Hi5003 Economics For Business - Assessment Answers

Answer:

Introduction

The overall growth and development of a country, over the years and the welfare of the population of the same considerably depend on how well the political, social and economic aspects of the concerned country perform and also on the level of stability in these aspects. Of this, the economic aspects of the country and its growth and dynamics contribute considerably to the country’s progress over time and to the level of welfare enjoyed by most of the residents of the country (Mankiw 2014). There are different macroeconomic indicators which act as yardsticks in measuring the performance of the economy of a country from different perspectives. The primary ones of these macroeconomic indicators include the Gross Domestic Product, the rate of inflation as well as the rate of unemployment prevailing in the country at a particular point of time.

The level of unemployment present in a country and its changes over the years act as indicators of the overall situations in the labour market of the concerned economy. The rate of unemployment prevailing in a country highlights the number of people in the labour force of the same, who in spite of being eligible to work and also willing to work do not find any job. The dynamics in the rate of unemployment, in its turn, shows the situation of the job creation in the economy and the demand supply mismatches in the labour market (Agénor and Montiel 2015). This in turn also indirectly influences the wage growth and economic abundance of the population of the country, which have implications on the growth of aggregate demand and overall economic productivity in the country.

Keeping this into account, this essay tries to study the trends in unemployment aspects prevailing in one of the most developed and significant economies across the globe, the economy of Australia, over the last five years.  The essay also focusses on exploring the different types of unemployment which have been prevailing in the economy over the last few years and their impacts on the economy as a whole, thereby trying to discuss and highlight the policies and strategic framework taken up by the Australian government to solve this issue of concern.

Unemployment scenario in Australia, as a whole

The economy of Australia has over the years developed considerably and is till date one of the primary dominant economy in the global framework. Much of this development and economic prosperity of the country and a higher than average general living standard of the major share of the population of the same can be attributed to the robust and impressive growth of the industrial, service, commercial sectors and employment generation as well as stable government policies in the country.

However, in spite of employment generation and industrial and commercial prosperity of the country, unemployment has remained one of the issues of concerned over the years in Australia. Australia, as a whole, shows the presence of all the three broad types of unemployment trends in its economy which are as follows:

Frictional Unemployment- This type of unemployment occurs due to the short-term and natural transitional unemployed phase of the workers who shift from one job to the other.

Cyclical Unemployment- This form of unemployment generally occurs in the phases of economic contractions or slowdown and are reduced with the recovery of the economy.

Structural Unemployment- This form of unemployment is a comparatively long-term and more severe one than that of the former two types. Structural unemployment occurs when there are shifts in the types of jobs created, creating a mismatch between the level of skills present among the workers and the level of skills required in the economy (Gregory and Smith 2016).

Australia, over the years, has experienced frictional unemployment in different magnitude as job changes and job switching are common phenomena in the country. On the other hand, cyclical unemployment can also be seen to be occurring during certain periods of time, like that in 2011, when the economy was going through an acute contractionary phase in its business cycle and the effects of the same could be seen on the overall productivity, demand and employment scenario of the country (Gregory and Smith 2016). In the last few years, however, the economy of Australia has been experiencing a shift in the industrial domain, from basic manufacturing sectors to an expanding service sector, which in turn has led to the creation of a mismatch of demand and supply of the level of skill required and present with the workers. This in turn, hints towards the presence of structural unemployment trends in the economy in the contemporary period, which if present, may lead to long-term and more serious repercussions on the economy of the country as a whole (Eichengreen and Hatton 2012). Keeping this into consideration, the unemployment trends in the last five years, in the country, are discussed in the following sections.

Australian unemployment in the last five years

The overall stable economy of Australia, however, in the last five years, as discussed above, faced considerable issues regarding unemployment issues cropping up in the country, due to both endogenous as well as exogenous factors. The dynamics in the rate of unemployment as a whole, in the last five years, in the country, can be seen as follows:

                                                                  Figure 1: Rate of unemployment in Australia in the last five years

                                                                                          (Source: Tradingeconomics.com 2018)

As is evident from the above figure, the rate of unemployment in the economy of Australia, has faced considerable dynamics in the last five years and there have been both positive as well as negative fluctuations of different magnitudes in the concerned period of time.

The rate of unemployment can be seen to be moderately low, at 5.6% in 2013, which can be attributed to the increasing number of jobs getting created in the economy during that period of time. Nearly 9100 jobs got created in the economy of Australia in 2013, of which 4000 were of that of full-employment type and the rest 5100 could be seen to be of that of part-time type (Zimmermann et al. 2013). However, the job creations in the economy, in 2013, could be seen to be considerably shadowed in 2014, with a huge number of losses of jobs in the country. More than 26,000 jobs could be seen to be disappearing from the economy, which in turn led to the increase of the rate of unemployment in Australia, from 5.6% to 6.1% in the first quarters of 2014 to as high as 6.4% by the end quarters of the same year.

