Demand and Supply Dynamics in the Labour Market of Australia

This report analyses the demand and supply trends in the labour market of Australia, with reference to the article named, “The new people problem”. It also interprets the economic concepts of demand and supply in the labour market of Australia.

Running head: ECONOMICS FOR BUSINESS
Economics for Business
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Table of Contents
Introduction................................................................................................................................2
Essence of the article..................................................................................................................2
Economic Interpretation.............................................................................................................3
Conclusion and Recommendation..............................................................................................7
References..................................................................................................................................8

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Introduction
The theoretical and conceptual framework of economics, have several building pillars
of the discipline and which also have considerable implications on the real case economic
activities in the global framework. One such conceptual framework of immense relevance
and importance in the economic growth dynamics of the countries across the globe is that of
the demand and supply framework (Baumol and Blinder 2015). In terms of economics, a
market is defined as the place where the demand and the supply forces of different
commodities and services interact with one another to reach a common agreement regarding
the economic outcomes of the production of the same.
The demand side constitutes of the people willing to avail or consume the product and
service, while the supply side shows the operations of the providers of such commodities and
services, which also have considerable implications on economic prosperities of the sectors in
specific and countries as a whole. There also exists markets where the resources of
production are bought and sold, which also include labour resources (Frank and Cartwright
2013). The dynamics in the labour market in any economy reflects the employment scenario,
the economic welfare of the individuals in an economy and the overall welfare of the
economy as a whole.
Keeping this into consideration, the concerned report tries to analyse and interpret the
dynamics and trends which are seen to be present in the labour market of one of the globally
dominant economies, the economy of Australia. To observe the demand and supply trends in
the labour market of the country in the contemporary period, the report takes reference of the
article named, “The new people problem”, published on 16 April,2018 (Hcamag.com 2018).

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Essence of the article
The article concerned, clearly depicts the headwinds which have been in the
employment sector and in the labour market of Australia. As per the assertions, the labour
market of the country has been and is about to experience a demographic shift, with a large
share of population ageing rapidly. These future aged population, who mostly belong to the
“Baby Boomer” era, are expected to join the retired population in near future, thereby
reducing the size of the labour force as the current birth rate in the country falling. The article
asserts to the creation of job vacancies which the inflow of immigrants cannot fill up (Watson
2013). The gap created is explained by the article by the phenomenon of a shift in the nature
and patterns of jobs which are being lately created in the country, especially post
Globalization.
As per the article, there is expected to be nearly 1.4 million non-fillable vacancies in
the country by 2025. The article also shows that the demand for labour which is being created
in the current scenario of the country is primarily for high skilled workers, owing to the shift
in the nature of the jobs created in the country over the years, while jobs being actually
reduced in numbers for low skilled workers, a large share of whom are immigrants from
different countries (Tan and Lester 2012). The article ends up by suggesting several methods
and strategies which can be taken by the employers and businesses in the country to address
this issue.
Economic Interpretation
From the above article it can be asserted the current situation in the employment and
labour market scenarios in Australia, is a case of demand and supply mis-match, in which
there is excessive job creations and demand for labour in some sectors while there are
stagnation or reduction of employment scopes in some others (Nicholson and Snyder 2014).

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Over the years, Australia has seen significant increase in the number of job creation,
of which a bigger share being that of part time jobs. Also, the growth in the employment
opportunities are seen to be diverse in different sectors in the last few years, which can be
shown with the help of the following figure:
Figure 1: Creation of full time and part time employments in different sectors of
Australia
(Source: Salt and Salt 2018)
As is evident from the above figure, over the years, more jobs have been created in
the service sectors of the country while the basic manufacturing sectors have experienced
reduction or stagnation in the aspects of job creation. This has in turn increased the demand
for skilled workers and productive human capital in the country, while the reduction of job
prospects in the slowing manufacturing sector has led to the reduction of demand for low
skilled labours in the country (Rader 2014).

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According to the law of demand, for normal commodities and services, with the
decrease in the price of the same the demand increases and vice versa:
Figure 2: Negatively sloped demand curve for normal goods and services
(Source: As created by the author)
On the other hand, the increase in the price of commodities lead to increase in the
supply of the same and vice versa:

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Figure 3: Positively sloped supply curve for normal goods and services
(Source: As created by the author)
Thus, the equilibrium occurs at the point where the demand and supply forces meet.
Any deviation from the same, can lead to either an excess demand or an excess supply of the
commodities and services, which can be shown as follows:
Figure 4: Demand-Supply dynamics in the market
(Source: As created by the author)
Keeping the above economic concepts into account, it can be asserted that in the
current labour market scenarios of Australia, owing to creation of high end and mostly
creative and service sector jobs, the demand for skilled workers have been increasing and the
supply being less than the demand, an excess demand is created, which in turn is increasing
the wages of these high skilled workers (Frank and Cartwright 2013). On the other hand, due
to the fall in the job creation in the manufacturing workers, the demand for low skilled

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labours has been decreasing, which clued with increasing inflow of low skilled workers from
all parts of the world, is creating an excess supply of such labours in the markets, thereby
reducing their wages and economic welfare.
Conclusion and Recommendation
Given the above discussed situation in the country, with excess demand for high
skilled workers and excess supply of low skilled ones, the only way to stabilize the market
and bring back equilibrium in the same is by facilitating training and skilled development
programmes for the existing low skilled labour force in the country, as the same will bridge
the gap between the demand and supply in the lucrative sectors and will also help most of the
existing workers in the economy to find jobs. This in turn will bring the labour market of the
country to an equilibrium situation and will also help in increasing the economic welfare of
the residents as well as the overall growth of the economy of the country in the long run.

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References
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Frank, R. and Cartwright, E., 2013. Microeconomics and behaviour. McGraw Hill.
Hcamag.com (2018). The new people problem. [online] HR Online. Available at:
https://www.hcamag.com/features/the-new-people-problem-248815.aspx [Accessed 17 Apr.
2018].
Nicholson, W. and Snyder, C.M., 2014. Intermediate microeconomics and its application.
Cengage Learning.
Rader, T., 2014. Theory of microeconomics. Academic Press.
Salt, B. and Salt, B. 2018. Where jobs of the future will be. [online] Theaustralian.com.au.
Available at: https://www.theaustralian.com.au/business/bettercities/job-growth-in-australia-
points-to-future-prosperity/news-story/4e6b4a314798e41a602254513f03aaf2 [Accessed 16
Apr. 2018].
Tan, Y. and Lester, L.H., 2012. Labour market and economic impacts of international
working holiday temporary migrants to Australia. Population, space and place, 18(3),
pp.359-383.
Watson, I., 2013. Bridges or traps? Casualisation and labour market transitions in
Australia. Journal of Industrial Relations, 55(1), pp.6-37.

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