Challenges of Unemployment in Australia
Discuss about the Unemployment Effects and Remedies for the Australian Economy over the LastHalf Decade.
In spite of the fact that unemployment has been falling in the last half of the past decade, a significant number of Australia are still unemployed with an estimated 490,000 workers being categorized as underemployed. Therefore, a critical lack of long-te rm and suitable employment still remains an issue for more than one million Australian; which in turn results in the imposition of high social cost on families across the country (Oxford 2016). According to a survey conducted by Newspoll via the Australia Institute, a significant number of unemployed Australians (63%) are willing to work in entry-level jobs as long as they are guaranteed regular compensation. The Australian Government has in recent years tried to enact new fiscal policies with the aim of reducing the unemployment situation in Australia. One such fiscal policy deals with increment of workers’ mandatory leave days. This fiscal policy is founded on the principal that individuals are more productive when they are well rested and relaxed (Pack 2018).
Another data survey by Newspoll showed that more than 50% of Australian would be willing to accept an increment in leave days if it meant forgoing a 4% income increment. According to the economic researcher Saunders, the greatest poverty drive in Australia is not illiteracy but wide spread unemployment. OECD recognized that the average number of children born in families with unemployed guardians or parents was three times more than those brought up in full employment households (Straits 2017). The unemployment rate realized a twelve year low in 2017 as a result of job creation in Australia through government incentives aimed at improved infrastructure development. In Addition, the Australian Government is trying to combat unemployment through the introduction of labor market flexibility. According, to government officials, the improvement of workplace flexibility will better employee-employer relationships within business establishment resulting in better work place performance (OECD 2017).
The Australian Government stated in last 2016 to make legislations that would result in increased labor market flexibility. These legislations were part of fiscal policies directed towards unemployment reduction by improving the satisfaction of employees and employers within the workplace setting (Janda 2017). Labor market flexibility seeks to eradicate traditional barriers that prevent employers from conducting successful work reorganization, and cause decline in job security. One of the ways that the Australian Government is doing this is through the removal of unfair dismissal legislations meant to favor small businesses and their respective owners (Smith 2017). Even thou labor market flexibility has created employment opportunities for part-time employees it has however created new problems for employees. The major problem associated with labor market flexibility is precarious employment; which refers to a situation where employees are offered employment that is devoid of holiday pay and sick pay. As such, the part-time jobs linked to labor market flexibility are plagued with diminished security of tenure. This leads to reduced disposable income in the Australian economy but considerable more than what would be witnessed if the market had far less part-time works. Labor market flexibility is great for solving short-term unemployment problems but it does not create long-term job security in the labor market (Oxford 2016).
Australian Government Initiatives to Address Unemployment
Another government lead initiative meant to boost employment has been the deregulation of the Australian labor market. This fiscal policy resulted in uneven distribution of work across Australian which lead to wide spread unemployment due to refusal by businesses to hire more employees (Hutchens 2017). Therefore, policy makers are trying to create balance by shifting labor market dynamics to favor the movement of workers to areas with over-abundance of work, or move employment opportunities to marginalized and economically deprived regions of Australia (Savills 2017). A study has should that an average full-time employed male Australian works roughly 44 hours a week which is significantly higher than the 32 hours recorded in 1982. Business analysts believe that the demand for increased productivity should be met by increasing the labor resource but not increasing the work hour; more times does not guarantee a greater yield it just creates a theoretical illusion of efficiency. Moreover, the number of individuals who work more than 45 hours a week has increased with the introduction of labor market flexibility, and the deregulation of the labor market. A report filled by the Australian Institute pushes for an alternative to the ideology of flexibility one that is based on a voluntary allotment of an employee’s work hours to another individual. This system is set to create better employment results compared to government lead incentives that favor business owners by making employee dismissals easier (Savills 2017).
Research has shown that if individuals worked according to their personal preferences, the leave hours taken by full-time employment workers would undoubtedly create at least 100,000 full-time jobs for unemployed Australians to take up. This type or work redistribution would also be observed in terms of financial stability: The income would shift from individuals with too much work to individuals with little or no work (Smith 2017). The relocation of funds has been used in some parts of Australia like Sydney to boost economic growth by giving more money to individuals who are willing to spend (by taking from workers will low marginal propensity to consume). The industry that is most likely to benefit economically from this redistribution would have to be the Australian domestic tourism sector. However, the unemployment rate over the past five years is not a good predictor of the economic situation in Australian. In spite of the almost stagnate unemployment rate witnessed in the past half-decade, the Australian economy has continuously recorded considerable growth that is not to be ignored. Currently, the number of people looking for work in Australia is valued at one million taking into account all forms of unemployment and individuals who work a part-time in their field of specialization. This implies that the growth in labor demand continues to heavily outweigh the growth in labor supply (Smith 2017).