The acute unemployment crisis, arising in the country, in 2014 could be seen to be reduced to a considerable extent, mostly due to the increase in the employment generation in the economy during that period of time. However, these new jobs created in the economy were mostly of part-time types which though increased the participation of the labour force of the country, could not increase the economic welfare of the residents and their security to a considerable extent. The number of full-time jobs created during this period can be seen to be considerably small as compared to the increase in the part-time employment scopes in the economy of Australia (Kryger 2015).

The trends more or less remained consistent in the economy in 2017, with the rate of unemployment reducing to 5.6% by 2017, which although small than that of the rates of unemployment prevailing in the country in 2014, can be still seen to be considerably high which in turn can be seen to indicate towards the fact the problem of unemployment still exist in the economy in the last five years.

Employment generation in the last five years

From the initially low, then significantly increasing and lastly moderately decreasing rate of unemployment indicates towards the fact that over the last few years, employment scopes of different types have been generated in the country, with the number and magnitude of employment generation varying with time. In the last five years, the total number of employed population in the country can be seen to be increased to 12.44 million, which indicates towards impressive performance of the employment generation dynamics in the country. Nearly 300,000 jobs can be seen to be created in the economy in 2017 only, which however has decreased the burden of unemployment in the economy to some extent. The growth of part-time employment scopes over the last five years can be seen to be 20% against 15% growth of part-time jobs in Australia.

However, in spite of the creation of employments in the country, the problem of unemployment in the country can still be seen to be persisting in the economy in the last five years. These trends in unemployment and the nature of the same across the country can be seen to be explored and discussed in the following sections.

Unemployment nature and differences in the Australian economy

The problem of unemployment prevailing in Australia can be seen to have different magnitudes and different types and the acuteness of the crisis can also be seen to vary across age, gender, types of industries in the country. The primary differences and noticeable forms of unemployment prevailing in the country are discussed as follows:

Youth unemployment in Australia

The most bothering form of unemployment which can be seen to be persistently present in the economy of Australia, though with varying magnitudes at different point of time is the problem of youth unemployment in the country, which over the last five years, can be seen to be as follows:

                                                            Figure 2: Youth unemployment rate in Australia over the last five years

                                                                                    (Source: Tradingeconomics.com 2018)

The youth unemployment in the country refers to the level of unemployment which prevails in the population of 15 to 24 years in the country and this has immense implications on the overall economy as the country which cannot create jobs for the future workforce may have to face considerable stagnation and economic slowdown in the years to come. In this context, the unemployment rate among the youths of the concerned country can be seen to be increasing visibly from 2012 to 2015, with the rate being as high as 14.5% in the same year (Zimmermann et al. 2013). The rate can be seen to be decreasing to some extent post 2014, but however cannot be seen to be decreasing below 12% in the last few years. The main reasons behind the same can be the lack of creation of jobs for the youths of the country and also for the increasing number of students pursuing higher education in the contemporary period.

Disparity in unemployment between male and female population

Australia, though being one of the most developed economies in the global scenario, shows considerable disparity when it comes to the aspects of unemployment related aspects in the country. Unemployment in the country, even in the last few years also, can be found to be significantly high among the female population than among their male counterparts, as can be seen by the differences in the labour force participation rate of both the genders in the country (Addison and Ozturk 2012). While the labour force participation of the male population of the country can be seen to be nearly 80%, that of the female population of Australia, in the recent periods, can be seen to be as los as 65%. Also 9.5% of the total female workforce in the country faces the problems of insufficient wage hours, which in turn is faced by only 5% among the male population.

Apart from disparity regarding the participation rate and work hours, the female labour force of the country also faces the problem of wage disparity with nearly 23% gap in the male and female workers’ wages in the country, even in the recent period of time. Also, the participation of the female labour force in part time jobs is 44% which is almost thrice that of the participation of male labour force in these kinds of jobs (15%).

Sectoral shift and related unemployment in Australia

One of the most serious and long-term forms of unemployment which can occur in a country is that of the structural unemployment, as has been discussed above. This type of unemployment can however be seen to be cropping up in the country in the last few years, much of which can be attributed to the fact that the Australian industrial sector has been experiencing a paradigm shift in the types of business cropping up in the recent period. Much of the boom in the manufacturing sector of the country as well as in its mining and construction industries are withering away whereas the service sector industries of the country have been increasing in magnitude over the last five years, as can be seen from the following figure, showing the patterns of jobs created in the last in the economy of Australia:

                                                                                 Figure 3: Types of jobs created and lost in Australia in 2017

                                                                                                       (Source: Budget.gov.au 2018)

As is evident from the above figure, due to the skill mismatch arsing in the economy in the current period, owing to the sectoral shift in the industrial domains, much of the manufacturing sector jobs are lost, thereby creating acute unemployment crisis among the workers in these sectors, who due to their moderate level of education and skill cannot be absorbed in the highly skilled and capital-intensive service sector jobs.

