Demand and Supply of Skilled Labor in the Mining Sector of Australia

Running head: ECONOMICS ASSIGNMENT
Demand and Supply of Skilled Labor in the Mining Sector of Australia
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1ECONOMICS ASSIGNMENT
Introduction: Essence of the story
Australia is a resource rich country and mining was one of the most booming industries
until the last few years. This industry requires specially skilled labor for specialist works. Hence,
the demand for skilled labor is high in this industry. According to a report by Turner (2012),
Australia’s mining sector has been facing a hard challenge as a crisis of skilled labor has
emerged. The demand and supply of the skilled labor in the mining sector has become a big issue
for the resource industry as it is struggling to recruit labor with specialist skills required in the
mining industry and hence, it faces a danger of stalling in the near future.
The shortage of supply in the labor market for the resource mining industry is a matter of
concern for the mining industry, overall economy as well as for the Australian government. Due
to the shortage in supply, the wages of the existing workers, even for the truck drivers, have
soared very high. This is a problem for the economy as the industry could soon face a stalling if
the human resource gap could not be reduced. There is supply of unskilled labor, but the industry
demands for skilled labor, such as, mining engineers, resource metallurgists and geologists. As
stated by Nick EastWood, Senior Mining Consultant at global recruitment agency Hunter
Personnel, there are jobs still available at the mining industry however, they cannot find the right
candidate (Richardson 2018). This also indicates towards the talent gap and frictional
unemployment in the economy.
Economic analysis
Skilled labor falls under the category of human resources and the demand and supply of
labor follows the standard laws of demand and supply. Labor is one of the main factors of
production and wage is its return. The law of demand says that as price of a good or service

2ECONOMICS ASSIGNMENT
increases (decreases), the demand for it falls (rises), ceteris paribus, and hence, demand is a
downward sloping curve. On the other hand, the law of supply says that if the price of a good or
service increases (falls), the supply of it increases (decreases) too, ceteris paribus. Supply has an
upward sloping curve (Becker 2017). The demand and supply for labor also follow the same
principle like other factors of production.
When there is excess demand for labor in the market, the wage rises to bring equilibrium
in the market and the opposite happens when there is an excess supply. The supply of unskilled
and skilled labor depends on many factors, and education and technological change are two
major factors among those. Education and training help in building up the skills among the labor
and technological changes in the economy. When the required level of education and
qualification is more, the less is the supply (Ehrenberg and Smith 2016).
On the other hand, rise in the aggregate demand for products and services leads to rise in
the demand for labor, shifting the demand curve to the right. In the Australian mining sector, the
demand for skilled labor increased when there was economic growth and aggregate demand for
the products as well as resources increased in the nation. According to the Solow growth model
with technological progress, economic growth occurs due to increase in savings and capital
accumulation, fall in the population growth rate resulting in higher income per person and rate of
depreciation of the machineries. All these effects are temporary because once the economy
reaches the steady state, it stops growing. Hence, long term economic growth can be achieved
only through continuous technological change (Solow 2016). There are some impacts of
technological change; especially the wage discrimination and those are visible in the mining
industry of Australia.