Business economics is a study of applied economic field. It is related to the financial challenges as well as the issues faced by business corporations operating in a specified economy or marketplace. It is concerned with economic problems, management issues, corporation, expansion, and strategy. In addition to this, it uses quantitative methods and economic theory to study business enterprises along with the factors contributing to the organizational structures diversity. Business economics also states the relationships of the firms among its capital, labor, and product markets.
The report has been prepared on the term “unemployment”. Unemployment is a big problem faced by every country, from small to very large scale. It is one of the important indicators of economy performance of the country along with the welfare of the humanity. Basically, there are various causes of unemployment in the country. However, the basic and main cause includes the new technology, economic conditions, along with the increasing number of populations. At the same time, the report highlights the Australian unemployment rate along with its various states such as NSW, WA, Tasmania, SA, and Queensland. The unemployment rate is defined by the total number of unemployed workers divided by total labor forces multiplied by 100%.
Besides this, the report discusses various major types of unemployment which include frictional, structural and cyclical unemployment is discussed. The minor unemployment types are also mentioned in the report. The economic models and theories are also addressed in the report. The various common issues faced for unemployment in the country is also highlighted which include natural disaster, recession time, offshoring, and shut down of the industry. Along with this, various policies made by the Australian Government in context to a reduction in the unemployment rate are also discussed in the report.
Whenever persons are with no work and are willingly searching for the work then it is known as unemployment. There are three types of economic model for unemployment namely the efficiency-wage model, contract model and insider-outsider model. The efficiency-wage model is based on the idea that the firms will pay higher wages to than would normally be. Because firms feel it is necessary and best strategy to attract workers towards them. By the help of this model, forms can have various benefits such as higher wages may prevent avoidance by employees towards firm (Parker, 2010). Moreover, offering higher wage may result in more qualified pool of applicants. While contract models state that the firms are prevented from changing wages by the labor contracts in the short run but allowing labors to respond their need variations for labor overtime and by the help of layoffs. On the other hand, the insider-outsider model pointed out the distinction between the insiders as well as the outsiders. Individuals bargaining for the current workers are known as insiders while those who are unemployed are the outsiders.
There is an increase of total number of people with 26, 200 jobs which were far better than total number of 10, 000 expected jobs. In February 2016, 5.8% was the unemployment rate however current rate of unemployment in Australia is 5.7% in the month of July 2016 because of increased numbers of jobs (Australian Bureau of Statistics, 2016). This can be seen in Figure 1. This is the first time ever to notice lowest unemployment rate in Australia since September 2013. At the same time, there is decrease of full-time employment by noted down by 45,400 jobs, while, there was increase in the number of part-time jobs was noted down by 71,600 numbers of total jobs.
Figure 1: Unemployment rate in Australia
Additionally, participate rate was noted down at 64.9 percent in the current year. Unemployment rate was expected only by 5.8 percent with 10,000 new a job by the economics but 5.7 percent is currently recorded unemployment. Although, Australian wage growth is still at low record and is likely to remain low as per the views of experts. As per the seasonally adjusted figures obtained from the ABS, the wage price index for total rates of pay was increased and measure by 0.5 percent in the June quarter (RBA, 2016). There was the increase in the index rate by 2.1 percent same as began from 1997 index records.
As per the senior economist John Peters of Commonwealth Bank of Australia, worker’s higher wage search had been decreased as compared to last 13 years unemployment rate (6.4 percent) in January 2015 (News.co.au, 2016). Further, New South Wales, Western Australia, Tasmania, South Australia as well as Queensland are some of the states of Australia, for which unemployment rate are as shown below:
Figure 2 Unemployment in various states.
There are basically three types of unemployment namely frictional, structural and cyclical unemployment. The structural unemployment focuses on an economic structural problems and labor markets inefficiencies. Several reasons may result in structural unemployment such as the change in technology and change in taste. The frictional unemployment includes the time horizon or period for the workers, searching for a job or shifting from one job to another (Dransfield, 2013). On the other hand, cyclical unemployment a type of unemployment that occurs when in an economy, there is no occurrence of aggregate demand in order to provide job to every job seekers. It also caused by the business cycle fluctuations. The lower demand for products is one of the reasons for cyclical unemployment in the economy.
