Comparison Of Unemployment In Australia And Indonesia

Types of Unemployment

Discuss about the Comparison of Unemployment in Australia and Indonesia.

The study has directed to understand the status of unemployment in Australia at the current state of scenario. Australian economy can be identified as one of the leading developed economies of the globe. Surprisingly, the unemployment rate has been an issue for the economy leading to global uncertainties and lack of growth rate of the world economy.  On the basis of per capita income, Australian citizens are counted as one of the leading countries. Currently, due to increased level of immigration and growth in the population, the labour market of the country has become quite stagnant. Precisely, the increasing demand for the skilled labours has created massive problems for unskilled labours (Borland, 2017). As a result of the existing scenario, the study will be helpful to identify the types of unemployment, issues of unemployment, and major causes leading to unemployment of the economy. Through the identification of the current rate of unemployment in Australia, the position of the economy can be reflected in the study.

Meanwhile, the research has further aimed to discuss the unemployment scenario in the states of Australia such as New South Wales. Also, meaningful comparisons in the rate of unemployment have been drawn with the other Australian states to identify the issues leading to the jobless situation. In addition to that, the policy measures such as fiscal policy and other policies leading to control the rate of unemployment have been briefed and thoroughly discussed in the paper to create a substantial argument (Janda, 2016). Alternatively, to create a diversified discussion, the current unemployment scenario of Indonesia, a developing country has been drawn to a conclusion. Meanwhile, the comparative discussion of the unemployment scenario and the government policy measures of the countries will figure out a clear picture of the economic status for both the economies. The study also delivers the growth measures defined by the Australian government to achieve the unemployment target satisfying for the country’s economic prosperity.

There are three primary types of unemployment that occurs in an economy. The unemployment types are known as cyclical, structural and frictional unemployment. It is important to understand the type of unemployment that occurs mostly in an economy for the government to development appropriate policy in order to stabilise the economic condition of the nation (Dixon and Shepherd, 2011). The three major types of unemployment are discussed in details herein below:

• Cyclical Unemployment: An economy faces different ups and downs over the time. The ups and downs in the market are the primary reason for the occurrence of cyclical unemployment in the nations. When a country enters a recession different people lose their jobs irrespective of their skills and knowledge (Dixon and Shepherd, 2011). The lost of job due to the downturn in the economy is known as cyclical unemployment. It is important to note that the unemployment rate increased to around 25 percent in some of the developing countries during the period of great depression.
• Structural Unemployment: The structural unemployment occurs due to the absence of demand for a particular type of employee. The primary reason for the occurrence of structural unemployment is the mismatch between the skills possessed by the workers and the skills required by the employees (Cho and Newhouse, 2011). It can be seen through a survey report that structural unemployment is primarily found unemployment in Australia due to the lack of experience and skills among the younger generation.
• Frictional Unemployment: Frictional unemployment is one of the unavoidable types of unemployment that occurs in an economy. The primary reason for the occurrence of frictional unemployment is the normal turnover in the employment market. The shift of an individual from one job to another needs a certain amount of time. The amount of time spent on finding a new job and getting employed is known as frictional unemployment (Cho and Newhouse, 2011).

Issues of Unemployment

Unemployment can create substantial economic issues leading to long-run economic uncertainties and slowdown. Though an economy cannot make the rate of unemployment to entire zero, the issue of unemployment can be attached to an economy. In the underlying section, the issues of unemployment have been defined as follows:

• Reducing the per capita income: One of the major issues of unemployment is continuous dip in the per capita income. If the majority of the population has remained jobless, automatically the average income of the country per person will reduce to a substantial margin.
• Decrease in minimum wage rate: Another issue of rising unemployment is deduction in the minimum wage rate. Therefore, to create better job opportunities, employees tend to leave their current job position leading to frictional employment. As a result of the scenario, drop in minimum wage rate will contribute to further unemployment issues.
• Chances of recession: Alternatively, in an indirect way, unemployment situation in an economy can largely contribute towards economic recession. If an economy has high rate of unemployment, the possibility of recession is enhanced. Due to surging rate of jobless, the government spending will be increased at a notable order resulting in economic breakdown.
• Economic slowdown: Last but not the least, the rate of unemployment can create massive scopes for economic slowdown leading to uncertainties. In a developed or developing economy, the rate of unemployment has been taken into consideration to identify the prospects of the economy. Hence, high rate of unemployment can lead to economic slowdown, to say the least.

Meanwhile, identifying the issues of unemployment will not be effective enough. Apparently, specific government policies such as fiscal policy and monetary policy have been directed to improve employment scenario and growth of the economy. Understandably, to control the issues of unemployment new set of investment and government policies will be the key to success.

