Employment dynamics of a country, showing the total number of jobs created in the economy of the same and the portion of the population getting engaged in productive and economic activities, play the role of one of the crucial indicators of economic welfare of the country as a whole. High levels of employment indicate towards high economic well-being and high purchasing power of majority of the population of a country, thereby indicating towards high aggregate demand, economic productivity and growth in the country as a whole (Mankiw, 2014). On the other hand, nations reeling under the pressure of high unemployment, often have majority of the population suffering from lack of affordability, low economic welfare and an overall stagnant economic condition in the country.
In this context, one of the dominant and most developed economics in the contemporary global framework, the economy of Australia, in spite of experiencing economic growth and commercial success, over the last few years, can be seen to experience considerable fluctuations in its unemployment dynamics (Heijdra, 2017). These fluctuations (mostly negative) can be attributed to the fall in the number of jobs created, especially for the basic skilled population of the country and also to the problems of high migration in Australia over the years. On the other hand, in the positive side, employment scopes can also be seen to be created in some specific sectors of the country, which in turn has led to a demand-supply crisis in the labour market of Australia (Dyster & Meredith, 2012).
Keeping the above discussion into consideration, the essay tries to discuss and analyse the issues regarding unemployment, cropping up in the economy of Australia over the last ten years, thereby highlighting the implications of the same on the overall economy of the country. The essay also tries to discuss the different policies which the government of the country has been taking, over the years, to solve the unemployment problem in the country.
To understand the unemployment scenario in Australia, it is of immense importance to understand the notion of unemployment and the conventional measurement of the same. “Unemployment”, in general, refers to the situation arising in the economy of a country, where a significant number of members of the population, in spite of being eligible as well as willing to work, do not get any scope of employment (Shimer, 2012).
Thus, the rate of unemployment in the country can be measured as follows:
Rate of Unemployment = Total number of people in the labour force who are unemployment
Total number of people in the labour force
In this context, the labour force of a country, in general consists of the members of the working age population of the economy, who are eligible as well as willing to work, irrespective of whether they are currently employed or unemployed (McCombie & Negru, 2014). Those people who voluntarily opt out from getting employed are not included in the labour force of the country.
In general, there are three broad types of unemployment, which occur in the economies of different countries, which are as follows:
Cyclical unemployment- This refers to short-term unemployment which occurs due to fluctuations and contractions in the economy’s business cycle.
Frictional unemployment- This occurs naturally when people in an economy switch between jobs (Allan, Tim & Tucker, 2012).
Structural unemployment- This is a long-term unemployment which happens due to structural shifts in the economy due to changes in technology, productive activities, thereby causing a demand-supply mismatch in the skills required and skills present in the economy (Wagner, 2014).
The economy of Australia, has over the years, experienced varying levels and types of unemployment, showing the characteristics of structural, frictional as well as cyclical unemployment at different points of time. The unemployment in the country, in periods like those of 2008-2009 and 2011-2012, being moderately high (at 5% or more) can be attributed to the business cycle contraction occurring during that periods, thereby showing the traits of cyclical unemployment, which led to considerable decrease in the overall economic productivity and welfare in the country (Gregory & Smith, 2016). Due to the constant phenomenon of job changes and switching from existing jobs to new ones by the people in the labour force in the country, the frictional types of unemployment is also found to be present in the economy of the country over the years.
However, in the recent period, a demand-supply mismatch of skills required and skills existing in the current labour force in the economy can be noticed in Australia. This mismatch can be primarily attributed to the shift in the productive activities of the country (the sectoral shift being mainly from the basic manufacturing and mining activities towards more of service sector and sophisticated technology-based manufacturing activities in the country) in the contemporary period (Mavromaras, Sloane & Wei, 2015). The effects of mining boom can be seen to be slowly withering away and different service sector industries can be seen to be growing in Australia, thereby leading to an excess supply of low-skilled labour and an excess demand for high skilled and educated labour in the economy. This type of unemployment, of the manufacturing labours, can be categorised under structural unemployment in the country in the contemporary period. Thus, it can be asserted that the unemployment scenario of the country, have shown the traits of all three broad types of unemployment in different periods, with the trait being more of the type of structural unemployment in the recent period (Crowley et al., 2013).