In addition to this, types of minor unemployment include natural, long-term, and seasonal, real or classical unemployment. These are as discussed below:
Natural unemployment: Flood, earthquake is some of the reason for this type of unemployment which is unavoidable.
Long-term unemployment: It is said to be when the person is looking for the job since last six months or more than 27 weeks.
Seasonal unemployment: Due to seasonal unemployment effects, seasonal unemployment takes place. As illustrated, resort workers, ice-cream vendors are included in it (Mitman, and Rabinovich, 2015).
Classical or real unemployment: When a law of supply decreases as compared to wages or simply when wages are higher then it will result in dictate demand. It occurs due to a negotiation of higher salary or wages by the side of the union, high minimum wages set by the government and wind-up of long term contracts due to the recession.
Causes and problems of unemployment may be different as per the country. However, some of the common unemployment causes faced in across Australia in general along with South Australia is as discussed below:
Shutdowns of the industry: It is one of the noticeable and major causes of unemployment. Shutting up of industry results in many of the people out of the work in a state of Australia namely South Australia. Additionally, industry diversity is very much insufficient to take up these workers at work. Agriculture, manufacturing, textile are some of the examples for theses industries (Gillespie, 2013).
Infrastructure: Spending on the infrastructure by the public as well as private company decreases due to harder economic times. Due to this, many skilled workers in the industry such as engineers and others move overseas which results in many labor unemployment in the current economy. Further, as and when spending picks ups, result come out to be the temporary skills shortage in an economy. Many Victorian workers are used by The South Australian government for successful completion of their recent major projects.
Offshoring: Due to tax benefits and incentives offered by western countries to move jobs, increase in Australian unemployment has taken place. As many of the textile, as well as manufacturing jobs, are going offshore, local workers here somehow have to adjust. Rather than manufacture, anything to export, economy uses to become more and more service economy.
Recession: In economics, a recession refers to the two consecutive quarter’s negative economic growth. It also refers to a contraction in a business cycle, which results in an economic activity general slowdown (Dransfield, 2013). Further, if the company will follow strict rule and regulation to overcome from the recession period and will lay off some or the other workers from the industry, then it will surely result in increased unemployment for an economy.
Technology: It is also one of the major causes for experiencing the unemployment in an economy. As illustrated, a single robot is very helpful to conduct a work for hundreds of people in a particular product line. However, the requirement of people is still in the industry to service, program software of that robot as well as repair. On the other hand, in many of the fields, technology is helping (Kaas, and Kircher, 2015). Further, currently, jobs, as well as money, are flowing into the renewable energy sector. The improvement in a technology results in more creation of a job in the future for this industry.
Natural disaster: As illustrated cyclone, flood, earthquake, and landslide are some of the natural disasters. The major and obvious cause of unemployment is natural disaster faced by the economy. Like in Queensland, workers use to work on a banana implantation which refers to be in a cyclone region. Moreover, if cyclone fan hits the industry then it will be the result of unemployment for many of the workers working in that particular industry.
Independent living: Teenager’s choice of independent living results in leaving the home. In Australia, parents and family independence has been an important feature of assuming adult status. Hence, unemployment takes place for those children who left their parent’s home for independent living.
The profound effects of unemployment are financial, economic, and budgetary effects. The basic causes of unemployment include the labor demand changing patterns along with the failure inappropriate response of the society to those changes (Kaas and Kircher, 2015). In particular, community services sector growth has been forced by public spending limits. Along with this, it is also noted that there are some of the economic, and the government policies that affect the country’s unemployment rate at a large scale. A total number of people registered with Centrelink include around 780,000 people as individual full time unemployed. Besides this, if one searches for a job over online job sites, then the total of 140, 000 job vacancies can be found. By the help of which, it can be stated that something is wrong in the economy or by the side of the government.
