Economics for Business: Dynamics, Causes, and Policies on Unemployment

This report provides a comprehensive analysis of unemployment in Australia, examining its dynamics, causes, and implications. It delves into structural and cyclical unemployment factors, highlighting the impact of skill shortages, business cycle fluctuations, and global economic events. The report presents statistical data on unemployment rates from 2013 to 2018, analyzing trends in employment, underemployment, and labor force participation across different demographic groups, including youth and immigrants. It also explores the variation in unemployment rates across different Australian states and territories, linking these disparities to sectorial compositions and economic transitions. Furthermore, the report discusses the government's policies aimed at achieving full employment and mitigating the adverse effects of unemployment on the economy and society. The report also discusses the effects of unemployment on various groups of people like youths, immigrants, and single people. The report provides the latest statistics of unemployment in March 2018 and April 2018. The report also covers the youth unemployment rate in Australia and unemployment among migrants and the disparity in unemployment in different states and territories of Australia.

Running Head: ECONOMICS FOR BUSINESS
Economics for Business
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1ECONOMICS FOR BUSINESS
Unemployment is signified by inability some labor market participants to obtain a job to
support minimal standard of living. The nature and types of unemployment varies among nations
depending on specific structure of the economy. Therefore, in analyzing unemployment
consideration needs to be given on structure of the targeted country. Australia has passed with
rapid change in its economic structure (Christiano, Eichenbaum and Trabandt 2016). The share
of service industry has increased significantly while that of manufacturing sector declined.
Manufacturing sector of Australia hiring a significant proportion of labor force, a decline in
manufacturing causes unemployment among many people. Construction and mining are two
sector that generate huge unemployment in Australia. A declining trend in both the sector
following a global slowdown and housing market crisis worsen the labor market condition in
Australia. The nature of jobs has also been changed overtime.
The implication of unemployment is not limited to economic domain. The unemployment
problem extends far beyond. Persistent unemployment imposes budgetary, financial and social
implication. The unemployed people are unable to supply necessary support to sustain daily life.
The uncertainty resulted from unemployment of current generation trickled down to next
generation (Rothstein and Valletta 2017). Unemployed persons are unable to send their children
to school and lack of formal education creates further unemployment. The worsening condition
of health and education leads to social deterioration.
The paper critically analyzes dynamics of unemployment in Australia. The
unemployment problem of Australia is discussed along with causes of unemployment,
unemployment among different groups of people, unemployment in different states and
government policies to achieve full employment in Australia.

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Several factors explain causes of unemployment in a nation. Like other nations, in
Australia also unemployment is caused by structural and cyclical reasons. Structural
unemployment is the outcome of skill shortage. This occurs when workers lack skills required to
perform specific type of jobs. One example of structural unemployment in Australia is the
unemployment resulted in manufacturing industry from adaptation of automation technology
(Keynes 2016). An advanced knowledge and skills are required to sustain jobs in the industry.
Those who lacked such skills became unemployment. Business cycle fluctuations another factor
responsible for time to tome unemployment in Australia. The business cycle phases are
describing by period of expansion and recession. During recession following a slowdown in
economic activity labor demand decline causing unemployment to increase significantly.
Production and output expands during phase expansion. As demand for labor increases,
unemployment falls. Unemployment caused by cyclical fluctuation is termed as cyclical
unemployment (Gregory and Smith 2016). The economy experienced recessionary pressure
during early 1990s and in 2008 resulted from global financial crisis. Another short-term
unemployment is frictional unemployment. People experiences a short-term unemployment
while shifting between two jobs. In addition to these forms of unemployment, other labor market
problem includes hidden unemployment, disguised unemployment and underemployment.

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2013 2014 2015 2016 2017 2018
5.20
5.30
5.40
5.50
5.60
5.70
5.80
5.90
6.00
6.10
6.20
Unemployment rate
Year
Unemployment
Figure 1: Unemployment in Australia
(Source: data.worldbank.org 2018)
The last five years of Australian labor market is characterized by several upswings and
downswings. Starting with 2013, the measured rate of unemployment in the last quarter was
5.8%, one percentage point lower than that exited one month back. Nearly 712,500 people
accounted to be unemployed in the labor market during this year. Owing to improvement in labor
market condition the underutilization rate decreased. Underutilization though had declined but is
failed to mark any improvement in the rate of labor force participation. The number of employed
persons increased. More than 1800 persons added to the group of employed people. There was a
considerable increase in full time employment and decline in part time employment. This trend
was reverse female participant in the labor market (Carvalho 2015). Full time employment for
females declined completely that pf part time employment increased. The labor market condition
worsens in 2014 with rate of unemployment hiked to 6.3%. There were 777700 unemployed
persons in labor market as against 712500 in 2013 (abs.gov.au 2018). The increased

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unemployment rate further increased the underutilization rate in the labor market. Lack of
employment opportunities aggravates the problem of underemployment. It is a state of
employment where people are hired in a job that requires a low-level skill than the worker
possesses or they are hired for a shorter hour of working than they desired. In this year, part time
employment among both male and females’ participants increased significantly. The full time
employment though has slightly increased for male members of the labor market but for females,
the statistics of full time employment went down.
The state of labor market improved in between 2015 to 2016. The labor market
experienced a gain in form of increase in the level of unemployment. Employment growth during
this year was the highest in the past 10 years. The gain in employment was due to an increase in
part time jobs. The part time employment during 2016 was 3,740,000 (Healy 2016). The full
time employment on the other hand experienced only a modest increase. In all, unemployment in
2016 fell by 3.1 percent. Along with a decline in unemployment, the participation rate among
the labor force increased by 0.1 percentage point. As participation in the labor, market mostly
occulted in firm of part time employment the average hours of working reduced significantly. In
spite of the fact that employment grew by 3.8 percent there was a decline in working hours on an
average by 0.6 percent. The growth of part time and full time employment in was 3.3% and
1.35% respectively. Persistent increase in underemployment further worsens the labor market
condition. Rate of underemployment grew by 2 percent in 2016 (Murtin and Robin 2016). The
growth of full time employment fails to offset underemployment rate in the labor market. The
excess supply of labor is the main force behind growing underemployment statistics.
Employment had not increase in all the states. Generation of employment opportunity
depends of the sectorial composition. The mining boom of Australia had ended causing a large

