Unemployment Problem in Australian Economyâ€Myassihgnmenthelp.Com

Question: Discuss about the Unemployment Problem in Australian Economy? Answer: Introduction The performance of Australia as observed through many indicators is deteriorating. Initially, this economy was noted to be among the leading in terms of economic growth. This was mostly argued on the fact that it was able to escape the 2008 global recession without much impact on its operations whereas many economies economic growth fell to very low level and are still on the recovery process. Unemployment is one of the indicators used to gauge the economic performance. Many economic sources have given data and statistics on the rising unemployment rate in Australia. This problem is thus attracting the policy response by the government since its one of its primary goals to ensure that the economy is tending towards full employment. However, we shall realize in this paper that this goal is subjected to many constraints. Thus attainance of this goal is almost next to impossible. The paper will note and elaborate on the various reasons as to why any economy cannot attain full employment level. On this notion, it can be deducted that even the policy makers cannot formulate a policy framework that can help in this goal achievement. The paper shall discuss the major policies implement or rather proposed by economists to be implemented in order to lower this rate of unemployment. In this study, the different unemployment types will be covered. Elaborations on whether they occur in the short or in the long run will be provided. Also the factors responsible for this categories of unemployment will be provided. Further on the elaborations and factors responsible for the categorization, the study will note the categories that could be avoided and those that cannot be avoided and also a note on the categories that the government policies may control. Various recommendations for the government, and other researchers will be provided at the end of the paper and conclusion will be drawn. Economics of Unemployment There are various conditions that has been put forward by the Australian government and mostly applied by many economies in determining the persons that are said to be unemployed. One of this conditions is that the person should not be having any job at the reference period (Abs.gov.au, 2014). Then this person should be vigorously looking for employment. Lastly, this person should be ready and willing to enter into any job vacancy that is provided. However, economists have argued that these conditions are not sufficiently depicting the unemployed persons and the data statistics provided may be very attractive whereas in the real sense there is a high number of unemployed persons in the economy. One on the issues is that of underemployment; this is where a person working for an hour and more is considered to be employed. If for instance we consider a person working for 1 to like 3 hours a day, at a low wage rate, this persons income is insufficient to meet the daily demands. Therefore, even though the person is considered to be employed, they are underemployed. This explains why an economy with low unemployment rate could be having so many people living under extreme poverty. There are so many reports of underemployed reports to the ABS. according to NewsComAu (2017), there over a million complaints of underemployment where the employed are not satisfied with the income they are earning and are looking for some more. Economists have noted that the female group are the ones mostly affected by the underemployment issue. Data Analysis Table: Australian Unemployment rate data Year 2012 2013 2014 2015 2016 Unemployment Rate 5.217 5.65 6.067 6.075 5.712 Source: Imf.org (2017) Graph: Australian Unemployment rate 2012 2016 The data on the unemployment rate collected from the international monetary fund estimates made after 2015 is plotted to obtain the above graph. The Australian economys unemployment rate has been high since 2012. The linear trend line that slopes upwards is also an attest that the rate has actually gone up over the five years. Though the Australian economy escaped the GFC unhurt, it has been facing the rising unemployment problem since then. The low unemployment rate in 2012 is also a confirmation of how the economy wasnt greatly impacted by the GFC. The question now is what went wrong? What is the factor behind the unemployment rate going up? The record of unemployment rate were roughly equal during the year 2014 and 2015. There was however a fall in the unemployment rate in 2016. Causes of Unemployment There are varying causes of unemployment in Australia. According to Sebastian (2015), there are some industries that are shutting down which include the manufacturing, agriculture and textiles industries. The argument based on these closures is that many people are losing their jobs; given the fact that there is insufficient industry diversity in the Australian states, those who lose their jobs remain unemployed before they get another job. This has greatly added to the unemployment rate. Unemployment is caused by increase in population which in turn increase the size of the labour force. There has been a great flow of immigrants into Australia, these people increases the competition for the available and the newly created jobs (Sebastian, 2015). Most importantly its caused to slow or stagnant economic growth. When an economy is performing poorly, the production level falls and thus some employers reduce the number of their workers. For instance if we consider a period of economic hard time, the spending on the infrastructure falls, thus, engineers and other skilled personnel on infrastructure development remain unemployed. Pressure from labor unions is also a factor behind the rising unemployment rate. Labour unions are in constant demand for wage increments; at high wage level, the employing firm cuts their demand for employees. This is also the case for the minimum wage legislation where government in an attempt to promote income equality fixes a higher wage level that the employers are required to pay only equal to or above. Some people also argue on advancement in technology to drive people out of their jobs. They argue that if for instance a company adopts the use of robots, it can lay many workers as a single robot could be able to do a job that initially many workers were employed for. However, there are many economists who argue that even if the