unemployment rate is closely tied with the inflation rate, every time the government employs expansionary fiscal or monetary policy, the unemployment rate falls, but on the other side, the inflation rate goes up creating a need for contractionary policies. Hutchens (2017) noted that the fall in unemployment rate in September 2017 caused the inflation rate to hike past its trough creating a need for a cash rate hike.

There is a great mistake in taking a person working for a single hour to be employed. The government should do an analysis of the average weekly spend on the Australian citizens and determine the minimum weekly wage required to support the basic needs. After doing this, it should revise the number of hour requirement according to the minimum wages and the average wage. For instance the government may find out that one need to work for at least 15 hours if the basic needs are met effectively. This at least will lower the problem of unemployment and a clearer picture of the unemployment situation in Australia will be obtained.

The government should completely do away with the conditions that one must meet to be considered unemployed and take all persons above the age of 15Years to be unemployed. This is the real labor force. One argument why the unemployment rate in Australia remains high even when there is an increase in job creation is because of these ignored workers. For instance, if we may consider the fact that the unemployed persons were say two million, if the government created 500,000 jobs, there is still a possibility that the unemployment rate will still remain to be the same or even go higher. Why? This is because the government has no ability to specify the allocation of those jobs to the unemployed. Most of these jobs might go to the discouraged workers and the underemployed. This is the reason why ignoring these people leads to the government making misleading decisions. If the government considered all those without jobs to be unemployed, it would easily track the changes in the unemployment rate. The government should use other rules and regulation to control this market other that trying to use expansionary policies as they have negative impacts.

Conclusions

Even though there seem to be an improvement in the unemployment rate in Australia over the 5 years under analysis, the rate is higher and still not favorable and need to be improved further. There is no single factor which we can base all the blame for the problem of unemployment rate in Australia, however, the decline in the performance of manufacturing sector has had a greater contribution. High taxation rate will generate more revenue for the government but it hurts the economy when it’s not doing well.

The government policies implemented has not had sufficient impact on improving the creation of jobs in Australia. The condition necessary for an unemployed person are unrealistic as they exclude many people who have no jobs from this bracket, some others work for only a few hours in a week and are considered unemployed, this is not a true representation of the unemployment rate in Australia. If the true unemployment rate was reported, Australia would have a very high unemployment rate; above 40%. For this reason, if the government used the current unrealistic report on unemployment rate to gauge its economic performance, it will be making misleading decisions as the situation seem to be in control while it’s not. The rate will continue being higher.

Amadeo, K. (2018). Structural Unemployment, Its Causes, and Examples: Why It's Harder to Find A Job Now. [Online] The Balance. Available at: https://www.thebalance.com/structural-unemployment-3306202 [Accessed 13 May 2018].

Belman, D. And Wolfson, J. (2014). What does the minimum wage do? Kalamazoo Michigan: W.E. Upjohn Institute for Employment Research

Databank.worldbank.org. (2018). World Development Indicators | DataBank. [Online] Available at: https://databank.worldbank.org/data/reports.aspx?source=world-development-indicators# [Accessed 13 May 2018].

Grimsley, S. (2017). Cyclical Unemployment: Definition & Examples. [Online] Study.com. Available at: https://study.com/academy/lesson/cyclical-unemployment-definition-examples-quiz.html [Accessed 13 May 2018].

Hutchens, G. (2017). Australia’s unemployment rate falls to four-year low of 5.5%. [Online] The Guardian. Available at: https://www.theguardian.com/business/2017/oct/19/australias-unemployment-rate-falls-to-four-year-low-of-55 [Accessed 14 May 2018].

Jericho, G. (2017). To those who claim Australia's unemployment data is dishonest – please stop. [Online] The Guardian. Available at: https://www.theguardian.com/business/grogonomics/2017/may/30/to-those-who-claim-australias-unemployment-data-is-dishonest-please-stop [Accessed 14 May 2018].

Letts, S. (2018). Jobs surge failing to deliver wage rises. [Online] ABC News. Available at: https://www.abc.net.au/news/2018-01-18/unemployment-december-2017/9338664 [Accessed 14 May 2018].

Levin-Waldman, O. (2018). Restoring the middle class through wage policy: arguments for a minimum wage. Cham: Palgrave Macmillan.

McEachern, W. (2017). Economics: a contemporary introduction. Australia: Cengage Learning.

Murphy, J. (2017). The work boast you should keep to yourself. [Online] NewsComAu. Available at: https://www.news.com.au/finance/work/at-work/i-need-more-worklife-balance-and-other-boasts-you-should-keep-to-yourself/news-story/5854afeae670301d45f64ccb1a0f0d33 [Accessed 14 May 2018].

Nzherald.co.nz (2018). Cost of Uber Eats could skyrocket due to union pressure in Australia. [Online] NZ Herald. Available at: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11985970 [Accessed 13 May 2018].

Pettinger, T. (2017). Seasonal Unemployment. [Online] Economicshelp.org. Available at: https://www.economicshelp.org/blog/glossary/seasonal-unemployment/ [Accessed 13 May 2018].

Sebastian (2015). Causes of unemployment - common causes in Australia. [Online] Adelaide-southaustralia.com. Available at: https://www.adelaide-southaustralia.com/money/causes-of-unemployment/ [Accessed 15 May 2018].

Statista.com (2017). Australia - unemployment rate by state 2017. [Online] Statista. Available at: https://www.statista.com/statistics/786491/australia-unemployment-rate-by-state/ [Accessed 14 May 2018].

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