Causes and Policies to Reduce Unemployment in Australia

Unemployment is a curse in all countries and results in poverty, despair, and segregation. This article discusses the causes of unemployment in Australia, including poverty, shut down of industries, technological changes, lack of skills and literacy, and outsourcing of jobs. It also suggests policies to reduce unemployment, such as improving opportunities for private sector businesses, reducing taxes and regulatory burdens, and improving the operations of Australia’s Workplace Laws.

Running head: FOUNDATION OF ECONOMICS
foundation of economics

FOUNDATION OF ECONOMICS 1
Table of Contents
Introduction:..........................................................................................................................................2
Calculation of Unemployment:..............................................................................................................2
Employed:.........................................................................................................................................2
Unemployed:.....................................................................................................................................2
Not included in labor force:...............................................................................................................3
Labor Force:......................................................................................................................................3
Unemployment Rate:.........................................................................................................................3
Working Participation Rate:..............................................................................................................3
Causes of Unemployment in Australia:.................................................................................................4
Poverty:.............................................................................................................................................4
Shut Down of Industries:...................................................................................................................4
Technological changes:.....................................................................................................................4
Lack of Skills and Literacy:...............................................................................................................4
Outsourcing of jobs:..........................................................................................................................4
Classification of Unemployment:..........................................................................................................4
Cyclical Unemployment:...................................................................................................................5
Structural Unemployment:.................................................................................................................5
Frictional Unemployment:.................................................................................................................5
Unemployment differs from region to region:......................................................................................5
Policies to be adopted by Australian Government:................................................................................6
Conclusion:............................................................................................................................................6

FOUNDATION OF ECONOMICS 2
Introduction:
Unemployment is termed as a curse in all countries at the different levels of
development. In results in poverty, despair and segregation form in the ordinary way of life.
It exploits the development of children and results in generating fights and conflicts in people
lives. All global economies have some level of employment from the beginning due to
dynamic birth, decline, growth, closure of firms and changes in the employment practices
(Nagel, 2015).
The economy of Australia has experienced vast changes in the employment structure.
These are majority caused by technological advancements, the rise in competition in wages
structure, changes in the level of income as well as in the consumption etc. The continued
loss of the job in the production of goods and services has led to a high decline in
employment opportunities for the people having an only moderate level of education. In
Australian Economy, unemployment has been an intense and harassing problem for the past
30 years (Ozerkek, 2013).
Calculation of Unemployment:
The unemployment rate is considered is the percentage of persons in the workforce
who are unemployed. Therefore, for the purpose of measuring the unemployment rate, it is
required to identify that who is involved in the labor workforce. The labor force includes all
persons either they are employed or unemployed. Further, it is to find out that who is
employed and who is unemployed that includes making professional and practical judgments.
The Australian Bureau of Statistics (ABS) is accountable for gathering data related to
the labor market of Australia. The bureau conducts a survey in each month which is known as
Labor Force Survey. During this survey, 50,000 people of the labor market are asked are
asked about their participation in employment. The survey is conducted with the people aged
15 years or above (Healy, 2016). The people are characterized into three categories:
Employed:
It includes the persons who are getting a paid job for an hour or more during a week.
Unemployed:
It includes the persons who are continuously looking for the job but do not have a job
at present.

FOUNDATION OF ECONOMICS 3
Not included in labor force:
It includes the persons who neither in a paid job nor looking for a job or work. The
students, people caring for children, housewives and retired people are involved in this
category.
After estimating the number of people in each category, below mentioned market
conditions are calculated:
Labor Force:
The sum of unemployed and employed people.
Unemployment Rate:
The percentage of total employed people in labor force.
Working Participation Rate:
The percentage of total working age population in the labor force.
The unemployment rate is calculated are as follows:
Where Labor Force:
Participation Rate can be calculated by using the below-mentioned formula:

