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Types of unemployment

Discuss about the Unemployment in Australia.

Today Australia stands as one of the countries with a growing economy. Recently, there has been a significant reduction in the unemployment rates in the country. The Australian government has put into place measures to discourage unemployment by providing tax reforms, expansionary budgetary measures and other economic incentives for upcoming and existing entrepreneurs (“Unemployment” 2016). Currently, underemployment, long-term employment, youth unemployment and old workers unemployment are some of the unemployment issues experienced in Australia and its regions.

The youth population form a large part of the unemployed population of Australia’s economy. Mainly, this is attributed to their lack of experience and the required skills for the requisite jobs they would likely apply. The Australian government has introduced macroeconomic policies and structural reforms with the aim of creating  job opportunities and microeconomic policies that will motivate the unemployed to seek employment opportunities for themselves. Immigration is also a major contributing factor to the high unemployment rates in Australia. Migrants who move into Australia from other countries result in the high unemployment levels. Migrants are likely to take time before they are absorbed into the Australian labor market.            

Australia’s unemployment rate is the lowest in the OECD countries (“OECD employment outlook” 2012). Increased domestic and international competition, high productivity and capital deepening are some of the factors which have largely contributed to the labor decline in Australia. (“OECD,” 2012). Like other economies, Australia labor market has been affected by the government policies, change in demographics, developing technology and increased globalization. Unemployment rates are likely to reduce with the entry of new investors in the economic sectors and the introduction and implementation of economically friendly policies and incentives to local and foreign firms. Consequently, new employment opportunities will arise affording unemployed persons with job opportunities thereby lowering unemployment levels in Australia s economy.

Australia has one of the largest unemployed population in the world (Schneider 2014).  Many economies in the world experience similar types of unemployment patterns to which Australia is no exception. Primarily, the main forms of unemployment include cyclical unemployment, frictional unemployment, seasonal unemployment, and structural unemployment.

Frictional unemployment

Frictional unemployment is also known as search unemployment. It is a form of unemployment which arises when employed workers lose their current jobs and are in the process of replacing it with another job (Pettinger 2012). Thus, this form of unemployment will always be in existence in the economy as employed persons, and new entrants are always searching for and changing jobs. However, it is a short-term form of unemployment.  Often, Worker skills and education levels determine the search length for most jobs by the unemployed workers.

Frictional unemployment

In addition, companies experience changes in the demand for labor due to a specific company or sectoral fluctuations. Similarly, there are increases in the demand for labor. Laid off workers are not immediately employed, thereby experience frictional unemployment until they find employment. Incompatibility between worker skills and skills required for specific jobs also causes frictional unemployment. Willingness to work can also affect unemployment rates. In addition, availability of job centers and unemployment agencies are likely to shorten unemployment time. The introduction of unemployment agencies and job centers will help unemployed workers to find work easily thereby reducing this type of unemployment (Amadeo 2016).

Vocational training programs can also be incorporated into the workplace to help workers sharpen their skills thereby reducing cases of work redundancies. This move might reduce the rate of layoffs.  Subsequently, Lower taxation rates for low paying jobs can aid in the eradication of this type of unemployment (Amadeo 2016). Lowering of social and unemployment benefits by the Australian government will increase opportunity costs of remaining unemployed population countrywide.

Structural unemployment occurs due to significant decline in employment opportunities caused by long term changes in market structures, labor mobility, job redundancies and technological advancements (Pettinger 2012). It is worth noting that Structural unemployment is the main cause of unemployment in Australia today. To curb this form of unemployment, the government of Australia should provide subsidies and grants to help companies establish, maintain and expand their operations. Education and training programs should also be introduced to reduce frictional unemployment by matching the skills of workers with the requirements of the jobs in the labor market.

By so doing, not only will the workers be suited for the jobs but there will be maximum economic output from those jobs. Additionally, outsourcing of government agencies to areas of high levels will help lower structural unemployment (Kent 2014). Outsource should be done in research and development areas. Social benefits and low unemployment levels can act as incentives for workers to seek job opportunities

Typically, cyclical unemployment occurs when the economy is experiencing recessions. Thus, this type of unemployment occurs due to changes in the business cycle. As such, the demand for workers is directly linked to the demand for products and services (Amadeo 2016). A downturn change in the demand for goods and services translates to less labor needed, hence a reduction in the number of employment opportunities. In cases where overall joblessness is greater than the natural rate of joblessness, cyclical addition results, thereby increasing total unemployment caused by low aggregate demand.

Structural unemployment

Persistent Cyclical unemployment may result in structural unemployment. This form of unemployment will be low during peak business cycles due to maximized total economic output. Cyclical unemployment is linked to growth and production cycles within a business (Kent 2014). Drops in consumer demand usually lead to a decline in business revenue hence the need to lay off some workers. Worker layoffs are mostly done to maintain and protect profit margins by the employers. When the economy enters a recession, many jobs lost are considered cyclical unemployment.

