Economic Analysis of the Australian Labor Market: A Detailed Report

This report provides an economic analysis of the labor market in Australia, focusing on the interplay between labor supply and demand, wage structures, and the impact of immigration. It examines the increasing labor supply due to immigration and its effect on wage rates, contrasting it with the rising wages for skilled labor due to employment shortages. The report references newspaper articles highlighting the challenges faced by asylum seekers and the broader issues of wage growth and income inequality. Using economic concepts like the Lorenz curve, the analysis illustrates the income disparities between skilled and unskilled workers and the potential consequences for Australia's national income. The report concludes with recommendations for the Australian government, including policies to increase wage rates, generate more employment opportunities, and support unskilled workers through fiscal and monetary policies, aiming to foster a more equitable and sustainable economic system. Desklib provides access to similar solved assignments and past papers for students.

Running head: ECONOMICS FOR BUSINESS
Economics for business
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Executive Summary:
The demand and supply of human resource in Australia has fluctuated significantly because
of skilled and unskilled workers along with their different wage structures. Hence, the report
has intended to analyze this scenario with the help of some present newspaper articles.
Moreover, those concepts have described deeply with appropriate economical concepts after
which some recommendations have been provided. At the end, the report has provided a brief
conclusion to describe the entire situation.

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Table of Contents
Introduction:...............................................................................................................................3
Analysis of article:.....................................................................................................................3
Economical analysis:..................................................................................................................5
Recommendations:.....................................................................................................................7
Conclusion:................................................................................................................................7
References:.................................................................................................................................8

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Introduction:
Human resource is an important factor that can help a country to develop its national
income by producing more outputs. With efficient and skilled labor, it becomes easier for a
country to experience comparative advantages for some particular products, which in turn can
led the exports of the country to increase further. In this context, it is essential to analyze
about the demand and supply of labor within a country that can influence the total wage and
consequently income inequality (Alt and Iversen 2017). Hence, with the help of newspaper
articles, this report has tried to find the scenario of labor market in Australia that can help the
government of this country to take proper decision regarding job creation and wage equality.
Analysis of article:
At present, the labor market of Australia is facing complications due to two opposite
consequences. For instance, the labor supply of this country has increased due to increasing
number of immigration, which in turn has decreased the country’s wage rate. On the opposite
site, wage rate for skilled labor has increased due to lack of employment generations.
According to the Guardian, the income of Australian asylum job seekers, provided by their
support service, has decreased and left them at a risky position with poor economic condition.
Some of them are pursuing their higher education from some colleges or schools within
Australia while others are taking training to prepare them for providing better service in
Australian market. This situation has decreased the condition of those asylum job seekers
further. Presently, Australia is providing support service to almost 12000 people regarding
new start allowance and rent assistance (Doherty 2018). This cut in price can force people to
leave their college or universities and to find jobs with lower wages. Hence, this cut in
support service has forced immigrated people into poverty.

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Figure 1: Wage rate of Australia (2013-2018)
Source: (Tradingeconomics.com, 2018)
In addition to this, a crisis in wage rate growth can be seen in Australia, which is
represented in figure 1. Thus, workers can demand for higher wage from their employers as
the labor market is in better position at present compare to before. In 2017, the
unemployment rate has decreased by 5.7% (Tradingeconomics.com, 2018). However,
Australian citizens cannot demand for higher wages, as they can face higher competition in
labor market with international labor and robots. According to the Bureau of Statistics, labor
market has contributed 51.5% to the country’s national income in 2017 while it has remained
at 54.2% in the previous year while profit share of Australia’s gross domestic product (GDP)
has increased significantly (Hutchens 2018). This in turn has represented a strong
employment opportunity in Australia.

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Economical analysis:
Figure 2: Lorenz curve
Source: (created by author)
As reduction of support service has forced immigrated people to find an unskilled job
with lower wage rate, it has generated an income inequality between skilled and unskilled
workers within the economy. This in turn can be explained with the help of a Lorenz curve.
The curve has represented an inequality gap based on income. In the above figure, a 45o line
shows perfect equality of income distribution, while the other curved line represents actual
distribution of income (Agbenyo, Ngben and Alhassan 2017). An unequal size of income
distribution can be represented by the difference between these two lines. For instance,
according to the figure 2, 20% of lowest income population has received only 5% of the total
GDP while according to the perfect equality; they need to receive 20% of total national
income.