The level of unemployment in the concerned country, however, has not been of the same magnitude and has experienced both positive as well as negative fluctuations, as can be seen from the varying levels of the rates of unemployment in Australia, over the last ten year, as can be seen from the following figure:
Figure 1: Rate of Unemployment in Australia over the last ten years
(Source: Tradingeconomics.com, 2018)
As the above figure reflects, the rate of unemployment in the country had nee significantly low (near 4%) before 2008. However, with the initiation of the Global Financial Crisis in the USA and its effects on the economy of Australia, the level of unemployment in the country increased visibly and strikingly due to the recession like situation which hit Australia during the crisis period. The unemployment rate, which rose till 6% in 2009, however started to decrease till 2012 (5%), before again starting to rise post 2012 (Crowley et al., 2013).
In 2013, the level of unemployment remained more or less at the level of 5.6% and during this period, nearly 9,100 jobs were created in the economy of the country of which 5,000 were new full-time employment scopes and 4,100 were mostly of part-time employment type. In 2014, however, the rate of unemployment rose to more than 6.1%, with the number of unemployed people increasing by 11,000. Nearly, 26,700 jobs were lost in the economy, most of them being in the mining and basic manufacturing sectors and the new jobs which were created were more of part-time jobs than full-time engagements (Gregory, 2012).
The consistent increase in the part time jobs in the country (the number being more than 3,740,000 by the end of 2016), led to an impressive fall in the rate of unemployment (by nearly 1.5%) in 2015-2016, which in turn increased the rate of participation of the labour force in Australia. However, the growth of full-time jobs in the country has been highly unimpressive in this period, which contributed to the lack of economic welfare of the population of the country in spite of the increase in the overall labour force participation in Australia.
In 2017, the labour force dynamics of the country has shown further deterioration, in spite of the decline in the rate of unemployment as a whole. The full-time job opportunities in the country can be seen to be declining further and the number of full-time job-seeking unemployment people in the labour force can be seen to be increasing by an astonishing rate of more than 10% (Gregory, 2012).
The traits and patterns of unemployment occurring in the economy of the concerned country, however are not uniform across all parts of the country or across the entire labour force of the country. The differences in the traits of unemployment can be seen to be discussed in the following section:
The magnitude of unemployment, in the contemporary period, can be seen to be varying across different regions across the country, which can be seen as follows:
Figure 2: Region-wise levels of unemployment in Australia (2017)
(Source: Lmip.gov.au, 2018)
The level of unemployment, as is evident from the figure above, can be seen to be highest in Western Australian region (rate of unemployment being as high as 7%), which can be primarily attributed to the loss of full time jobs in the region (nearly 5,700 full time employment scopes being lost in the region in the recent period). Unemployment rate can also be seen to be considerably high in South Australia (6.1% as compared to the nation’s average unemployment rate of 5%), much of which can be due to the loss of employment generation in the previously flourishing automobile sector of the region (McFarlane et al., 2016). The burden of immigration (mostly of basic skilled workers) in these regions has also contributed to the unemployment problems in the same.
The level of unemployment can also be seen to be varying across the different industrial sectors of the country in the recent period, which is evident from the following diagram:
Figure 3: Job creations in different industrial sectors of Australia (2017)
(Source: Budget.gov.au, 2018)
The above figure, makes it evident that in the recent period, employment scopes have been primarily and considerably created in the different service sector industries in the concerned country, including those of household, education and business-related services. On the other hand, substantial number of jobs can be seen to be lost in the agricultural sector and in industries like that of mining, construction and basic manufacturing ones. This in turn indicates towards the creation of an acute structural unemployment in the country (McFarlane et al., 2016). This is because with the increase in the development of service sector industries the demand for skilled labours has been increasing in the country. However, the increase in the employment scopes of service sector industries is developing at the cost of shrinkage of the basic manufacturing and mining industries. The labour force in the country being primarily composed of basic skilled labours (also consisting of huge number of immigrants), the fall in the job creation in the manufacturing sectors has led to acute unemployment crisis among the general labour force of the country, arising out of the mismatch of the demand and supply of skills required and skills present in the current labour force of Australia in the contemporary period.