fact of robots being more productive is true, advancement in technology create more jobs. This is because even the new introduced equipment need programming, maintenance and repair. Technology may thus be a source of employment. If for example a machine is innovated that is used for recycling of some waste materials, people will be employed in the process. The last factor under discussion is that of natural disasters. For example during a drought season, agricultural activities is impacted and people fails to be employed. Types of Unemployment Cyclical Unemployment This type of unemployment results from unavoidable situations. Economic situations keep on changing. There are many factors that affect the aggregate demand and supply in an economy. With a higher aggregate demand, businesses are induced to supply more since higher demand also results in higher prices for goods and services. In the process of adjusting the supply level, businesses employ more labour thus reducing the unemployment rate. This is the case when the economy production level is in a boom. However, sometimes there could be a deficient in demand. Given the initial supply level, lower demand results in falling prices and discourages production. Since businesses are not willing to produce more and sell at lower prices, they lay off some initial workers. This is the case when the economy is in a burst and it increases the unemployment rate. This unemployment may continue to the long run since the economys rate of adjustment for recovery may be lower. This creates a need for int ervention by policy makers in order to accelerate the recovery process. For instance lets consider an economic situation such as a recession, Structural Unemployment This unemployment type is very harmful to every given economy as it is not resolved through automatic forces. Thus, government intervention is mandatory. It occurs in the short run but ends up prolonging to the long run (Hall Lieberman, 2010). Its worse since it occurs even when there are many job opportunities presented; its only that the unemployed dont fit in those vacancies (Amadeo, 2016). As the name suggests, it is as a result of structural changes. For instance lets assume that the production costs for a specific firm increases in one economy and the firm decides to shift operations to an economy with lower cost; this firm may not take with them all its workers. There are many barriers that many prevent some people from shifting from one economy to the other, these include immigration restrictions and language barriers. Thus, the shifting leaves many of the employees unemployed. Some of these employees skills may not be important for other firms and thus trouble securing a ne w job. Another case is when there is an advancement in technology that results in new innovations and efficient means of production. The digital migration has resulted in the need of employees with advanced skills. For instance a firms operation may become computerized and this lowers the number of employees required compared to when it was done manually. Otherwise, a digital migration may require all the employees to be computer literates, these leads to laying off of those not meeting the new job requirement. Frictional Unemployment This unemployment sometimes is voluntary unlike other types of unemployment. However, its not all the times it is voluntary; sometimes its as a result of economic factors. Overall, this unemployment type is unavoidable in every economy and requires less government intervention (Nash, 2017). The voluntary case is where for example a fresh graduate is not ready to engage in a low paying job and instead decides to stay unemployed until they get their dream job (Pettinger, 2012). Another case is where an employed worker opts to leave the current job to look for another. It may take time to get that new job and these persons remain unemployed. The economic case is the fact that the graduates from universities may not be knowing their potential employers and those employing may not be knowing the right candidates for the position. Thus, time is taken before a fresh graduate gets a job since processes such as interview and waiting periods may be longer. The employing firms also need to cons ider many candidates so as to choose the best. Those not chosen will have to wait for another vacancy to arise and compete for it. Thus time and information asymmetry is the important factor behind frictional unemployment. Seasonal Unemployment There are jobs that require some services periodically. During the period when the services are in demand, there are people who get employed. However, immediately this period is over, these people become unemployed until the production process gets back to a similar period again. If these people are not into jobs, they may remain unemployed for the period in between. An example of this unemployment form is exhibited in the agricultural sector where there is a time frame in between the services demand. For instance after planting, there is no service demanded until weeding time. This is also exhibited in Ski resort; this job is available during winters when there is snow but absent during summers with absence of snow (Pettinger, 2015). This unemployment is mostly present in the case of tourism industry. There are months in which the inflow of tourists is very high and some where there is a few (Hall Lieberman, 2010). More jobs are available during months of high inflows and low other wise. The Distribution of Unemployment in Australia Australia is a large economy divided into several large states. The economic growth and development of these states vary from a state to another. This may be as a result of the population differences between the states, the amount of rainfall received in each state since it determines the level of agricultural activities, and the industrialization of the states. Owing to this differences, these states have varying level of unemployment. More industrialized states have more job opportunities than those with less industrialization. The following graph will show the hopelessness index differences between the states from the lowest to the highest. Graph: Unemployment in Australian States Source: Murphy (2016) The hopelessness index is obtained by combining the number of the people starting new jobs and those that are unemployed. The Northern Territory has the lowest hopelessness index whereas Tasmania has the highest. A lower hopelessness is desirable for a