Unemployment Scenario in Australia

Question: Discuss the unemployment rate, types, issues, and government policy of Australia and comment unemployment in various states of Australia. You need to specify in different region like NSW, WA, Tasmania, Qld or SA. Answer: Introduction The unemployment problem is a major issue of all developing and developed nations. Due to the unemployment, the well-being of the people is affected negatively. Unemployment refers to joblessness. As the people are jobless, they have less money to buy goods and services. The unemployment takes place when the demand for workers is less than the number of workers available in the market (Pigou 2013). If this feature `persists for a long period, then it becomes the concern of the policy makers of the economy. They aim at reducing the rate of joblessness. The higher rate of unemployment is a major issue, because it often leads to social unrest. In an economy, there remains some kind of unemployment rate even in the state of full employment. This is known as natural rate of unemployment (Shimer 2012). Therefore, there is no concern about the natural rate of unemployment. Unemployment rate beyond this level becomes the concern for the economy. Several types of unemployment exist. The unemp loyment generates from several factors. Sometimes the unemployment is short run in nature and sometimes the unemployment is long term (Woodbury and Davidson 2012). Different country faces different types of unemployment and the factors affecting the unemployment scenario are different in the respective countries. Based on the nature of unemployment, the governments of the countries act accordingly. This paper will discuss the unemployment rate in Australia. It will identify the types of unemployment and issues related to the unemployment in this country. The paper will focus on unemployment scenario of various states in Australia, such as, Western Australia; New South Wales; Tasmania; Queensland and South Australia. Moreover, the government policies of this country in order to manage the unemployment issues will be discussed. Unemployment Theory The term unemployed refers to those people who are willing and able to work at prevailing wage rate but unable to find a job for a considerable period. The labor force constituted by number of employed and number of unemployed people. The labor force does not incorporate those people who are not willing work at the existing wage rate and remain jobless (Schenk 2013). Only the involuntarily unemployed people are considered. The rate of unemployment is calculated by the following way: Unemployment Rate= (Number of involuntarily unemployed Labor Force) 100 There are generally three types of unemployment, such as, structural unemployment; cyclical unemployment and frictional unemployment. The frictional unemployment takes place when the workers search for new jobs or shift from one job o another. This kind of unemployment always exists in an economy to some extent. It takes time for the workers to search a job they like or to change their existing job (Wagner 2014). Moreover, after completion of education, fresh labors enter the market to find a job. As a result of this, for the time-being this type of unemployment takes place in an economy. The cyclical unemployment takes place when the unemployment rate changes according to the change in the business cycle of the economy (Argy and Nevile 2016). When there is lack of demand, the economy enters into the recessionary phase. During this time, many jobs are lost and unemployment rate increases. Similarly, when the economy starts to recover, new demand is generated and the firms require mor e labors to increase its production (Diamond 2013). As a result of this people get hired and unemployment rate declines. The structural unemployment takes place due to lack of demand for certain types of workers. The reason behind this is that there is mismatch between the skills of the workers and the skill requirement of the employers. This skill gap arises generally due to the change in technology of production. Advance technology reduces the requirement of unskilled labor and demands for the new types of labors who are skilled. Moreover, the jobs may be off-shored because of the availability of cheap labor overseas. Therefore, unemployment takes place as the structure of the economy changes and as the skills become obsolete (Kahn 2015). The frictional unemployment is not of much concern for the economy and it is short term in nature. There is no such measure to reduce this kind of unemployment; however, it must be ensured that the transition period is not so long. The tenure of the cyclical unemployment depends on the intensity of the business activity. If the recession is deep then the cyclical unemployment will persist for a long period (Enderwick, Manzetti, Mavrotas, Shorrocks and Motamen-Samadian 2015). So, the policy makers should focus on improving the economic activities in order to generate demand. By improving the economic activity, cyclical unemployment can be reduced. The unemployment that is structural in nature is the most severe. This kind of unemployment is long term and can only be reduced by bridging the skill gaps (Carrre, Grujovic and Robert-Nicoud 2015). Changing the skills acquired by the labor by giving them proper training will lead to improve the situation of the economy. The recovery process also takes considerable time. Hence, structural unemployment is the major concern of an economy and the policy makers. Unemployment Rate in Australia In this paper, a particular period has been considered for the analysis of unemployment in Australia. From 2000 to 2016, the data has been collected to support the discussion. The unemployment rate has been taken for the month of March each year. In the following table, the overall unemployment rate of this country has been represented. Table 1: Overall Unemployment Rate YEAR Unemployment Rate 2000 6.9 2001 6.8 2002 6.7 2003 6.4 2004 5.7 2005 5.4 2006 5.1 2007 4.7 2008 4.3 2009 6.0 2010 5.7 2011 5.2 2012 5.5 2013 6.0 2014 6.2 2015 6.5 2016 6.0 In the following figure, the changes in the rates of unemployment have been represented graphically. In 2000, the unemployment rate was quite high, however, in the following period the rate has fallen continuously. In 2008, it has reached its lowest level. Nevertheless, during the period of financial crisis, the rates again have started to rise. In the following period, the rates fluctuated and again it has increased to 6% and even more since 2013 until now (Abs.gov.au, 2016). However, the unemployment rate has not reached the high level of early 2000s. The overall unemployment rate in this economy has shown a downward sloping trend, which signifies that the rate of unemployment in this country has fallen over time. Figure 1: Overall Unemployment Rate in Australia The paper will now analyze the unemployment rate in some of the states of this nation. Unemployment rates of New South Wales (NSW); Queensland; South Australia; Western Australia and Tasmania has been considered for the analysis. It will be verified whether the unemployment trends of these states are similar to that of the overall unemployment rate of this country. In the following table, the unemployment data of New South Wales has been provided. Table 2: Unemployment Rate in New South Wales YEAR Unemployment Rate (NSW) 2000 6.0 2001 5.7 2002 6.4 2003 6.0 2004 5.5 2005 5.8 2006 5.1 2007 5.1 2008 4.5 2009 6.9 2010 5.7 2011 5.3 2012 4.9 2013 5.8 2014 5.5 2015 6.2 2016 5.4 The following figure represents the changes in unemployment rates of the New South Wales. In the initial period, the unemployment rate of this state fluctuated around a high level. Since 2006, the rate started to decline. During 2008, the unemployment rate was lowest; however, in the period of global financial crisis, this rate has drastically increased. In the following periods, the rate has decreased but kept on fluctuating around a high level. The unemployment trend is downward sloping but it is flatter and almost horizontal. It indicates that the rate has fallen but only by a smaller amount. The unemployment rate remained stagnant at higher level. Figure 2: Changes in Unemployment Rate of New South Wales In the following table, the unemployment data of Queensland has been provided. Table 3: Unemployment Rate in Queensland YEAR Unemployment Rate (QSL) 2000 8.4 2001 8.9 2002 8.2 2003 8.2 2004 6.7 2005 4.9 2006 5.3 2007 4.4 2008 4.1 2009 5.4 2010 6.1 2011 6.1 2012 6.1 2013 6.5 2014 6.7 2015 7.2 2016 6.7 The in the early 2000s the Queensland experienced significant level of unemployment. The rate has declined and become lowest in the 2008. However, in Queensland, the unemployment rate has persistently shown a rise. At present, the rate is much higher in this state. Though the trend of this state is downward sloping, indicating fall in the rate of unemployment; the values of the rate of unemployment is still higher. Figure 3: Changes in Unemployment Rate of Queensland In the following table, the unemployment data of South Australia has been provided. Table 4: Unemployment Rate in South Australia YEAR Unemployment Rate (SA) 2000 7.9 2001 7.1 2002 7.1 2003 6.1 2004 5.7 2005 5.5 2006 5.2 2007 5.2 2008 4.7 2009 6.2 2010 5.8 2011 5.7 2012 5.5 2013 6.2 2014 7.5 2015 6.6 2016 7.3 In South Australia, rate of unemployment was higher in the early 2000s. However, it has significantly fallen until 2008. Due to the global financial crisis, the unemployment rate has again risen and kept on fluctuating. At present, the unemployment rate is quite high in this state. The trend line of this indicator