In the Australian market, the major causes of unemployment are significantly diversified. Understandably, the main reason behind rising unemployment in the economy has been described as follows:

• Industry shutdowns: In the current state of scenario, industrial shutdown can be identified as the major cause of rising unemployment in Australia. Meanwhile, in the region of South Australia, the industry shutdown has contributed to the massive jobless situation. Hence, most of the unemployed people cannot find another vacancy in the other industries such as manufacturing, automobile, textiles and mining (Bårdsen, Hurn and McHugh, 2012).
• The global crisis and economic slowdown: Due to global economic downturn and slowdown in the major economies, the export orders in the industrial sector have dropped in a notable way. As a result of the scenario, the organisations in the South Australia, New South Wales, and other territory have forced to cut down the number of jobs for the unskilled labours (Murphy, 2016). Also, the global financial crisis has limited the public as well as private spending leading to unsatisfactory job creation.
• Offshoring: Offshoring has become another leading factor to the increase rate of unemployment in Australia. As the modern organisations have started to offer tax inducement to the developed nations in the Western continents to shift jobs, the Australian unemployment situation has got worst (Bårdsen, Hurn and McHugh, 2012). Hence, most of the jobs in the Australian textile, mining, engineering, automobile and other industries have offered to the skilled and professional job seekers of the western nations. Thus, unskilled labours in Australia are losing their jobs randomly.
• Technological development: Last but not the least; modern technological development and use of robotics in manufacturing, automobile, and textile industry in Australia have taken the place of the unskilled labours in the past decade or so. As a result of the same, major industries have reduced the number of workforces contributing to the unemployment scenario.

According to the report of the Australian Bureau of Statistics, the seasonally adjusted rate of unemployment in Australia has increased to 5.8 percent in the last year of 2016. Meanwhile, the unemployment rate has surged by 0.1 percent in compare to November’s data (Abs.gov.au, 2017). In the underlying section, a graph has been delivered to show the rate of unemployment in Australia in the past five years.

Figure: Australia Unemployment Rate

Source: (Abs.gov.au, 2017)

Meanwhile, the jobless claim figure rose unexpectedly as mere 13,500 new employments have been created in the economy. Alternatively, the jobless claims have increased by 14,700. In the next segment, the jobless situation in New South Wales and other Australian territories has been briefed.

In order to identify the actual status of the unemployment situation in Australia, the unemployment rate of Australian states has been compared to get a clear indication of the prospects. Meanwhile, in December 2016, the unemployment rate of New South Wales has been registered at 5.2 percent that is below the overall rate of unemployment in the country (lmip.gov.au/, 2017). Understandably, the industrial hiring rate, as well as the government spending, has largely contributed to control the rate of unemployment of NSW between 5 and 5.5 percent. Also, the growth of part-time job opportunities in the territory has kept the unemployment rate of the state steady.

According to the survey report released by Australian Bureau of Statistics, apart from Northern Territory and Australian Capital Territory, the seasonally adjusted unemployment rate of all the Australian states are recorded above 6 percent excluding NSW in December 2016. In the underlying section, a chart has been delivered with the trending data of unemployment rate of each of the states (lmip.gov.au/, 2017). Notably, though the level of unemployment of Australia is below 6 percent in the past six months or so, the unemployment issues are kept rising in the primary states such as Tasmania, Western Australia, Victoria, Queensland, and South Australia.

Causes of Unemployment

Figure: Unemployment Rate by Australian State and Territory in December 2016

Source: (lmip.gov.au/, 2017)

In the underlying section, a comparative table has presented to discuss the diversified unemployment rate, causes of unemployment and government policies of states to reduce unemployment as follows:

Australian government policies directed to reduce the rate of unemployment have been briefed as follows:

• Increasing aggregate demand: The government of Australia has identified the most active fiscal policy to increase the government investment spending creating more job opportunities. Moreover, a substantial amount of fiscal stimulus has been given under the fiscal policy to support modern industries operating in Australia (Filc and Ko?hler, 2009). Thus, extra spending on industrial infrastructure can create jobs.
• Tax Reforms and employment subsidies: Affirmatively, by lowering the marginal tax rates, significant taxation policy reforms have been introduced by the Australian government to increase job opportunities in different industries. Apart from that, government subsidies such as employment contracts should be signed by the employers to hire young candidates (Borland, 2017).
• Lowering occupational immobility: Precisely, the government of Australia encourages policies known as apprenticeship schemes and career development schemes to make the people more skilled. Thus, by reducing occupational serenity, new talents can be prepared to increase their skills to find appropriate jobs (Irmen, 2009).