Seasonal unemployment exists due to the seasonal nature of certain industries. Such industries only produce or distribute product at the specific time of the year. In Australia, farming, horticulture, tourism and construction sectors are major examples of such seasonal employment opportunities which cease to exist when the season is over. In this regard, the government can offer incentives to relocating labor to areas in demand of it during the off-peak season.

Australia has experienced long periods of unemployment in its history since the mid-1970s (Fowkes 2011). Notably, unemployment is a worldwide problem for most economies of the world, and Australia is no exception. By and large, unemployment disrupts the growth of any economy. In Australia, more job opportunities need to be created to reduce the extremely high levels of unemployment. Usually, lack of employment opportunities leaves workers jobless. Primarily, this problem can be eradicated through the creation of employment opportunities.

The introduction of economic policies and incentives to new entrepreneurs and investors into the economy will increase job opportunities for the unemployed persons in Australia. Friendly taxation policies for firms will result in increased job opportunities for workers. Unemployment opportunities are caused by a decline in industries. To prevent closure and decline of industries is to increase and maintain demand so that employed workers retain their jobs.Youth unemployment contributes to the larger unemployment levels in Australia (Smerdon 2015).

According to the ABS, persons between the ages of 15-24 are more likely to be unemployed. Despite the fact that most young people are unemployed they are unlikely to suffer long term unemployment. Youth unemployment had since averaged 13.5 percent in 2015. This figure is more than the twice adult unemployment rate. Thus, the government should take into consideration various interstate and intrastate costs of living and discrepancies in youth unemployment countrywide by introducing local discounts to nationally regulated payoffs.

From mid-2008, the level of youth unemployment has constantly risen (Carvalho 2015).  Providing equal education and employment opportunities the youth will go a long way in preventing discrimination and encourage competitiveness among the youth. Over time, this will increase job opportunities thereby reducing youth unemployment.

Cyclical unemployment


 Source: (ABS 2016)

Long term unemployment

Today, this form of unemployment is largely witnessed among old workers and workers with low academic qualifications. One of the major causes of long term unemployment is the redundancy of workers skills. Primarily, workers with redundant skills have difficulties in finding jobs since their skills have no value. Essentially, skill redundancy is caused by the changing technological advancements. Also, failure to sharpen work skills according to the technological changes in the economy has led to permanent unemployment for many Australian workers.

Source: (Trading Economics 2016).

It is worth noting that persons aged between 55 and 64 years are unlikely to be employed (“unemployment” 2014). Long term unemployment is a major contributor to unemployment rates in Australia. Long term unemployment is measured by the fact that a worker has been unemployed for more than 52 consecutive weeks. (“ABS” 2016) long term unemployment is characterized by social isolation, poor physical and mental health and poverty (Fowkes, 2011).

Adoption of long term actuarial management of the welfare system will rationalize the public funds use and in turn maximize economic output. A rise in the education curriculum to suit the market needs will increase the employability rates of individuals in the economy, thereby reducing long term unemployment in Australia. Additionally, the implementation of paid internships for young adults can help reduce the high youth unemployment. Early career guidance ought to be offered to young adults so as to cultivate a sense of direction in the youth at an early age. Australia should shift towards levy scheme aimed at training people in skill shortage areas.

Limited job opportunities for the older workers is also a major problem in the country. As a result, older workers prefer to retire or resign from the labor market (Wade 2014). It has also been noted that employers often discriminate against old workers due to their reduced health and working capacity. Besides, these workers are more susceptible to health and physical injuries and less likely to work as fast as the younger employees. In addition, the older workers are relatively less productive, something that discourages employers from training and employing them.

In this regard, the government must instigate mechanisms to increase job opportunities for the older generation in the country. First, it should protect the old workers from age discrimination when it comes to job opportunities (Wade 2014). What is more, government legislation should enhance age integration among older workers by employers to reduce unemployment among older persons and long term unemployment.

Seasonal unemployment

The Australian government has put in place policies and measures aimed at mitigating and eradicating unemployment levels in its states. At some point, the government introduced a social welfare income kitty to cater for persons in need but lack the capacity  and means (Jericho 2016). The welfare support  system  of Australia is noncontributory, specific, goal oriented and objective towards the needs of the unemployed (“ABS” 2011). The recognition of blind pensioners by the government is a move to encourage employment productivity among persons with disabilities.

Microeconomic policies introduced by the government are important in promoting employment. The Australian Reserve Bank is responsible for the country’s monetary policy. Therefore, the RBA has the operational independence aimed at controlling inflation rate of 2-3 percent on average over the middle term (“The Contribution” 2011). Today, the RBA is tasked with the responsibility of achieving full employment, economic prosperity and price stability. Thus, the bank controls interest rates to influence the aggregate economy (Pettinger 2014). Mainly, this is achieved through an inflation goal and discipline in monetary policy decision.

Furthermore, the Australian government uses expansionary fiscal policies to stimulate economic growth. Mainly, these policies are introduced to provide incentives and expansion opportunities for firms. It is worth noting that tax cuts and breaks are offered to firms to reduce the cost of production and enhance their productivity. Besides, reductions in income tax lead to an increase in disposable income. In turn, this leads to increased aggregate demand. Subsequently, this brings about an increase in employment opportunities as more workers are required to meet the new production demands. over time, the policy succeeds in propelling economic growth within the country.