is almost horizontal, indicating consistency in the rate of unemployment in this region. Figure 4: Changes in Unemployment Rate of South Australia In the following table, the unemployment data of Western Australia has been provided. Table 5: Unemployment Rate in Western Australia YEAR Unemployment Rate (WA) 2000 6.6 2001 7.4 2002 6.0 2003 5.9 2004 5.6 2005 5.1 2006 4.2 2007 2.9 2008 3.4 2009 5.3 2010 5.5 2011 4.7 2012 4.4 2013 5.3 2014 5.4 2015 6.0 2016 5.9 In Western Australia, the rate of unemployment was not so higher in the early 2000s, like any other states. The rate was higher than 7% only in the 2001. From 2006 to 2008, it has experienced low rate of unemployment. Like the other states, this state also faced rise in the rate of unemployment during the period of global economic crisis. The current rate of unemployment is also fluctuating. The unemployment rate of this state has shown a downward sloping trend, which indicates that this indicator has fallen over time, even if the slope is quite flatter. Figure 5: Changes in Unemployment Rate of Western Australia In the following table, the unemployment data of Tasmania has been provided. Table 6: Unemployment Rate in Tasmania YEAR Unemployment Rate (TSM) 2000 8.4 2001 8.5 2002 8.4 2003 9.3 2004 6.5 2005 6.1 2006 6.8 2007 5.4 2008 4.9 2009 4.4 2010 5.6 2011 5.5 2012 6.9 2013 7.3 2014 7.6 2015 6.6 2016 6.7 In Tasmania, the unemployment rate of the initial period is significantly higher with the highest rate during 2003. The rate has started to decline until 2008 and 2009. It is interesting to note that, during the global crisis the unemployment rate was not so high unlike the other states. However, the unemployment started to grow again during the phases of recovery. The current rate of unemployment is more than 6%. However, during the period of study the unemployment rate has shown a fallen trend in Tasmania. Figure 6: Changes in Unemployment Rate of Tasmania Types and Issues of Unemployment in Australia From the above section, it can be observed that the New South Wales; Queensland and Tasmania have contributed significantly to the overall unemployment of the nation. The type of unemployment in New South Wales can be defined as structural in nature. This is because; due to boom in the mining sector, the skill requirement has been changed. Even if there is supply of labor but due to the skill gap, unskilled labors remained unemployed (Wade 2014). This factor has contributed to the unemployment of the New South Wales. Since the unemployment rate in this state is long-term in nature, the scenario of this state is considered to be severe. This is because; persistent level of unemployment leads to social unrest. The recruitment process in this state is also difficult. The growth of service in this region is also contributed to the falling trend in unemployment. The labor market of this state is mostly engaged in the part-time employment. Therefore, the Figure 2 has shown a declining trend in the unemployment rate of New South Wales. The nature of unemployment in Queensland is mostly structural and partly frictional in nature. The youth unemployment rate is the major contributor to the growing unemployment of this state (Qgso.qld.gov.au 2016). The youth unemployment is growing because there is a mismatch between the skill requirement of the new job position created in the region and the skills of the fresh entrants in the labor market of this state (Remeikis 2015). Hence, due to structural change in the economy the youths are not getting job in this region. Moreover, as youths are entering the job market, some kind of unemployment takes place that is frictional in nature. However, the unemployment rate has shown declining trend in Queensland, as can be seen from Figure 3. In South Australia, the industries have started to shut down, due to the economical change in this region. Moreover, the existing industries are also unable to absorb the labor, mostly because of their inefficiencies. However, in this region, the flourishing sectors are textile; agriculture and automotive industries, those cannot diversify their production in order to reduce the rate of unemployment. Many industries of South Australia have shifted overseas, as tax incentives are more attracting to the entrepreneurs (Scutt 2016). Local workers remained unemployed. Therefore, the nature of unemployment in this region is structural in nature. The unemployment rate of this region is also a consequence of recession. Hence, it is also cyclical in nature. The transition from full time workers to part time worker, does not affected this region. Hence, there is no significant fall in the rate of unemployment. The unemployment rate in Western Australia is comparatively lower than the other states. This is because; this region has been growing since late 2000s. The