Forms of Unemployment
Discuss about the Unemployment during last 5 years and its effect on Australian economy and government policy towards reducing unemployment.
Unemployment describes a condition of labor market where some of the member in labor are incapable of finding paid jobs at the existing market wage. The problem of unemployment and social consequences. Unemployed persons are unable to find a steady source of income and hence suffer from poverty, alienation and poor health condition (Bernanke, Antonovics and Frank 2015). Unemployed people are unable to provide support to their family even for basic substance. They are unable to send their children to school and support education. Lack of formal education made their children vulnerable to future unemployment. Unemployment problem of current generation thus perpetuates to next generation (Mavromaras, Sloane and Wei 2015). Some factors responsible for time-to-time unemployment in the labor market include increase in population due to rise in birth rate change in the structure of the economy. When unemployment exists for a long period then it leads to the problem of long-term unemployment.
The Australian economy has undergone major changes in its economic and industrial structure. Consequently, labor market experienced dynamic changes resulting in unemployment among some groups of the labor market. The economy has made successful transition by adaption of advanced technology. In a globally integrated world, the economy needs to reshape its industrial structure causing structural unemployment (Carvalho 2015). The recent slowdown of mining industry is another factor contributing to unemployment in Australia. Unemployment puts a drag on the economy.
The essay portraits unemployment trend in Australia in the last five years. Before analyzing the trend, the paper tries to find specific causes of unemployment in Australia. Specific focus has been given on particular groups like youth and immigrants. Employment challenges are considered along with remedial measures taken by the Australian government to combat unemployment.
Unemployment in an economy caused by a number of different factors. There can cyclical and structural factors that lead to steady unemployment in an economy. Cyclical, structural and frictional are the three main forms of unemployment. The different forms of unemployment provide useful insight to understand the existing unemployment problem in an economy. Cyclical unemployment is the form of unemployment caused during recessionary phases of business cycle or economic cycle. The economic downturn during recession causes a shortage of demand for goods and services leads to a lack of jobs. The weaker demand condition in the goods market reduces labor demand aggravating the unemployment problem. Australia experienced cyclical unemployment during recession of 1990s and global financial crisis of 2008 (Bachmann and Sinning 2016). Labor market suffers with the problem of structural unemployment when skills of laborers do not match with the requirement of available jobs. In the manufacturing sector, advanced automation technique resulted in a considerable job loss among manual laborers. Unemployment resulted from structural factors tend to sustain for a longer period as it usually takes time for workers to develop required skills. Long-standing structural unemployment in Australia causes steady long-term unemployment in the economy. Frictional unemployment indicates unemployment exists during transition between two jobs. Apart from unemployment, one prominent problem of Australian labor market is underemployment (Li, Duncan and Miranti 2015). Underemployment describes a scenario when people though engaged in paid jobs but less than hours, they are willing to. Underemployment is reflected from part time employment statistics. Groups vulnerable to underemployment are mostly youth, older and female participants
Unemployment in Australia: An Overview
Unemployment rate in Australia during 2013 was around 5 to 6 percent. The ABS statistics indicate, unemployment people in the labor market numbered 712500 (theguardian.com 2014). The fourth quarter of 2013 experienced an improvement in state of labor market. Reduction in the underemployment rate signaled an improvement in labor market condition. The problem of low participation rate remained in the labor market. With a decline in unemployment, there is a gain in employed statistics. For male participants, full time employment increased as against fall in part-time employment. Females were however at a disadvantageous position. They were unable to get full time jobs in the labor market. Among the female participants’ part time employment surged while full time employment went down. Since 2013, Australian economy entered in phase of relatively slow growth rate. Following inverse relation between economic growth and unemployment. Labor market condition worsens in 2014. This was reflected from a rise in recorded unemployment rate to 6.4% (abs.gov.au 2014). The accounted unemployment rate in 2014 was the highest since the economy ever experienced in the last 12 years. The rapid increase in unemployment statistics was primarily due a large increase in labor force participation. Labor force participation indicated by proportion of people willing and able to do work increased by 43,400. As against this people under employed group decreased by 300. Unemployment rose because of a greater increase in number of labor force participants relative to number of employed. Tasmania recorder highest rate of unemployment with an unemployment rate of 7.6%. The jobless rate in Victoria increased to 7% while for Queensland unemployed percent rose to 6.8% (theguardian.com 2018). Male members experience a shift from part time to full time employment while the shift was reverse for females. Funds were pulled out from resource projects.