Labor Market Flexibility
The increase supply of women professional in traditionally male dominated fields has led to increased unemployment for university and college graduates in Australia (Novak 2018). One of the economic theories used to try and remedy the situation deals with reduction in real wages of workers allowing the employment market to successfully absorb the increased labor supply. In a standard trade model, however, this try of change would have to be temporary because the compensation issued to factors of production is considered invariant to the supply of those factors. As such, increasing labor supply does not guarantee that workers will accept a low pay in the long-run. Many people feel that a fiscal policy made under these grounds, would not increase the real-wages paid to workers; but it would increase the spending proportion in the economy by reducing the income of one worker to pay a new worker. Ironically, such a fiscal policy would indeed increase the real wages of workers because the increasing labor force will demand higher compensation in the long-run (NCAN 2018).
The increment in the unemployment rate over the past three years can be attributed to two crucial factors. The first driver is increased labor cost, with the demand for highly qualified professionals; academicians have secured expensive education programs that have left them with sizable student loans and employment compensation expectations. As such, the cost of hiring doctor has increased significantly in 2018 compared to 2002 (Oxford 2016). The second driver is second factor is delayed government involvement, the Australian Government has adapted to the used of remedial measures instead of preventive ones to handle matters of unemployment. The government has been trying to adopt preventive measures through the introduction of fiscal policies that prevent the centralization of goods and service within cities and urban centers.
A Schumpeterian analysis of the Australian landscape could emphasis that there are indeed long-term economic benefits associated with economic cycles. However, other economic viewpoints disagree with ideology suggesting that significant volatility in economic growth is indeed harmful to the well-being of any economy. The two main forms of unemployment that are normally associated with constant and expected inflation rate are structural and cyclical unemployment (Pack 2018). Therefore, as the cost of living continuous to increases in Australia as has been witnessed over the past five years so too will the prevalence of cyclical and structural unemployment. On the other hand, a considerable change natural unemployment can be attributed to variations in real wages offered to workers. Over the last five years, natural unemployment has realized minute decrements due to increased real wage offered to employees across different fields due to better wages. In Australia, natural unemployment is highest amongst individuals in their mid-forties because they are content with government aid. In addition, a majority of the jobs available on the market demand skills that are not commonly found in older generations such as use of online platforms to showcase resumes and send them to prospective employers. It is however difficult for government to evaluate positive and negative change in the natural rate of unemployment due to the complexity associated with its tabulation (SBS 2017).
Part-time Employment and Precarious Employment
In Australia, full-time employees are offered four weeks of paid leave each year. This holiday duration is shorter than what is offered to full-time employees under the European Union (five weeks of paid leave). Newspoll published a report in 2013 revealing that only 44 percent of all Australians categorized under full-time employment actually take up their mandatory annual leave (Oxford 2016). Almost half of all those who fail to take up their annual leave blame it on labor inflexibility at the workplace. This form of inflexibility is attributed to the employee having too much work obligation to actually take time off for a holiday, or the employer is unwilling to allow the worker to go on vacation because of given workplace relocation issues. Due to these complexities in the provision of annual leave to full-time employees, most workers have actually expressed a higher preference for additional leave weeks compared to a marginal increment in real wages (Oxford 2016). The willingness of employees to purchase additional leave weeks tends to differ depending on the gender, age, and employment sector of workers. However, a majority of all young people who are full-time employees are in favor of extended holidays as opposed to increased remuneration. This desire by the youth to have more holidays by sacrificing better pay explained the income to age growth curve in Australia that indicates that older employees are paid more than their younger counterparts. As such, disparities with regard to generational preference for leisure exist that dictate the manner in which individuals are likely to affect economy situation based on their spending, saving, and investment habits. The older generation will tend to direct considerable funds towards savings and investment, while the younger generation is more interest in spending (Staff 2017).
Proper fiscal policing in 2017 has allowed redistribution of work in most government parastatal and public businesses allowing work responsibilities to shift from highly strained employees to part-time workers. There are several benefits with regard to macroeconomics that are associated with redistribution of work; for instance, the significant reduction of welfare payments made out to the unemployed population of Australians (Smith 2017). The Australian Government spends a lot of money in the provision of welfare payments to unemployed individuals that could be redirected to other areas of public interest like education, healthcare, and infrastructure development. The most significant benefit is the extra holidays given to workers makes them spend more in the domestic market through activities like tourism and procurement of locally made goods/services. This allows for income to flow from the rich to the poor especially in marginalized regions of the country that are popular as tourist attractions due to aboriginal culture. An increased distribution of funds amongst the Australian public has reduced the need for imports improving the performance of domestic industries and organizations. Moreover, the increment of time spent with family (extended worker holidays) has reduced spending on expensive goods met to compensate for time not spent with children or spouses (Smith 2017).