FOUNDATION OF ECONOMICS 4
Causes of Unemployment in Australia:
The main causes of unemployment in Australian economy can be described as
follows:
Poverty:
One of the main reasons for unemployment is the poverty. In the areas of poverty,
finding the job is even more difficult in comparison to finding jobs in other areas. The people
have to stay at their home and take care of their siblings and parents along with work. In such
areas, there are no proper job opportunities and this results in increased unemployment in the
economy (Cristescu, et al., 2013).
Shut Down of Industries:
Closure or shut down of major industries of the economy is the main reason for the
increasing unemployment rate in Australia. Sometimes sudden closure of any big company or
industry results in a huge number of increasing unemployed workers (Sanchez-Castaneda, et
al., 2012).
Technological changes:
A huge development in the technological advancements has resulted in the reduction
in the cost of using computers, disks, chips and laser products. This makes less need for
human intervention because computers and technology are so powerful. A number of small
and big businesses are able to handle the complex transaction with the help of technology and
it is continuously increasing unemployment in Australia (Uddin & Uddin, 2013).
Lack of Skills and Literacy:
Sometimes, jobs are available for the highly qualifies persons with required skills and
abilities. The people who are not educated or less educated are not able to get a job because
of their less educational skills. This increase in the number of unemployed people.
Outsourcing of jobs:
Most of the Australian companies outsource its business functions to another country
to get their work done at cheaper cost. Thus, the local population of the country does not get
the job and it results in increased unemployment in the economy (Aurangzeb & Asif, 2013).
Classification of Unemployment:
The unemployment can be classified into below-mentioned types:

FOUNDATION OF ECONOMICS 5
Cyclical Unemployment:
It occurs with fluctuations in economic activity over a business cycle. At the time of
economic down, a fall in demands for services and goods often result in a lack of availability
of jobs for the people willing to work. It is often described by the medium term (1 to 12
months) employment in nature. An increase in this type of unemployment suggests the
economy operate less than its potential. Businesses offer a lower increase in wages due to
more people available than requirement which often leads to lower inflation (Skender & Uka,
2015).
Structural Unemployment:
When there is a mismatch between the available jobs and preferable jobs by the
employees, it is known as structural unemployment. The reason for such mismatch can be
either the insufficient skills of employees or the long way of jobs form the jobseekers.
For example, There has been a sharp decline in the participation of persons employed
in routine manual jobs during past two decades because of technological advancements. The
manufacturing industry can be considered as a good example that has a high share of
availability of routine manual jobs and its size has declined in the economy in production as
well as in employment. The structural unemployment is long lasting as compared to another
type of unemployment. This is because it takes a number of years to generate or develop
required skills in the employee (Ballantyne, et al., 2014).
Frictional Unemployment:
It occurs when persons move among the jobs in the labor market. Movement of
working people is important for an elastic labor market and helps in achieving an efficient
allocation of labor. But it is not easy to find a new job immediately and thus people have to
face the situation of unemployment for some time. This type of unemployment exists for
short-term (up to one month).
Unemployment differs from region to region:
The reason for and impacts of unemployment can differ from region to region. This is
because labor market conditions are different in every region along with their socio-
demographic structures. For example, some regions are depended only on a limited number
of firms and industries to maintain their population size, infrastructure, services and income
levels. If these areas may face sudden job reduction in any of running industries, then it may
have to suffer the form high unemployment conditions. On the other hand, such areas may

