An Economic Analysis of the Beer and Labor Markets in Australia

This assignment provides an economic analysis of the beer and labor markets in Australia. It compares beer consumption with Germany, discusses the price elasticity of beer, and examines the impact of excise taxes and government measures to reduce consumption. The analysis extends to the labor market, exploring real wage differences between Australia and the US, the effects of minimum wage policies, and the challenges of unemployment and participation rates. The assignment references various studies and data sources to support its findings and policy implications, offering a comprehensive overview of these interconnected economic sectors. Desklib provides this assignment as a study resource, along with AI study tools, to aid students in their learning.

Running head: ECONOMIC ASSIGNMENT
Economic Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Market for Beer................................................................................................................................2
Question 1....................................................................................................................................2
Question 2....................................................................................................................................2
Question 3....................................................................................................................................3
Question 4....................................................................................................................................3
Question 5....................................................................................................................................4
Question 6....................................................................................................................................4
Labour market:.................................................................................................................................5
Question 1:...................................................................................................................................5
Question 2:...................................................................................................................................6
Question 3:...................................................................................................................................6
Question 4:...................................................................................................................................7

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Market for Beer
Question 1
The other advanced country that is being compared with Australia is Germany. According to the
Australian Bureau of Statistics and the the per capita consumption of beer is being considered for
making comparisons and it has been seen that the beer consumption in Germany is much higher
at 104.2 litres than that in Australia at 71.4 litres. The method of using a per capita approach for
cross-country comparisons is better as it reflects a more precise image of the level of
consumption prevailing in the overall economy as compared to other methods which results in
providing lower consumption estimates which lead to disproportionate representation of various
groups whose drinking rates are different than what has been reflected. However, due to the
harmful nature of alcohol, the aggregate-level data can be a better method to capture the
relationship, the changes and consequences in drinking patterns.
Question 2
The fundamental difference in the consumption of beer between Australia and Germany is the
drinking culture in the two countries. The Germans follow binge drinking whereas in Australia
that is not the case. The data shows that the German beer drinking culture is far more
predominant in comparison to Australia as Germany accounts for 104.2 liters of beer per capita
as of 2016 while Australia accounts for 71.4 litres per capita. Germany has been famous for beer
worldwide and was the first European nation to have introduced beer standards and quality
control. Germany also celebrates the Oktoberfest beer festival which is a Bavarian culture.
Australia is also a beer loving country but the fame is based on the love for beer and not the
quality and major part of the beer consumption is done by the ocker Australian male who

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consumes 80% of the beer but they comprise of only 10% of the population (Howard, Gordon
and Jones 2014).
Question 3
The price elasticity of beer is very difficult to properly define in Australia. Some research
suggests that the demand for beer is price inelastic while others found it to be elastic. However in
comparison to other alcoholic drinks, beer has comparatively lower elasticity and low income
elasticity (Room, et al. 2016). That is a change in the price of beer will not affect its demand as
much as it will affect the demand for other alcoholic beverages but a change in the income of
consumers will lead to a greater possibility in the change in the consumption demand of beer as
compared to other alcoholic beverages (Zhao, et al. 2014).
Question 4
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Figure 1: Implication of an Excise Tax by the Government

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Source: Created by Author
Before the excise, tax by the government the beer market was at equilibrium as shown in figure 1
and the price and quantities were given by P and Q. The tax raised the price of beer due to which
the quantity demanded fell to Qd and the quantity supplied rose to Qs as a result of this higher
price. The difference between the old price P and the price after tax Pt is the tax amount, which
would go to the government.
Question 5
If the government wishes to reduce the rate of beer consumption it will ideally impose taxes on
beer, which will lead to more revenue and lesser incidence of health issues as beer contains
alcohol, which is injurious to health. On the contrary, the market for beer will have to pay the
cost for this decision (Sharma, Vandenberg and Hollingsworth 2014). The beer prices will rise
and in markets where the price elasticity of demand for beer is inelastic, the consumers will have
to pay the cost of this decision of the government to reduce the rate of beer consumption.
However, in markets where demand for beer is elastic will face an excess supply situation as
consumers will no longer be willing to consume beer at the higher rates after tax.
Question 6
Apart from the imposition of taxes, various measures have been taken up by the Australian
government to reduce the consumption rate of beer (Treno, et al. 2014). A few strategies are:
 To make the communities aware of the health impacts of the consumption of alcohol and
the adverse effects that consuming beer can have on their health.
 Devising strategies to protect individuals who are at high risk. This would entail the
intervention of health professionals for guidance and remedy

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 Prevention measures of the incidence of alcohol related harm to the youth
 Making stricter rules and regulatory initiatives which would keep the beer consumption
under a check within the country
 Marketing the beer brands in a responsible manner, which would not lead to people to
indulge more highly in its consumption. Measures should also be taken in regards to the
provisioning of beer and pricing it accordingly
 Creating environments that are safe to drink beer and will not lead to misconduct
 Steps against drinking and driving as well as proper work force development
All these measures can only be implemented if the government has provided for proper research
and evaluation measures to fully understand the causes and solutions to beer consumption so as
to devise policies for reduction of the consumption of beer within the country.
Labour market:
Question 1:
Real wage is the inflation adjusted wages and this are represented in terms of the quantity of
goods and services that can be bought by an individual at a specific time under ceteris paribus
situation. It depicts a clear interpretation regarding the price of good and services that an
individual can buy with his or her wage and in case of the rise in the purchasing power at a
specific time under ceteris paribus situation, it can be said that real wage has been enhanced
(Clark 2017). Factors that can alter the real wage scenario are inflation, price change of the
goods and services and with fall in the same, it can be argued that real wage or the purchasing
power of an individual has been enhanced. Thus, though real wage is a good indicator of growth
in the real purchasing power, yet it has drawbacks too and real wage can depict the trend of the
consumption of an economy too.