Unemployment crisis among the immigrant population

Australia, over the years, due to its economic prosperity, has attracted huge number of economic immigrants in the country. However, these immigrants, in the recent years, face huge crisis of unemployment, with the rate of unemployment being six times higher among them. Nearly 33% of the total immigrant population of the country remains unemployed, with the crisis being more acute among the African and Middle Eastern ones (Abdelkerim and Grace 2012).

Implications of unemployment on Australian economy

In the presence of persisting crisis of considerable levels of unemployment in a country, the overall economic purchasing power of the residents of the country decreases, which in turn reduces the aggregate demand and thus the overall economic productivity in the country in the long run. This can be seen to be happening in case of Australia, as can be seen from the GDP of the country over the last five years:

                                                                               Figure 4: Australian GDP in last five years

                                                                                  (Source: Tradingeconomics.com 2018)

This can also be seen to be accompanied by low real wage rates in the country as due to the lack of demand for labour, the bargaining powers of the workers can also be seen to be diminishing (Addison and Ozturk 2012).

Policy Framework of Australia

The problem of unemployment being a chronic issue of concern with widespread implications, the government of Australia has already initiated to design and implement strategies and policies to combat the same. Several policies, like that of National Employment Strategy as well as Indigenous Employment policies can already be seen to be in action in be country and in the last year only 300,000 jobs have been created (Whiteford 2014). Apart from this, the government of the country has also initiated vocational training and skill development courses to reduce the structural unemployment burden in the country and the educational framework of the country has also been modified with professional and employment related trainings embedded in them (Zimmermann et al. 2013). Efficiency has also been increased in allocating jobs to the job-seekers in the economy in the recent period.

Conclusion

As is evident from the above discussion, the economy of Australia, in spite of being one of the largest and most developed ones in the global framework, has been facing the crisis of persistent unemployment over the last five years, with the types, nature and magnitude of unemployment varying across age, gender, type of population and also sectoral changes. This in turn can be seen to have considerably negative implications on the economy of the country as a whole, in terms of overall economic productivity, demand and economic wellbeing of the population of the country. The government of the country has however initiated to respond to these crises by implementing various employment programmes, generating employment, providing skill development facilities to the workers and also by efficiently allocating jobs to the unemployed population in the country in the contemporary period of time.

References

Abdelkerim, A.A. and Grace, M., 2012. Challenges to employment in newly emerging African communities in Australia: A review of the literature. Australian Social Work, 65(1), pp.104-119.

Addison, J.T. and Ozturk, O.D., 2012. Minimum wages, labor market institutions, and female employment: A cross-country analysis. ILR Review, 65(4), pp.779-809.

Agénor, P.R. and Montiel, P.J., 2015. Development macroeconomics. Princeton University Press.

Budget.gov.au (2018). Budget 2016-17 - Sticking to our national economic plan for jobs and growth in a stronger, new and more diversified economy. [online] Budget.gov.au. Available at: https://budget.gov.au/2016-17/content/glossies/jobs-growth/html/ [Accessed 26 May 2018].

Eichengreen, B.J. and Hatton, T.J. eds., 2012. Interwar unemployment in international perspective (Vol. 43). Springer Science & Business Media.

Gregory, R.G. and Smith, R.E., 2016. 15 Unemployment, Inflation and Job Creation Policies in Australia. Inflation and Unemployment: Theory, Experience and Policy Making, p.325.

Kryger, T., 2015. Casual employment in Australia: A quick guide. Parliamentary Library.

Mankiw, N.G., 2014. Principles of macroeconomics. Cengage Learning.

Tradingeconomics.com (2018). Australia GDP|1960-2018 | Data | Chart | Calendar | Forecast | News. [online] Tradingeconomics.com. Available at: https://tradingeconomics.com/australia/gdp [Accessed 26 May 2018].

Tradingeconomics.com (2018). Australia Youth Unemployment Rate | 1978-2018 | Data | Chart | Calendar. [online] Tradingeconomics.com. Available at: https://tradingeconomics.com/australia/youth-unemployment-rate [Accessed 26 May 2018].

Tradingeconomics.com. (2018). Australia Unemployment Rate | 1978-2018 | Data | Chart | Calendar. [online] Available at: https://tradingeconomics.com/australia/unemployment-rate [Accessed 26 May. 2018].

Whiteford, P., 2014. chapter 3 AUSTRALIA: INEQUALITY AND PROSPERITY AND THEIR IMPACTS IN A RADICAL WELFARE STATE. Changing Inequalities and Societal Impacts in Rich Countries: Thirty Countries' Experiences, p.48.

Zimmermann, K.F., Biavaschi, C., Eichhorst, W., Giulietti, C., Kendzia, M.J., Muravyev, A., Pieters, J., Rodríguez-Planas, N. and Schmidl, R., 2013. Youth unemployment and vocational training. Foundations and Trends® in Microeconomics, 9(1–2), pp.1-157.