The crisis of unemployment in the contemporary economic domain of Australia, as discussed in the above section, is expected to have both long term as well as short term implications on different aspects of the economy, the primary ones being as follows:
Loss of current output- One of the primary implications of persisting problem of unemployment in the countries, in general framework, is the loss of productivity in different sectors, thereby leading to loss of economic output of the country as a whole (Furceri & Mourougane, 2012). In case of Australia, with the unemployment in the agricultural and basic manufacturing industries increasing in the contemporary period, the industrial production can be seen to be experiencing the following dynamics:
Figure 4: Industrial Production Dynamics in Australia
(Source: Tradingeconomics.com, 2018)
As the above figure shows, the industrial production in the country has been subjected to considerable fluctuations over the last decade. However, in the last few years (barring 2018), the production can be seen to be showing an overall declining trend, which can be attributed to the loss of jobs in the manufacturing and mining sectors of the country.
Fall in wages of the workers- With the increase in the number of participants in the labour force (attributed to both the increase in the population of the country as well as huge inflow of migrants from all over the world) and a simultaneous loss of jobs in mining, manufacturing and other subsistence sectors, an excess supply of labours (especially of those with basic skills and levels of education) has been created in the economy (Furceri & Mourougane, 2012). This, in turn, has kept the wage growth stagnant and has actually decreased the real wage valuation in the economy:
Figure 5: Decline in the real wage growth in Australia
(Source: Scutt, 2018)
The real wage of the country can be seen to be decreasing in the last few years, which in turn indicates towards the loss of economic welfare of the residents, in general, in the country.
Loss of skills- The prolonged unemployment of the workers with basic manufacturing skills has the threat of the workers losing motivation to look for jobs and to upgrade themselves, which in turn may lead to the loss of skills of the unemployed workers as a whole and redundancy of the existing skills (Allan, Tim & Tucker, 2012).
Poverty and Inequality- With a considerable section of the population losing their jobs the level of poverty among them can be seen to be increasing, thereby leading to increased inequality in the country (Furceri & Mourougane, 2012).
Loss of quality of life- The loss of employment scopes, by reducing the economic wellbeing of a significant share of the population of a country can be seen to be affecting their overall quality of life, in terms of inferior health, lower education and skill development scopes and others.
The government of the country, can be seen to be implementing various policies and strategies for reducing the problems of unemployment cropping up in the country over the last few years. The primary policies taken in these aspects are as follows:
Increase in job creation- The government of the country has been emphasizing on increase in the number of jobs in the country over the last few years:
Figure 6: Cumulative increase in the number of jobs in Australia
(Source: Businessinsider.com.au, 2018)
However, most of the increase in the number of jobs can be attributed to the growth in the number of part-time jobs, which however, has to some extent, helped the government of the country to engage a greater share of people in economic activities (Corden, 2012).
Training programs- With the main reason of the rising unemployment being a mismatch in the level of skills, the government of Australia has implemented various funded programs to address the same, the main programs being those of the Adult Migrant English Program, Skills Service Organizations, Job Ready Program, Apprenticeships incentives for the employers and others (Percapita.org.au, 2018).
Incentives for businesses- The government of the country has also rolled out various incentives like those of New Enterprise Incentive Scheme, Trade Support Loans and other to promote small and scale businesses with a vision to increase the level of employment and economic activities in the country (Percapita.org.au, 2018).
Unemployment Support- The unemployed people in the country are eligible to get unemployment benefits, social security benefits and other financial and non-financial aids from the government. This has been done by the government in order to keep the unemployed labour force motivated to search for jobs.
Conclusion
The above discussion makes it evident that in the contemporary period, the economy of Australia has been facing an unemployment issue arising out of mainly sectoral shifts and mismatch in the aspects of skills required and skills present in the labour market, thereby leading to the creation of structural unemployment in the country. This form of unemployment, arising in the last decade, due to the shrinkage of the mining, agricultural and basic manufacturing sectors, has led to creation of various problems in the economy of the country, including that of loss of productivity, economic growth, economic wellbeing, motivation, skills and an overall quality of life of the people of the country. Keeping this into consideration, the government of the country, over the last few years, can be seen to be implementing various policies including those of part-time job creation, training facilities, trade incentives and also provision of financial and non-financial aid and support to the unemployed labour force in the economy, with the intention to reduce the problem of unemployment in the country over the last few years.
References
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