FOUNDATION OF ECONOMICS 6
also face a reduction in unemployment if people migrate to other regions for the purpose of
finding work. In this case, the area to which people are migrating may suffer a high rate of
unemployment. If the migrating area has jib opportunities, then it may also face the
conditions of strong growth in employed people (Nagel, 2015).
Policies to be adopted by Australian Government:
 The government's economic strategy should be focused on improving opportunities
for private sector businesses and also strengthen their capability to go global. It will
automatically create job opportunities for the residents. This will also help in
attracting foreign direct investment thus lead to the growth of the economy.
 The government should have the prior focus on undertaking fiscal alliance at a
measured step, spending on the quality of investment and implementing changes for
the purpose of foster entrepreneurship and innovation (Jacobs, 2014).
 The Australian government should also reduce taxes and unnecessary regulatory
burdens on businesses so that employment opportunities can be generated at a large
level. This may include cutting green and red tape, eliminating inefficient taxes like
mining and carbon taxes and decreasing the company tax rate.
 The government should also improve the operations of Australia’s Workplace Laws
with the help of reforms to balance the relations and workplace system.
 The government should frame policies which can encourage more people to
participate in employment opportunities and become a part of the workforce.
 To improve the productivity and capability of people, the Australian government
should frame policies and run training development programs. It may include
restructuring education system, provide vocational training, and provide education in
slum and backward areas etc. (Anon., 2015).
Conclusion:
On the basis of above study, it can be concluded that unemployment is a severe
economic problem which should be eliminated as the highest priority. For such purpose, the
government should first identify the root causes behind the unemployment and then find out
the areas in which it exists at large level. The government is required to take corrective
actions and implement policies as suggested above, that can help in reducing unemployment
to an extent. As unemployment is a widespread problem which cannot be eliminated

FOUNDATION OF ECONOMICS 7
overnight but by implementing above mentioned policies and suggestions, a step can be taken
in the direction of eliminating unemployment.

FOUNDATION OF ECONOMICS 8
References
Anon., 2015. PREVENTING UNEMPLOYMENT AND UNDEREMPLOYMENT FROM
BECOMING STRUCTURAL. [Online]
Available at: https://www.oecd.org/els/emp/OECD-Preventing-unemployment-and-
underemployment-from-becoming-structural-G20.pdf
[Accessed 15 June 2018].
Aurangzeb & Asif, K., 2013. Factors Affecting Unemployment: A Cross-Country Analysis.
International Journal of Academic Research in Business and Social Sciences, 3(1), pp. 219-
230.
Ballantyne, A., Voss, D. D. & Jacobs, D., 2014. Unemployment and Spare Capacity in the
Labour Market. [Online]
Available at: https://www.rba.gov.au/publications/bulletin/2014/sep/pdf/bu-0914-2.pdf
[Accessed 15 June 2018].
Cristescu, A., Stanila, L. & Andreica, M. E., 2013. Causal Disparities of Poverty and
Unemployment in the EU. Journal of Eastern Europe Research in Business & Economics,
Volume 1, pp. 1-12.
Healy, J., 2016. The Australian labor market in 2015. Journal of Industrial Relations, 58(3),
pp. 308-323.
Jacobs, E., 2014. Twelve Ways to Fix the Youth Unemployment Crisis. [Online]
Available at:
https://www.brookings.edu/wp-content/uploads/2016/06/Brookings_JacobsUnemployment_T
o-Print.pdf
[Accessed 15 June 2018].
Nagel, K., 2015. Relationships between unemployment and economic growth – the review
(results) of the theoretical and empirical research. Journal of Economics and Management ,
20(2), pp. 64-79.
Nagel, K., 2015. Relationships between unemployment and economic growth – the review
(results) of the theoretical and empirical research. Journal of Economics and Management,
20(2), pp. 64-79.

FOUNDATION OF ECONOMICS 9
Ozerkek, Y., 2013. UNEMPLOYMENT AND LABOR FORCE PARTICIPATION: A
PANEL COINTEGRATION ANALYSIS FOR EUROPEAN COUNTRIES. Applied
Econometrics and International Development, 13(1), pp. 67-76.
Sanchez-Castaneda, A., Serrani, L. & Sperotti, F., 2012. Youth Unemployment and
Joblessness: Causes, Consequences, Responses. Newcastle: Cambridge Scholars Publishing.
Skender, N. & Uka, A., 2015. Types and Duration of Unemployment in Kosovo.
Mediterranean Journal of Social Sciences, 6(3), pp. 453-457.
Uddin, P. S. O. & Uddin, O. O., 2013. Causes, Effects and Solutions to Youth
Unemployment Problems in Nigeria. Journal of Emerging Trends in Economics and
Management Sciences, 4(4), pp. 397-402.