Figure 1: Unemployment in Australia
(Source: data.worldbank.org 2018)
The year 2015, labor market condition improved with a fall in unemployment rate to 5.8%. The labor market experienced a stronger growth in employment. Number of people having a job increased to 71,400. The recorded increase exceeds that of the forecasted. Participation rate increased to 65.3% (abs.gov.au 2018). Both full time and part time unemployment increased simultaneously. Before 2015, mining sector, the main driver of industrial growth of Australia had been struggling because of change in growth focus of China causing a decline in export demand.
The steady performance of labor market recorded in 2015 continued in 2016 as well with a decline in unemployment rate to 5.7% (news.com.au 2018). There was a notable decline in the number of people searching for jobs. This led to a decrease in unemployment statistics. In spite of a fall in employment, overall unemployment had declined. The decline in part-time employment was more than offset by the increase in new fulltime jobs. Number of persons actively engaged in jobs and those searching for jobs both declined. Tasmania again recorded highest unemployment rate of 7.2%.
Trends in Unemployment in Australia
In 2017, there was a trend decline in unemployment rate to 5.5 percent. This was the lowest since the last four years. The year 2017 was characterized by a recorded increase in employment creation in every month throughout the year. Employed statistics rose significantly. Part time jobs increased by larger magnitude than full time ones. Part time jobs rose by 19,500 with an increase in full time jobs by 15,100. The participation rate in the labor market rose by 0.2 percentage p9nt reaching to 65.7 percent (abs.gov.au 2018). The acceleration in job growth was largely contributed by increase in business investment. The concern for policymakers remain because of slow growth in wages. The slow wage dragged the consumer spending. Tasmania and Victoria accounted for highest rate of unemployment with unemployment rate being 6.1 percent.
In the ongoing year of 2018, the unemployment rate picked up to 5.6 percent. This is surprising as the labor market added 18,000 new jobs (news.com.au 2018). Hike in both underemployment and unemployment statistics revealed a downward pressure on wage growth.
The severity of unemployment problem varies among different groups of the labor market. People mostly suffer with prolonged unemployment are migrants, youth and females.
Australian youths are suffering with a problem of long-term unemployment. Despite of their effort to find jobs they are unable in arranging a job mainly due to lack of availability in entry-level jobs in the labor market.
Figure 2: Trend in Youth unemployment in Australia
(Source: abs.gov.au 2018)
Several factors are contributing towards the rising statistics for youth unemployment. The first factor is poverty. Poverty remains a major problem in some regions of Australia. People having a high poverty statistics record more difficulty for young people (aged 15 to 24) to settle with a job. More than 31.5 percent of young Australian are either unemployed or underemployed. The underutilization rate, which is a combined measure of unemployment and underemployment, rose to a recorded high level. As of now, there is 659, 000 young Australian facing serious challenge of unemployment (news.com.au 2018). Prior to global financial crisis unemployment rate was below 10 percent while underemployment rate was around 11percent. The problem has not much intensified than that was before. The incidence of part time and casual employment are growing among the youth participants (Carvalho 2015). Underemployment mostly hurt young people who do not have college or university degree. These people have much more uncertain future than other members of the youth participants do. Participation among youth Australian has increased somewhat.
Challenges Faced by Different Groups
Like youth, migrants’ people in Australia are exposed to the risk of unemployment. Unemployment rate are growing rapidly among migrants arriving from North Africa and Middle Eastern. Estimates of Australian bureau of Statistics indicates that jobless rate during first five years of their arrivals is 33%. This is almost 6 times larger than the level of national average. European and Asian migrants are at a comparatively better position than their counterpart in Middle East and North African is. Jobless rate among South East Asian migrants is 3.6 percent while that of eastern European migrants is 1.6 percent (news.com.au 2018). In Australian job market, skills of English language play an important role in getting jobs. Most of the Middle Eastern migrants are refugees. English language thus becomes the main barrier for them in finding jobs in Australia. It takes at least some tomes for them to develop their skills of English language. This is the reason why unemployment is more prevalent during the first few years of their arrivals. Asian migrants in contrast mostly have graduate degree and study in Australia. This has made job searching easier for them.
Figure 3: Unemployment rate among migrants since years of arrival
(Source: news.com.au 2018)
With passes of time, the new Australians gradually developed their skills on English language and necessary skills. Thus with the passes of time unemployment rate among the migrants declined steadily.