Labor market policies have also been put into place by the government to get workers employed. By and large, policies in labor market are designed to equip workers with requisite skills needed by firms above those provided by mainstream education and training programs. Market policies are best suited for disadvantaged labor market systems. It has led to labor market expansion over the years. The government seeks to protect employers and employees through the enactment of the Workplace Relations Act. The Act spells out rights and responsibilities of both parties to keep workers employed fairly hence maintaining employment opportunities.

In addition, the establishment of labor tribunals to hear and determine disputes between employers and employees has also led to reduced unemployment levels in the country. Unjust work dismissals, poor working conditions, and wage disputes have an avenue of a fair hearing. Cases of unjust dismissals ensure that employees unjustly laid off or fired from their jobs keep steady income from their jobs or are adequately compensated by employers. In turn, this reduces the level of joblessness.  Furthermore, low wage rate policies have been initiated with the aim of contributing to growth output and increasing employment opportunities for the unemployed population. Wage restraint is a form of wealth distribution mechanism.

Issues of unemployment in Australia

Macroeconomic policies have been introduced and implemented in the Australian economy to influence the magnitude and economic growth patterns and to balance account deficit. Maintaining low-interest rates, reducing foreign exchange rates through nominal devaluations and consequent wages help reduce unemployment. Government spending influences macroeconomic policies. Fiscal policies attempt to stabilize business cycles, influence interest rates and improve job opportunities in an effort to control the economic conditions.

The Australian government also encourages numeracy and literacy skills of school leavers to enhance their employability chances in the economy. Also, training and educational programs are available to shape future workers skills to fit the needs of the labor force in the economy. Vocational training is available to advance worker skills according to the changing technological dynamics of the economy. This is a way to reduce welfare dependency by the unemployed and lower unemployment rates in the countrywide.

 Furthermore, the program helps to cultivate a working culture among the youth thereby reducing youth unemployment in the country. In addition, the 2003-2004 financial year budget introduced a new tax regime in Australia (“Unemployment” 2016).  The package increased tax benefits and cuts for families by lowering drawing rates with incentives in rewards for middle and low wage workers and employment of women after childbirth. Particularly, this strategy was aimed at reducing unemployment levels amongst women as well as to improve their living standards.

The high levels of unemployment in Australia is one of the major concerns in the country today. However, the situation is improving gradually over the years. Remarkably, the unemployment level dropped in 2011 to 5% percent (“Australia labor” 2015). Most of Australia’s population is concentrated in NSW and Victoria with 32.0% per cent and 24.9% percent respectively of the total population (“Australian labor” 2015). According to the Australian Bureau of Statistics (2015), the unemployment levels in New South Wales fell to 5.9 per cent. The drop is attributed to new investments in the construction sector of the economy. Consequently, employment opportunities were created in the region reducing the number of unemployed workers in the region.               

Rate by jurisdiction, 12 months to November 2016, original data

Source: (ABS 2016)

Over the years, Queensland has experienced high levels of unemployment. According to the Australian Bureau of Statistics report (2015), there has been a constant unemployment rate of 6.4 percent in the state since 2015. However, in the same year, Queensland recorded the highest rate of youth unemployment rates at 13.9 percent. On the other hand, Western Australia is considered one of the strongest economies in Australia. This can be attributed to the 2005 mining boom, which saw the unemployment rates in the state dropped to 5.1 percent (Scrutt 2015)

 South Australia recorded a 6.8 %per cent unemployment rate (Scrutt 2015). In 2008, the region had one of the highest youth unemployment rates. In the same way, Tasmania is considered the third region with low unemployment levels in the country. Mainly, this is because the region experiences large population growth rates as compared to other regions. Remarkably, the unemployment level reduced to 6.4%per cent in 2015 (“States” 2015).

Source: (ABS 2016).


High level of unemployment is associated with negative effects in all economies of the world. In Australia, high rates of joblessness have been recorded for a long period of time. In this regard, the government has recognized the implications of unemployment to its citizens and has initiated policies and measures to reduce unemployment. Consequently, unemployment levels are likely to drop due to microeconomic and macroeconomic policies. Predominantly, high levels of youth unemployment, long term unemployment, and limited opportunities for older workers are the main unemployment issues in the country.

The most predominant form of unemployment in Australia is structural unemployment. Primarily, it occurs due to mismatch of skills between the workers and the requisite jobs. Australia also experiences frictional, seasonal and cyclical types of unemployment. Labor force participation has been encouraged by the government in a bid to lower unemployment levels countrywide. Monetary and fiscal policies inclusive of expansionary budgetary policies have been articulated to address the plight of unemployment in Australia.

The government has provided economic incentives for new investors and existing investors to encourage growth and creation of more opportunities to reduce unemployment levels countrywide. Unemployment affects individuals, the government, and the economy. Poor living standards, poverty, less revenue for the government through taxation of the few employed citizens are some of the effects. Eventually, unemployment levels will reduce in Australia.


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