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Question 2:
Australia and US, both are developed nations and indulged in international trading by a
large extent, however, when it comes to the real wage, then two states faces difference. Australia
can be acknowledged as the most expensive country among the G20 member nations and
considering the consumer prices of goods and services, it can be seen that price in US market is
32.32% lower than US market (Moscarini and Postel 2017). On the other hand, it can also be
seen that there were high growth in the real wage rate of the Australian employees compared to
the US workers under the growth in the manufacturing sector of the state. Moreover, it can also
be seen that there were higher amount of the fluctuation in the market of US under the rapidly
growing competition with China that has reduced the incentive for the workers to work
additionally. Thus, comparatively it can be seen that, Australian during the last one decade has
faced higher and stable situation in case of its real wage.
Question 3:
Australia is one of the few nations that exercise minimum wage policies and as
considering the same it can be seen that it has highest minimum wage for its workers. However,
over the period it can be seen that Australian minimum wage policy has reduced the performance
of the labour market due to the fall in the employment under enhanced price of holding an
employee. As of now it can be seen that Australian minimum wage is $18.29 per hour or $694.90
for a week depicting a considerably high amount of cost for holding the labours (McKenzie
2018). This tends to increase at a 3.5% annual rate making the real wage of the state rise at a
higher rate (Bishop 2018).

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Question 4:
With rise in the minimum wage, there will be rise in the earning at individual level,
however, during the past years, it has showcased moderate amount of fall in the rate of
employment and in the participation rate as well. For the higher rate of wage, employees are
eager to employ only skilled labours, which is less in number in Australia (Wilson 2017). It has
further reduced the scope of employment in different sectors ranging from mining industry to
manufacturing industry. Thus, if the minimum wage of the state is not revised with specific focus
on the local scenario, then it will deteriorate the labour market situation further and cause a fall
in the employment level further as well. Moreover, under the enhanced minimum wage, it can
also be seen that, it will reduce participation rate that will sufficiently reduce the income of the
individuals as well under the unemployment scenario.

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References
Apparent Consumption of Alcohol, Australia, 2016-17. (2018). Retrieved from
http://www.abs.gov.au/ausstats/abs@.nsf/mf/4307.0.55.001
Australia - OECD Data. (2018). Retrieved from https://data.oecd.org/australia.htm
Bishop, J., 2018. The Effect of Minimum Wage Increases on Wages, Hours Worked and Job
Loss (No. rdp2018-06). Reserve Bank of Australia.
Clark, G.L., Gertler, M.S. and Whiteman, J.E., 2017. Regional dynamics: studies in adjustment
theory. Routledge.
Howard, S.J., Gordon, R. and Jones, S.C., 2014. Australian alcohol policy 2001–2013 and
implications for public health. BMC Public Health, 14(1), p.848.
Jiang, H., Livingston, M., Room, R. and Callinan, S., 2016. Price elasticity of on-and off-
premises demand for alcoholic drinks: A Tobit analysis. Drug and alcohol dependence, 163,
pp.222-228.
Loretz, S. and Oberhofer, H., 2016. “When Helping the Small Hurts the Middle”: Beer Excise
Duties and Market Concentration. In Brewing, Beer and Pubs (pp. 97-119). Palgrave Macmillan,
London.
McKenzie, M., 2018. The erosion of minimum wage policy in Australia and labour's shrinking
share of total income. Journal of Australian Political Economy, The, (81), p.52.
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.

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Sharma, A., Vandenberg, B. and Hollingsworth, B., 2014. Minimum pricing of alcohol versus
volumetric taxation: which policy will reduce heavy consumption without adversely affecting
light and moderate consumers?. PLoS One, 9(1), p.e80936.
Shrestha, V. and Markowitz, S., 2016. The Pass‐Through of Beer Taxes to Prices: Evidence from
State and Federal Tax Changes. Economic Inquiry, 54(4), pp.1946-1962.
Srivastava, P., McLaren, K.R., Wohlgenant, M., Zhao, X. and Campus, C., 2014. Econometric
Modelling of Price Response by Alcohol Types to Inform Alcohol Tax Policies (No. 5/14).
Monash University, Department of Econometrics and Business Statistics.
Treno, A.J., Marzell, M., Gruenewald, P.J. and Holder, H., 2014. A review of alcohol and other
drug control policy research. Journal of Studies on Alcohol and Drugs, Supplement, (s17), pp.98-
107.
Wilson, S., 2017. The Politics of ‘Minimum Wage’Welfare States: The Changing Significance of
the Minimum Wage in the Liberal Welfare Regime. Social Policy & Administration, 51(2),
pp.244-264.