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Figure 3: Shift of demand curve
Source: (created by author)
The unskilled domestic workers of Australia cannot demand for higher wages as they
can be substituted with other international workers and robots. As price and quantity
demanded of a product has a negative relation, increase in wage can led the demand for
domestic workers to fall while the demand for their substitute product can be increased at the
same price level (Rosato 2016). It can be described with the help of above diagram where the
quantity demanded for a product has decreased by Q1 Q0 amount while its price has
increased by P0 P1 amount. This in turn has helped the demand for its substitute products to
increase, that is, from Q0 to Q1.
The combined outcome of income inequality and lower level of wages can influence
Australia’s national income to decrease as employees can contribute fewer amount of their
income to the country’s GDP. Moreover, lower level of employment can affect the aggregate
demand of Australia adverse for which in turn has led the country’s accumulation of national
income to decrease (Stiglitz 2016). By decreasing purchasing power parity of workers, the

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country can loss its social level as well. Hence, as a whole, the entire economical system of
the country may break down.
Recommendations:
After discussing the labor market scenario with the help of some economic concepts,
it can be said that Australia needs to take some immediate steps to protect its entire
economical system. Hence, for doing so, proper policies, rules and regulations are required.
The government can increase wage rate for unskilled labor along with its skilled labor
through by implementing affective policies (Dosi et al. 2015). Moreover, the government,
through its fiscal and monetary policies, can assist unskilled workers by providing facilities,
like low tax rate or lower amount of educational fees, to maintain social welfare.
In addition to this, the Australian government needs to generate more employment
opportunities to provide sufficient jobs to their domestic people along with immigrated one.
Increasing number of employment opportunities with higher wages can help the country to
develop its national income, as those unskilled labors can contribute more to the national
income of Australia.
Conclusion:
After the discussing the real scenario of human resource in Australia, it can be
concluded that the concerned country is facing some difficulties regarding its employment
opportunities and income distribution. Due to huge amount of immigration, the country has
experienced huge amount of labor supply. However, by cutting down the support service of
those people, Australia has forced them to employ in unskilled sector, which in turn has
generated income inequality. Hence, for avoiding this negative phenomenon, Australia needs
to take proper policies, like wage rate increment for those unskilled workers.

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References:
Agbenyo, F., Ngben, J.M. and Alhassan, S., 2017. UNDERSTANDING THE
IMPLICATION OF OCCUPATIONAL DISTRIBUTION ON INCOME INEQUALITY:
EVIDENCE FROM NADOWLI-KALEO DISTRICT, GHANA. UDS International Journal
of Development, 3(2), pp.16-31.
Alt, J. and Iversen, T., 2017. Inequality, labor market segmentation, and preferences for
redistribution. American Journal of Political Science, 61(1), pp.21-36.
Doherty, B. 2018. Cuts leave asylum seekers in Australia at risk of destitution, say
advocates. [online] the Guardian. Available at: https://www.theguardian.com/australia-
news/2018/mar/09/cuts-leave-asylum-seekers-in-australia-at-risk-of-destitution-say-
advocates [Accessed 11 Apr. 2018]. – One of the main article
Dosi, G., Fagiolo, G., Napoletano, M., Roventini, A. and Treibich, T., 2015. Fiscal and
monetary policies in complex evolving economies. Journal of Economic Dynamics and
Control, 52, pp.166-189.
Hutchens, G. 2018. Rise up and demand pay increases, Reserve Bank chief urges
workers. [online] the Guardian. Available at: https://www.theguardian.com/australia-
news/2017/jun/19/rise-up-and-demand-pay-increases-reserve-bank-chief-urges-workers
[Accessed 11 Apr. 2018]. – one of the main article
Rosato, A., 2016. Selling substitute goods to loss‐averse consumers: limited availability,
bargains, and rip‐offs. The RAND Journal of Economics, 47(3), pp.709-733.
Stiglitz, J.E., 2016. How to restore equitable and sustainable economic growth in the United
States. American Economic Review, 106(5), pp.43-47.
Tradingeconomics.com. 2018. Australia Annual Change in Hourly Rates of Pay | 1998-2018 |
Data | Chart. [online] Available at: https://tradingeconomics.com/australia/wage-growth
[Accessed 11 Apr. 2018].