Unemployment and Economic Growth in Australia
National Broadband Network (NBN) is an infrastructure incentive of the Australian Government that is considered to be the most important development project in the past 10 years. The Australian Government has redirected a significant proportion of their annual development budget towards it completion. The project is expected to be completed by late 2020. NBN is expected to provide high speed data communication across Australia for both personal and business related needs. This digital system is aimed at creating jobs for thousands of Australians working in fields like information technology, business law, electrical engineering, and business management. Moreover, the NBN will allow for better communication better job-seekers and employers. In most cases, employers are unable to find competent help because they are unable to effectively reach potential employees through traditional avenues like telemarketing, newspaper, television, and radio advertisements.
Therefore, the NBN policy relates to matters of creating job opportunities for people through improved communication and networking between business managers and hopeful employees (Savills 2017). NBN creates increased data transmission thereby providing Australia with high capacity broadband connectivity that will allow information sharing between business departments, branches, and distribution centers. With increased information availability and accessibility, Australians are able to secure better professional training that will in turn result in improve job opportunities and overall productivity. Technological advancements in different fields associated to better information sharing will result in improved labor efficiency and output. According to government predictions 93% of all Australian school, homes, and businesses will access high speed internet through fiber optic cables data transfer rates of up 100mbps. The NBN policy has so far been used an avenue through which jobless youths are offered part-time employment in various agencies that are responsible for the completion of the NBN project. As such, the economic importance of the NBN policy is effective in terms of job creation across Australia (Savills 2017).
Conclusion
Unemployment can be viewed as a debilitating factor for Australia with regard to economic expansion and growth. It is ushers in poverty and despair leaving a significant proportion of the general public excluded for quality services like proper healthcare, housing, and living standards. According to psychiatrists, unemployment leads to developmental issues in children and family conflict. The Australian economy can attribute the cyclical aspect of unemployment to the dynamics of entry, growth, decline, and death of businesses. These changes in the performance of businesses affect the flow of labor across different sectors leading to elevated levels of underemployment, over-employment, or unemployment (Pack 2018). In Australia, the government has dealt considerably well with frictional unemployment through fiscal policies and improved internet connectivity in major cities and urban centers. According to economist, critical damage is dealt to a household when unemployment persists for more than 7 to 10 years. In Australia however, the upper bound on unemployment period peaks at 3 years. This is an indication that the economy has recovered since the 2000s, when the upper bound for unemployment duration was roughly 5 years. Over the last five years, the manner through which the Australian economy has being producing goods and services has improved considerably leading to better hospitality, manufacturing, retailing, banking, agricultural, and processing industries (Oxford 2016).
References
Hutchens, G 2017, Australia’s unemployment rate falls to four-year low of 5.5%, viewed 15 May 2018, <https://www.theguardian.com/business/2017/oct/19/australias-unemployment-rate-falls-to-four-year-low-of-55>.
Janda, M 2017, Unemployment stays at 5.4pc despite ‘stellar’ jobs boom in November, viewed 15 May 2018, <https://www.abc.net.au/news/2017-12-14/unemployment-jobs-november-abs/9258448>.
NCAN, NCAN 2018, Job surge shows strength but Australia’s unemployment rate is climbing, viewed 15 May 2018, <https://www.news.com.au/national/job-surge-shows-strength-but-australias-unemployment-rate-is-climbing/news-story/3b6ca2ec987ade27765a4d2e3c70bf25>.
Novak, L 2018, South Australian unemployment rate falls to 5.6 per cent in March, viewed 15 May 2018, <https://www.adelaidenow.com.au/news/south-australia/south-australian-unemployment-rate-falls-to-56-per-cent-in-march/news-story/6df1f1852196d962f8c0a938fd9a6375>.
OECD, S 2017, ‘OECD Economic Surveys’, The Organisation for Economic Co-operation and Development, pp. 1-47.
Oxford, BI 2016, ‘Measuring Australia’s Economic Performance’, Oxford Big Ideas: Economics and Business, pp. 1-7.
Pack, C 2018, ‘The Australian Economy and Financial Markers’, Reserve Bank of Australia, pp. 1-34.
Savills, S 2017, ‘Australian Economic Drivers’, Savills Research, pp. 1-24.
SBS, N 2017, Unemployment near a five year low at 5.4%, viewed 15 May 2018, <https://www.sbs.com.au/news/unemployment-near-a-five-year-low-at-5-4>.
Smith, W 2017, ‘Unemployment Policy in Australia’, Per Capita, pp. 1-40.
Staff, O 2017, ‘How does Australia compare? Employment Outlook 2017’, OECD, pp. 1-2.
Straits, T 2017, Australian job growth surges, unemployment near 5-year lows, viewed 15 May 2018, <https://www.straitstimes.com/business/economy/australian-jobs-growth-surges-unemployment-near-5-year-lows>.
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