According to the article of Jakarta Globe (2015), the unemployment rate of Indonesia has increase in the first half of 2015 from 5.7 percent to 5.81 percent. Furthermore, the unemployment rate drew to 6.20 percent by the middle of the year. It has been estimated by the economist that the slower economic growth has been the primary reason for the high rate of unemployment in the country (Jakarta Globe, 2015). Research shows that the economic growth for more than a decade has succeeded in reducing the unemployment rate from more than 20 percent in the 1990s to 6 percent in the year 2015. But, the slower rate of economic growth is unable to provide employment to the younger generation joining the labour market every year. A table has been presented below showing the unemployment rate of Indonesia for the last ten years:

On the other hand, the government of Indonesia has been quite effective in implementing new policies in order to improve the employment level in the country (Delalande, 2016). The Indonesian government has effectively collaborated with the private sector in order to provide more jobs to the people of the nation and has effectively reduced the unemployment rate to 5.5 percent in the first half of the year 2016. A figure has been presented below for better understanding:

Figure: Unemployment rate (Indonesia)

Source: (Tradingeconomics.com, 2017)

Currently, the unemployment rate in the country is around 5.94 percent and the economist has forecasted that the unemployment rate will increase in the upcoming years due to the downfall in the mining industry (Tradingeconomics.com, 2017). Furthermore, the fall of demand in the mining industry has negatively impacted the economy of Indonesia that will further impact the unemployment level in the country.

The Indonesian government has played an active role in order to reduce unemployment rate in the nation. The government has implemented different policies to improve the current condition of the labour market. The government policies that are currently used in Indonesia have been discussed herein below:

• Collaboration with public sector: The government has collaborated with the private sector organisations to provide more jobs to the Indonesian people. The active participation of the government has been quite effective in providing 2 million more jobs to the younger generation entering the labour market every year (Farrer, 2015).
• Fiscal policy: The Indonesian government has made changes in its fiscal policy to promote business in the country. Lower interest loans have been provided to the Indonesian organisations along with employment subsidy to improve job market (Jackman and Layard, 2007).
• Career development program: The government has focused on career development programs by collaborating with several private institutions to improve the skills and knowledge of the Indonesian people. Furthermore, the government provides lower priced skill development programs and training facilities to the people to improve the strength of the workers in the Indonesian labour market (Jackman and Layard, 2007).

By considering the above analysis, a comparison has been drawn for the unemployment level between Australia and Indonesia that has been presented in the table given below:

Unemployment in Australia

It can be seen from the above table that the population of Indonesia is more than Australia. Though both the economies have a same level of unemployment, but the number of unemployed people in both the countries varies by a huge number (Murphy, 2016). For example, the number of unemployed people in Australia is 1.368 million. On the other hand, the number of unemployed people in Indonesia is 13.365 million which is ten times more than that of Australia (Scott, 2017). Furthermore, the per capita income of the Australia people is more than the per capita income of the Indonesian people. Hence, the standard of living in Australia is quite better than the people of Indonesia.

Furthermore, it can be seen through the above table that the structural unemployment is mostly seen in Australia. On the other hand, the Indonesian economy most faces cyclical unemployment. Hence, the Australia government needs to take necessary steps in order to improve the skills and knowledge of the younger generation (Delalande, 2016). Additionally, the government of Australia needs to make changes in its government spending in order to promote business in the urban region to support the needs of the labour market. But, in the case of Indonesia, the government needs to focus on balancing the economy by promoting business in the country to provide jobs to the unemployed people (Murphy, 2016). Furthermore, the Indonesian government needs to focus on the declining condition of the mining industry in order to save the jobs of the current population and balance the economic condition of the nation. Hence, the basic difference that can be seen between the two countries are the number of unemployed people, the type of unemployment, the standard of living and the reason for the current unemployment rate.

The investigation on current state on the unemployment situation in Australia has revealed significant data and information to be taken into consideration. The study has compiled the major issues leading to unemployment (Murphy, 2016). At the beginning of 2016, the unemployment rate of the country was 6 percent whereas, at the end of the year, the rate has been fractionally pulled back below the level of six. Nevertheless, the global slowdown and industrial shutdowns have fuelled the increasing rate of unemployment in the majority of the states (Irmen, 2009). Though the fiscal policy and tax reforms are contributing towards more growth in the job market, the target rate of unemployment is yet to be achieved.

Unemployment situation in New South Wales

In the case of Indonesia, the unemployment rate has gradually increased from 5.5 percent at the beginning of the year to 5.94 percent at the end of the year 2016 (Scott, 2017). The industrial shutdowns and the declining in the global mining industry have been identified as the primary reason for the increasing unemployment rate in the nation (Murphy, 2016). It can be seen from the news that more than 100 mines of Indonesia have stopped their production in the year 2016 making 1000s of people unemployed. On the other hand, the people of Indonesia have been forced to work at a lower job as compared to their skills and knowledge (Scott, 2017).