Full employment policy program in context to national economic, various major elements would be considered such as oriented macroeconomic policy for the employment output and growth. Additionally, public service employment and community substantial expansion eventually must be involved in the creation of 350000 new jobs, funding investment in public projects by the help of issuing government bonds (Mitman and Rabinovich, 2015). More labor market programs can be expanded as to provide job for long term unemployment workers, progressive tax reforms together with a jobs charge and taxes among regressive tax concessions removal.
The main Australia’s unemployment benefit refers as Newstart Allowance, which is paid to unemployed working age people. By the help of Newstart Allowance and Youth Allowance, various activity tests are done to make sure that recipient is actively looking for work. Financial support by the government is also provided to Job Service providers to assist the unemployed in finding work for themselves and in certain time period.
Government intervention basis: Purpose of income support is to provide a minimum adequate living standard to the unemployed people, who are out of work and unable to support themselves by saving or other means. Unemployment benefits are implemented to make sure that person should have sufficient resources to search and get employment for one.
The current structure of the program: According to Department of Human Services, 2016, Newstart Allowance will be provided to those who are unemployed and aged over 22 years. The Newstart Allowance payment rate was $501.00 per fortnight for the single person along with $452.30 for a couple as per January 2014. On the other hand, Youth Allowance is paid to unemployed person aged 16 to 21. It is also paid to person engaged in education. Moreover, payment rate for Youth Allowance for 18 years leaving away from home was $414.40 per fortnight for a single person. Newstart Allowance is paid to various persons such as large recipient proportion, have matured age, partial capacity to work, or a combination of these characteristics.
This is up to $124.00 per fortnight for a single person and for couples it is $116.60. The Newstart Allowance rate is significantly lower as compared to current minimum wage or the rate of pensions is of $1,244.40 per fortnight, which includes the Disability Support Pension which has a cost of $827.10 per person for a fortnight. A person is not eligible for payment if assets are higher than a certain threshold which includes an asset threshold for $196,750 for a homeowner and for a non-homeowner it is around $339,250. For receiving the benefits of this policy, person should participate regularly in various approved activities which include formal employment participation (Department of Human Services, 2016).
Trends: Newstart Allowance current expenditure includes around $8.4 billion per year as well as expected to increase at a growth rate of 1.4 per year up to $8.7 billion by 2016-17 in nominal terms as shown in the Figure 3 below:
Australian current job services expenditure is of $1.3 billion, however, it is expected to decrease per year at the rate of 0.9 percent. On the other hand, Indigenous Employment Program activities include $173 million per year along with Disability Employment Services expenditure of $750.4 million per year (Reserve Bank of Australia, 2016).
Figure 3: Newstart Allowance Expenditure
Disability Employment Services are helpful to provide wide range of services such as helping out the person in work preparation which includes specific job skill training. Supporting individual on job search such as development of resume, providing interview skills training, and suitable jobs looking help is also provided in the Disability Employment Services of Australian Government (Australian Government, 2016). Along with this, initially support in job placed with employer and coworkers interaction is also provided. Vocational training and employment-related assistance for modification in workplace are also included in the program. Two types of Disability Employment Services include:
Disability Management Service: It is planned for disability people such as injured or ill persons who need help and support from an employment service.
Employment support service: It is for those people who are permanent disability. Also, need an assessed for longer period of time with an ongoing regular support in the workplace.
Indigenous employment program (IEPs) is a significant program for closing the gap between Aboriginal and non-Aboriginal Australians living standard in the VTEC Brisbane. Australian Government, as well as local partnerships, is responsible for funding each program. This program aims to make sure that Torres Strait Islander and Aboriginal Australians are assisted into jobs (Department of Human Services, 2016). As illustrated, an opportunity is provided to job seekers of Aboriginal to get a work suitable for one. Moreover, IEPs offer training access, assistance on job search, and education programs for job seekers.