territory. It means that there are many people starting new jobs and low number of those unemployed. In this case, a person who loses a job can very quickly find a new one; the hopes of one getting a job is very high in Northern Territory than in Tasmania. In the case of Tasmania, there are lower people starting new jobs whereas the number of the unemployed is very high. The other analysis is the age group hopelessness index where the group which is more or less likely to find a job is determined. Graph: Hopelessness index of Australian job search based on age group Source: Murphy (2016) There is less worry for the people of the age group 23-34 as compared to the younger group of 15-19 years. The biggest worry of getting a job is on the age group 60-64. Most of these people are old and are considered unproductive and thus the chance of being employed is very low.The next analysis is on the factors that influence the participation is the labour force which also determines the economys unemployment rate. Graph: Hopelessness index based on family characteristics Source: Murphy (2016) It is noted that there is a 90 % possibility for a married man of the age 35-44 years to participate in the labour market with an unemployment rate of below 2.8%; this is in comparison to another man of the same age who has an 80% possibility of participation and unemployment rate of 6.4%. Lone parents are more hopeless to participate in the labour market. Government Policies The most important policies for the government to solve the problem of rising unemployment rate are those intended to stimulate the economy; these are the fiscal and monetary policies (Gallego, 2017). The government could either lower tax rate or increase spending; the two will have the same result. Otherwise, the RBA could increase money supply of lower interest rate. The choice of these policies is influenced by other economic factors such as inflation rate. The government in the case of frictional unemployment can only be of help by ensuring that there is equality in the receivership of information on new job vacancies. Pettinger (2015) proposed the following as a solution to seasonal unemployment; the government should ensure the economy is more diversified excluding the case for the tourism industry (not possible), he proposed that the government should formulate a regulation such that even with temporary jobs, workers still are able to receive income throughout the year. The go vernment should note all the off-seasons in the year and increased its spending during this period so that those whose jobs have halted will get another job to engage in. Recommendations The government should raise the number of hours that a person should be working to be considered employed. An hour of work is not a fair level to consider a person to be employed. Else, since the level of wage rate is predetermined, it should fix the minimum income that a person should be earning so as to be considered employed. This would help in solving the issue of underemployment. If the unemployment rate included also the discouraged workers, it would be very high. There are so many workers who are not engaged in any job but are not included in the unemployment estimation. The conditions for a person to be considered above is excluding a high number of people from the unemployment estimation whereas they are in that category. Thus there should be a thorough edition of those conditions while taking into condition the various reason responsible for increasing unemployment. The government struggle towards lowering the unemployment level should be focused mostly on cyclical and stru ctural unemployment. The other may recover naturally. Since this paper could also be used by university student or any other learning institutions, I would recommend that every student after completion of his/her education should not stay idle whereas there is a job opportunity being presented. This is irrespective of the low wages being offered or rather if the job is not related to the degree held. They can engage in that job while still looking for the desired job; this would help in lowering the level of frictional unemployment that either occurs naturally or mostly voluntary. This could also be useful to the employed but lacks job satisfaction; they should hold on instead of leaving their job before getting a new one. In order to control the unemployment without making some parties worse off, the government should consider promoting its economic growth. The right policy framework by the government should be put in place so that it will be able to facilitate a fast growth of jobs so as to ensure that there are sufficient job opportunities from which the Australian could take advantage of. Conclusion Owing to the unemployment issues discussed above such as underemployment and the fact that the discouraged workers are not included in the unemployment rate, it can be concluded that low unemployment rate may not necessarily be an indicate of good economic health. There so many people living on hand to mouth since they earn too little income. If the discouraged workers are also included in the unemployment measure, unemployment would be the best measure of economic growth. Economic growth is an important factor that influences the unemployment level and thus it should be the major concern for the policy makers. New and many job opportunities would create a large market from which many Australians may fit. This is because there are many Australians who are unemployed with no job securities and some are not or may not fit on many job opportunities as they possess no skills. There is a small number of people who start new job; a lower number raises the hopelessness level. Lastly it can be concluded that the implementation of some government policies is not easy as it may make other economic factors worse of. References Abs.gov.au. (2014). 6105.0 - Australian Labour Market Statistics, July 2014. Abs.gov.au. Available at: https://www.abs.gov.au/AUSSTATS/abs@.nsf/0/FBE517ECA9B07F63CA257D0E001AC7D4?OpenDocument [Accessed 19 May 2017]. Amadeo, K. (2016). What Is Structural Unemployment? Causes, Examples. The Balance. Available at: https://www.thebalance.com/structural-unemployment-3306202 [Accessed 20 May 2017]. Gallego, L. (2017). Inflation Unemployment. [Online] Policonomics.com. Available at: https://policonomics.com/lp-inflation-unemployment1-economic-policies/ [Accessed 22 May 2017]. 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