The existing unemployment in Austral has an averse influence on economic as well as social wellbeing. The persistent unemployment restricts development skills. Because of being unemployed for a long period existing skill deteriorates. The statics for log terms unemployment exceeds that of average national unemployment. Existence of long-term unemployment hurts the benefit generated from increased income (Mavromaras, Sloane and Wei 2015). Unemployment worsens physical and mental health condition damaging well-being of society. Increasing incidence of poverty, crime and social isolation are some other social consequences of increasing unemployment problem.
Australian labor market is facing challenges in several areas. The first challenge is posed by demographic dynamics. Ageing population has become one of the most common problem for most advanced nations. In Australia, participation rate among the labor fall is expected to fall below 63 percent for people aged 15 and over by 2054-55. This will raise fiscal burden by reducing tax base. The long-held unemployment in Australia has turned into a more intensive problem of long-term unemployment. Another serious problem is youth unemployment in Australia. The indigenous population in Australia faces higher barriers to find jibs than rest of population on average (Gregory and Smith 2016). Job creation in Australia has slowed down after the global financial crisis. This is particularly due to change in internal structure of the economy. Decline in job creation contribute to growing unemployment in Australia.
Remedial Measures and Future Prospects
With the objective of addressing existing challenges in the labor market a set of policies are designed by the government. Tax reforms that were initiated in 2015 have benefitted more million small businesses. Realizing success of such policy proposition has made to expand the scheme to include medium enterprise as well. With this, incentives are also given in firms of lowering company tax rate. As in 2016, government in Australia reduced the regulatory burden on community and business by over $5.8 billion. Investment in infrastructure has been increase in order to accelerate productivity growth along with strengthening the connection with labor market. In the government budges of 2017-18, additional $50 billion was proposed to invest in infrastructure of land transportation. The amount of investment is proposed to increase to $70 billion by 2020-21 (Gregory and Smith 2016). The National Innovation and Science Agenda has designed to ensure specific progress in economic growth in certain areas and overcome employment challenges.
Regulatory reforms are undertaken in labor market. In order to secure interest of the workers a registered organization commission has established to improve union governance and employment organization. The active labor market program of government include enhancement of subsidy structure in order to benefit both employer and job seeker. Government has streamlined the exiting wage subsidies, which include youths, mature age, parents, and indigenous and long term unemployed in January 2017. A New Enterprise Incentive Scheme (NEIS) is designed to increase employment opportunity for job seekers. In the budget of 2016-17, the available number of place under NEIS was increased to 8,600 from earlier 6,300. The program has also broadened to include as many people as possible who are not on income support. Measures are taken to increase participation of female members and address gender inequality in the labor market. Migrants’ unemployment is one major problem characterized in Australia (Bonoli 2017). Migrant Workers’ Taskforce has established to address unemployment among immigrants. Australian youths are exposed to high risk of unemployment. Transition to Work, Empowerment of youth initiative are some of the programs designed to reduces youth unemployment and protect Australian youth from being long term unemployed.
Conclusion
In the essay provides a complete labor market dynamics of Australia. Despite being one of the developed nations in the world, unemployment remains a significant problem for the Australian economy. Structural, cyclical and frictional unemployment are some of common forms of unemployment in Australia. The recent slowdown of China’s growth has influenced Australian economy in form of decline in mining investment and aggravated unemployment. Tasmania, Victoria and Queensland are some states suffering from massive unemployment problem. As against a slow growth of mining, service sector expands resulting in a gain in employment. Single people, immigrants, youth and females are some groups exposed to problem of high unemployment. One prominent features of labor market in Australia include growing underutilization slow growth of wages, growth of part time employment against decline in full time employment. Youths being the new entrants in the labor market are facing significant difficulty in finding jobs. Skill mismatch is one major problem towards youth employment. The youth unemployment has a scaring effect for the economy. Immigrants are unable to find jobs especially during first few years of their arrivals. Asian immigrants having minimum graduation degree are comparatively less vulnerable to unemployment than those of migrants are from African and Middle East. In order to combat sustain unemployment, effective policy initiatives are taken by the government
Reference list
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NewsComAu. (2018). Australia’s unemployment rate rose to 5.5 per cent in December, up from 5.4 per cent in November, with an extra 20,000 people finding themselves jobless, according to new data.. [online] Available at: https://www.news.com.au/national/job-surge-shows-strength-but-australias-unemployment-rate-is-climbing/news-story/3b6ca2ec987ade27765a4d2e3c70bf25 [Accessed 26 May 2018].
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