Demand and Supply of Labor in Australia: An Economic Analysis

This report analyzes the demand and supply of labor in Australia with the help of economic concepts. It suggests recommendations to control wage fluctuation due to excess labor supply. The report is relevant for policymakers, domestic and international workers interested in understanding the job market scenario of Australia.

Running head: ECONOMICS
Economics
Name of the university
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Author Note

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Executive Summary:
This report ha intended to describe the human resource of Australia with the help of demand
and supply concepts. The supply of labor has increased due to immigration from other
countries. Wage rate in Australia has decreased because of ample supply of unskilled labor
while demand for skilled labor has increased. Hence, to control this wage fluctuation, the
report has suggested some recommendations.

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Table of Contents
Introduction:...............................................................................................................................3
Outline of the topic:...................................................................................................................3
Economic analysis:.....................................................................................................................4
Recommendations:.....................................................................................................................7
Conclusion:................................................................................................................................8
References:.................................................................................................................................9

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Introduction:
Australia has delivered large amount of employment opportunities with attractive
remunerations, which in turn has attracted people worldwide to come over there for job
purposes. The country has huge demand for skilled labor while the supply of one has also
increased significantly. The chief reason behind this population increase is immigration
(Jansen, Tin and Isaacs 2018). Hence, the chief intention of this report is to analyze the
demand and supply of labor for understanding condition of human resource in this country.
Policymakers and both domestic and international workers may show their interests on this
topic to understand the job market scenario of Australia. After discussing the situation with
the help of some newspaper articles, this report has intended to analyze this concept under
appropriate concept of economy after which it can provide some recommendations that
policymakers can apply to control this situation. At the end of this report, a conclusion is
provided to represent the entire discussion briefly.
Outline of the topic:
According to the Guardian, a well-known newspaper of Australia, the labor in
Australia has increased during this period due to immigration. Hence, the amount of net
intake of offshore humanitarian in Australia has increased while the number of skilled
workers has declined due to weak condition of labor market (Rizvi 2018). The chief reason
behind this increasing number of immigration is international students. Australia has declared
new job opportunities for skilled labors to intake the huge number of immigrated people of
2017-18 into the workforce. Hence, the number of working people has remained at 12 million
in 2017, where both part-time and full-time job opportunities have increased noticeably (Salt
and Salt 2018).

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However, this increasing number of labor supply does not only decrease the wage rate
but also has generated some economical problems that Australia has faced. Firstly, the per
capita income of this country has decreased because of large number of population while the
employment opportunities have increased slowly (Warren-Myers and Heywood 2018).
Hence, the market of human resource can be described under the economical concept of
demand and supply to understand the implications more precisely.
Economic analysis:
Demand and supply are the two chief economical tools that can be used to understand
about the equilibrium market price for a particular product and its corresponding amount.
According to the law of demand, price of a commodity varies inversely with its quantity
demanded (Moscarini and Postel-Vinay 2017). Hence, thus the demand represents a
downward sloping line to represent this negative relation. In Australia, demand for workers
can be increased if the wage rate has decreased contiboisly. This can be described with the
help of a diagram.
Figure 1: the demand curve
Source: (created by author)

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The above figure has represented a downward slopping demand curve where, Q0
amount of output can be received at P0 price level. Moreover, an increase in price by P0 P1
has decreased the amount of quantity demanded by Q0 Q1 amount. Thus, according to this
diagram, an increase in wage rate has led to decrease the amount of labor demand while the
opposite situation c also be occurred.
Figure 2: Job growth of Australia in 21st century
Source: (Salt and Salt 2018)
The trend of job market growth for various categories can be seen from the above
diagram, where both full-time and part-time jobs are represented. From the above diagram, it
can be said that full-time job opportunities have increased in some sectors while that for part-
time jobs have also varied for different sector. Hence, demand for both full-time and part-
time employees have increased during this 21st century in Australia (Salt and Salt 2018).
On the other side, according to the law of supply, price of a product has positive
relationship with its quantity supplied and that can be represented with the help of an upward