mining boom has contributed to the growth of this region. However, due to the same reason, mismatch of skills takes place. The resource project requires highly skilled labors, but the work force is inefficient to provide such kind of labors (Janda 2015). Hence, the skill shortage is the major unemployment issue of this region. So this kind of unemployment is structural in nature. Moreover, in Western Australia, the participation rate in the labor force is also increasing. Therefore, the unemployment rate is also increasing. This kind of unemployment is frictional in nature. The unemployment rate in the region of Tasmania is a major contributor of the overall unemployment in Australia. There are several contributors to the long-term unemployment in this region. The low levels of education; non-metropolitan culture of the region contributed to the higher unemployment rate of this region. Moreover, the dominant social coalitions are creating major hindrance to the developing proposal of the region. In addition to this the industry of this region are traditional and uncompetitive in nature (Crikey.com.au. 2013). This has resulted into lower growth of this nation and generating high rate of unemployment. Moreover, financial support from the mainland provides them less incentive to change or grow. The sluggish tourism sector and hospitality industry are unable to absorb the labor. In addition to this, the fate of the forest product industry causes the fall in the growth of this region, which in turn created lack of demand for labor (ABC News 2014). The declin e in this industry also laid-off workers that have created high unemployment in the region. The unemployment of this region is structural in nature. This region has also remained unaffected by the cyclical downturn of the economy due to global crisis. This region is less opened to the international market and the unemployment rate was not affected at the time of global recession of 2008-2009. Hence, it can be said that the unemployment is not cyclical in nature in Tasmania. Figure 7: State-Wise Unemployment Rate in Australia The above diagram represents the change in unemployment in the different region of Australia. It can be said that, Western Australia is in a better situation in terms of unemployment, followed by New South Wales; Queensland. Tasmania and the South Australia are the worst performer in terms of employment. Government Role The government has Australia has been taking significant measure in order to improve the unemployment scenario of the nation. The government can reduce the unemployment by increasing the aggregate demand. Unemployment can be reduced by pursuing expansionary fiscal policy. Through fiscal policy, the demand will be increased and the requirement of labor for production will go up (Rendahl 2014). As there will be a tax cut, the businesses or firms will be able to hire more workers as their cost of production has reduced. However, as unemployment of this country is mostly generated because of the skill gap, the government emphasizes on developing skills of the labor force by offering proper training to the fresh entrants or the existing labors. Since, technological changes have taken place, the government also trying to create awareness regarding choosing tertiary training. Moreover, in order to reduce the rate of unemployment, creation of job position in the existing public sector can re duce the higher rate of unemployment in this nation. Conclusion The paper has discussed the unemployment scenario in Australia. It has taken unemployment data from 2000 to 2015 and analyzed the trend. The analysis is made on the overall trend of the unemployment rate of this country. In addition to this the paper has analyzed the unemployment trend of New South Wales; Queensland; South Australia; Western Australia and Tasmania respectively. It has been found that the overall unemployment rate in Australia and in respective states have fallen over time. Some states have performed well and situation of some states are of major concern. The nature of unemployment of each state has been identified. It has been found that in most of the states the structural change in the economy is the major factor behind the high unemployment rate. Due to proper government policy and rise in participation rate, this trend has fallen over times. References ABC News. (2014). Jobs and unemployment: What's the real story in Tasmania?. Abs.gov.au. (2016). 6202.0 - Labour Force, Australia, Apr 2016. Abs.gov.au. (2016). 6202.0 - Labour Force, Australia, Apr 2016. Carrre, C., Grujovic, A. and Robert-Nicoud, F., 2015. Trade and frictional unemployment in the global economy. Diamond, P., 2013. Cyclical unemployment, structural unemployment.IMF Economic Review,61(3), pp.410-455. 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