Furthermore, it leads to a lower level of minimum wage rate in the nation that has created a downturn in the labour market. Hence, it is important for the government of both the nations to take necessary steps in order to control the impacts of global economic downturn and maintain a balance in the labour market (Scott, 2017). Furthermore, the government of Australia needs to focus on developing the skills and knowledge of the workforce by implementing different career development programs by collaboration with several private institutions.

Conclusion

The above analysis shows that the unemployment of the both the countries occur due to the economic downturn in the global market. On the other hand, the impact of a high rate of unemployment is more on the Indonesian economy because of its higher amount of population and lower income level. The high amount of unemployment leads to increase crime level in the country and make the people feel unsatisfied and depressed. Hence, the unemployment leads to social unrest in both the economies. On the other hand, the government of both the countries have worked effectively in controlling the unemployment rate. But, the high rate of increasing population has made it difficult for the Indonesian government to provide adequate jobs to the new members of the labour market.

Hence, the Indonesian government needs to focus on improving the economic growth rate in order to meet the challenges of unemployment in the country. On the other hand, the Australian government needs to implement necessary policies in order to increase the demand in the labour market to mitigate the issues of unemployment in the economy. Therefore, a difference can be seen through the analysis of unemployment between a developed country and a developing country, i.e. in the type of unemployment and its impact on the economic balance.

References

Abs.gov.au. (2017). Australian Bureau of Statistics, Australian Government. [online] Available at: https://www.abs.gov.au/ [Accessed Jan. 2017].

Bårdsen, G., Hurn, S. and McHugh, Z. (2012). Asymmetric Unemployment Rate Dynamics in Australia. Studies in Nonlinear Dynamics & Econometrics, 16(1).

Borland, J. (2017). Unemployment in Australia-Prospects and Policies: An Overview. The Australian Economic Review, 30(4), pp.391-404.

Cho, Y. and Newhouse, D. (2011). How Did the Great Recession Affect Different Types of Workers?. 1st ed. Bonn: IZA.

Delalande, J. (2016). WA notches highest unemployment rate in the country. [online] WA Today. Available at: https://www.watoday.com.au/wa-news/western-australia-records-highest-unemployment-rate-in-the-country-20161117-gsre6x.html [Accessed Jan. 2017].

Dixon, R. and Shepherd, D. (2011). State and Territory Employment and Unemployment Patterns in Australia. Australian Economic Review, 44(2), pp.196-206.

Farrer, M. (2015). Unemployment in Australia rises to 6.4%, highest for 13 years, ABS figures show. [online] the Guardian. Available at: https://www.theguardian.com/business/2015/feb/12/unemployment-in-australia-rises-to-64-in-january-abs-figures-show [Accessed Jan. 2017].

Filc, W. and Ko?hler, C. (2009). Macroeconomic causes of unemployment. 1st ed. Berlin: Duncker & Humblot.

Investments, I. (2017). Unemployment & Employment in Indonesia | Indonesia Investments. [online] Indonesia-investments.com. Available at: https://www.indonesia-investments.com/finance/macroeconomic-indicators/unemployment/item255? [Accessed Jan. 2017].

Irmen, A. (2009). On Wage Policies and Unemployment. The Open Economics Journal, 2(1), pp.39-44.

Jackman, R. and Layard, R. (2007). Innovative supply-side policies to reduce unemployment. 1st ed. London: L.S.E.

Jakarta Globe. (2015). Indonesia’s Unemployment Rate Increases as Economy Slows | Jakarta Globe. [online] Available at: https://jakartaglobe.id/business/%EF%BB%BFindonesias-unemployment-rate-increases-economy-slows/ [Accessed Jan. 2017].

Janda, M. (2016). Unemployment edges up to 5.8 per cent. [online] ABC News. Available at: https://www.abc.net.au/news/2016-07-14/unemployment-jobs-figures-abs-june/7628690 [Accessed Jan. 2017].

lmip.gov.au/. (2017). Unemployment Rates (15+) by State and Territory, December 2016 (%). [online] Available at: https://lmip.gov.au/default.aspx?LMIP/LFR_SAFOUR/LFR_UnemploymentRate [Accessed Jan. 2017].

Murphy, J. (2016). Australia has an employment problem that no one’s talking about. [online] NewsComAu. Available at: https://www.news.com.au/finance/economy/australian-economy/hopeless-cases-the-bitter-taste-of-australias-employment-problem/news-story/ae4504c4341e10b27098ef1680edc8fd [Accessed Jan. 2017].

Scott, M. (2017). Assembling the Antipodes: migration, finance and territoriality across Australia and New Zealand. Territory, Politics, Governance, pp.1-19.

Tradingeconomics.com. (2017). Indonesia Unemployment Rate | 1982-2017 | Data | Chart | Calendar. [online] Available at: https://www.tradingeconomics.com/indonesia/unemployment-rate [Accessed Jan. 2017].

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