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sloping curve (Dustmann, Schönberg and Stuhler 2017). This law is also applicable in labor
market, where employees want to serve their labor for higher wage.
Figure 3: the supply curve
Source: (created by author)
The figure has represented a supply curve, where Q0 mount of quantity has supplied
at P0 price, while at P1 piece, the quantity supplied has increased by Q1. Hence, under labor
market, workers can provide higher amount of labor if they receive higher wage rate (SBS
Your Language, 2018). This is also happened in Australia, where people want job for
comparatively higher remuneration.
This situation has generated excess supply of workers, which in turn has led the wage
rate to decrease. However, excess supply of workers can be seen for unskilled labor force in
Australia and consequently, they have received lower wage rate. On the other side, the
demand for skilled workers have always remained high compare to their supply and this
further has helped the wage rate of those skilled workers to increase.

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Figure 4: Excess demand and excess supply of workers
Source: (created by author)
According to the figure 4, excess demand for skilled workers can be represented at P2
wage rate while the equilibrium wage rate is Pe. Hence, P2 can be increased until it reaches
to this equilibrium wage rate. Similarly, unskilled workers have excess supply, which has led
their wage rate to decrease further.
Recommendations:
The wage rate of this country has fluctuated due to the excess labor supply. Hence,
the government of this country can impose some restrictions to reduce the number of offshore
humanitarian intake. This further can protect the self-interest of domestic workers o Australia
to achieve higher wage rate, which in turn can help them to afford houses (Nguyen and
Duncan 2017). Moreover, by controlling this huge amount labor immigration, the country can
generate its per capita income.

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On the contrary, for skilled labor markets, Australia can generate more employment
opportunities to hire people. This can help the country to increase its total amount of skilled
labor supply, which can further decrease the wage rate for them. To controlling the emerging
demand o houses along with its increasing price, the government may control the number of
population by restricting immigration.
Conclusion:
In conclusion, it can be said that Australia has huge supply of unskilled labor, which
further influence the wage rate of this country to decrease. However, the demand for skilled
workers has remained high and consequently has provided more wage compare to unskilled
workers. Those phenomenons can be described more clearly with the help of basic demand
and supply concept.

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References:
Dustmann, C., Schönberg, U. and Stuhler, J., 2017. Labor supply shocks, native wages, and
the adjustment of local employment. The Quarterly Journal of Economics, 132(1), pp.435-
483.
Jansen, M., Tin, A.S. and Isaacs, D., 2018. Prolonged immigration detention, complicity and
boycotts. Journal of medical ethics, 44(2), pp.138-142.
Moscarini, G. and Postel-Vinay, F., 2017. The Relative Power of Employment-to-
Employment Reallocation and Unemployment Exits in Predicting Wage Growth. American
Economic Review, 107(5), pp.364-68.
Nguyen, H.T. and Duncan, A.S., 2017. Exchange rate fluctuations and immigrants' labour
market outcomes: New evidence from Australian household panel data. Journal of
International Economics, 105, pp.174-186.
Rizvi, A. 2018. Tony Abbott's speech on immigration contains flaws in logic | Abul Rizvi.
[online] the Guardian. Available at:
https://www.theguardian.com/commentisfree/2018/feb/21/tony-abbotts-speech-on-
immigration-contains-flaws-in-logic [Accessed 9 Apr. 2018].
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 9
Apr. 2018].
SBS Your Language. 2018. Your chance to migrate to Australia. New occupation list for
2017-18 announced. [online] Available at:

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https://www.sbs.com.au/yourlanguage/punjabi/en/article/2017/06/30/your-chance-migrate-
australia-new-occupation-list-2017-18-announced [Accessed 9 Apr. 2018].
Warren-Myers, G. and Heywood, C., 2018. A New Demand-Supply Model to Enable
Sustainability in New Australian Housing. Sustainability, 10(2), p.376.