Job interview preparation is also provided to Indigenous job seekers in this program along with work experience opportunities. Support on induction program with familiarization on workplace is also taken care for participant. Additionally, mentor’s support on post-placement and workplace mentoring for participants is included in the IEP with successful participation of business people and introduction of Aboriginal sports. Where ever necessary, the culture awareness training is also given to job seekers to have basic understanding of people of Aboriginal with their values.
The Minimum Wage: National Commission of Audit (2014), high rate of minimum wage is measure due to younger workers in an economy. The rate of youth unemployment measure is around 12 percent nationally, as compared to 6 percent general unemployment rate which can be seen in the given Figure 4. Moreover, in terms of various states, huge differences in the youth unemployment rates can be measured as illustrated 17 percent in Tasmania and in Western Australia it is 10 percent.
Figure 4: Youth Unemployment Rate.
As shown in Table 1 below, nationally, the minimum wage rate is same but the relativity of the Average Weekly Earnings, and the Minimum Wage in the state of Australia, is different.
Table 1: Average Weekly Earnings, and the Minimum Wage in Australian State.
Along with this, huge differences in the wage rate of Territories and among States are also noticed as shown in the Figure 5. As illustrated, the minimum wage in Australian Capital Territory is 45percent of Average Weekly Earnings however in NSW it is around 55 percent IN Tasmania it is measured as 65 percent.
Figure 5: Wage Rates of Territories.
From the above report, it is concluded that business economy plays a vital role in development of the country and it is concerned with economic problems and issues in the management, corporation, expansion, and strategy. It is identified that every economy is facing unemployment to a certain extent. As illustrated, Australian economy has around 5.7% unemployment as of current year. There are many types of unemployment faced by the country. However, some basic unemployment includes frictional, structural and cyclical unemployment. It can occur due to natural disasters such as flood, cyclone, and earthquake. Moreover, private and public sector infrastructure, recession, and technological change may also be the major factor responsible for the unemployment in an economy.
It is also identified that Australian Government has many laws for coping up with unemployment problems in country. This programs mainly includes New start allowances, Indigenous employment program (IEPs), and Disability Employment Services. By launching of these programs, many changes were noticed such as decrease in unemployment rate. However, many states of Australia are still facing unemployment with huge differences of percentage such as NSW and Queensland. Therefore, states and territory should also be taken care by government while making programs to decrease unemployment instead of focusing on an economy only.
Australian Bureau of Statistics (2016) [Online] Available at: https://www.abs.gov.au/ (Accessed on: 20 August, 2016).
Australian Government (2016) [Online] Available at: https://www.australia.gov.au/about-government/states-territories-and-local-government (Accessed on: 20 August, 2016).
Australian Government, Department of Human Services (2016) [Online] Available at: https://www.humanservices.gov.au/customer/services/centrelink/disability-employment-services (Accessed on: 22 August, 2016).
Australian Government, National Commission of Audit (2014) [Online] Available at: https://Www.Ncoa.Gov.Au/Index.Html (Accessed on: 22 August, 2016).
Dransfield, R. (2013) Business& economics. UK: Routledge.
Gillespie, A. (2013) Business& economics. UK: OUP Oxford.
Kaas, L., and Kircher, P. (2015) Efficient firm dynamics in a frictional labor market, The American Economic Review, 105(10), pp. 3030-3060.
Mitman, K., and Rabinovich, S. (2015) Optimal unemployment insurance in an equilibrium business-cycle model, Journal of Monetary Economics, 71, pp. 99-118.
News.co.au (2016) Part-time jobs help unemployment rate in Australia to fall to 5.7 percent [Online] Available at: https://www.news.com.au/finance/work/parttime-jobs-help-unemployment-rate-in-australia-to-fall-to-57-per-cent/news-story/7a6d23a6b97073a953bfbdf3cd895c7f (Accessed on: 20 August, 2016).
Parker, J. (2010) Models of unemployment, Economics Course book, pp. 1-33.
Reserve Bank of Australia (2016) [Online] Available at: https://www.rba.gov.au/statistics/ (Accessed on: 20 August, 2016).
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