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economic transition. With contraction of mining industry, states that depends on mining heavily
experienced a decline in industrial output and hence faced bigger problem of unemployment
(abs.gov.au 2018). On the other hand, states that give priority to non-mining industries and
service sectors experienced a growth in output along with employment opportunities.
The recorded unemployment rate over 2017 was 5.6%. The labor market condition
improved with creation of various news jobs focusing mainly on full time employment. Among
54,000 new job created only 14,000 were part while rest are full time (abs.gov.au 2018). The
push in labor marker through full time job creation was however unable to reduce jobless rate.
This was the time when a number of female participants joined the labor force. The participation
rate among females increased to become 60 percent. Increase in average working hours is
relatively smaller which rise by only 0.4 percent. The incidence of underemployment remained
considerably high.
High rate of underemployment pushed wages downward. The employment growth thus
was unable to bring a wage growth and hence, failed to increase economic growth. The latest
statistics of unemployment in March 2018, showed an unemployment rate of 5.5%. The observed
unemployment rate matched with the market consensus rate. With creation of new job
opportunities, the statistics for unemployed people marked a decline by 2400
(tradingeconomics.com 2018). The tendency of people to search for full time employment
increased while that for part time employment decreased. Still the statistics for full time
employment was far less than the expected number of increase. Part time employment on the
other hand has continued to increase. The employment rate has remained steady at 61.9% in
April 2018.

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The intensity of the unemployment problem varies among different groups. Not all
members of the labor force are equally vulnerable to the problem of unemployment. Given the
current state of the Australian economy, unemployment is in worst form among youths,
immigrants and single people. The long-term unemployment has a destructive effect on
Australian economy. The rate of unemployment also varies among different states of Australia.
After completing education young people join the labor force. They have formal
education base, but lacks experiences. Therefore, they require some time to settle down in the
labor market and perform according to the requirement of available jobs. Data reveals that nearly
one third of young Australians fails to find jobs suitable for them. Young people in Australia is
found to be either unemployed or underemployed. The youth unemployment rate in Australia in
2017, reached to a recorded high level of 18 percent, a rate far higher than an overall rate of
8.6% (theguardian.com 2018). Presence of youth unemployment has become one distinct feature
of Australian labor market over the past few years. The rate of youth unemployment surged from
its previous level of 13.5%. The youth unemployment is more prominent among young members
who do not have university degree and hence lacks skills and qualification. People with low level
of education are unable to match the skill requirement in phase of economic transition. The youth
unemployment rate in Australia has now reached to its highest level since the hit of global
financial crisis in 2008. There are currently more than 650,000 people in the labor force aged
between 15-24 who are searching either for jobs or are underemployed (news.com.au 2018).
Underemployment measured as a different hours of young people willing to work and that of
actually working hours has been widened rapidly over the last few years. In 2014, there were
39.3% students engaged in casual work. For part time work, the corresponding statistics is
35.8%. Both the rates are the highest since 2001. For service industries the opportunity of jobs

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for young people however has increased somewhat. The percentage of people aged 15 to 19
years and that between 20 to 24 years working in service industries were 70% and 40%
respectively in 2016 as compared to 30% and 10% in 1984 (news.com.au 2018).
Figure 2: Youth unemployment in Australia
(Source: tradingeconomics.com 2018)
Unemployment among migrants are blamed for surging unemployment problem in Australia.
Immigrant coming from Middle East have bolstered the unemployment rate. The jobless rate
among these immigrants found to be 33 percent in the first five years of their arrivals (Jones et
al. 2015). The immigrant unemployment report has revealed that the incidence of unemployment
among Middle East immigrants has doubled within a decade. Every one among three immigrants
from this is found to be unemployed. The jobless rate among immigrants originated from North
Africa and Middle East is higher as compared to immigrants group belonging to Europe or Asian
counterpart. Unemployment rate among the immigrants is far above the national average. The
European and Asian migrant job a lower jobless rate as compared to workers born in Australia
(Clarke and Skuterud 2016). Unemployment rate among Middle East immigrants is as high as

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17.5 percent as compared to 1.9 percent for those belonging to Southern and Eastern Europe
(news.com.au 2018). Lack of skills to Middle East immigrant over English language is the
primary hurdles for them to find jobs in Australia.
Figure 3: Distribution of unemployment among different residence group
(Source: abs.gov.au 2018)
Disparity is found to exist among different states and territories of Australia. In the end of first
quarter of 2017, a growth in employment was observed for almost all states and territories with
only exception in New South Wales. Employment has increased largely in Victoria and
Queensland. The two states add respective number of 5100 and 4400 persons in the employed
group. In contrast, employment has declined in New South Wales by nearly 1000 persons. Since
the first quarter of 2016, the largest employment growth has observed in Victoria, South
Australia and Northern Territory. Over the same period employment declined in New South
Wales and Western Australia. There was an increase in trend unemployment rate by less than
0.1% point in Victoria and New South Wales (abs.gov.au 2018). The rate of unemployment

9ECONOMICS FOR BUSINESS
remained steady in South Australia and Queensland. Except these two states, unemployment has
decreased in all other States and territories.
Figure 4: Unemployment in different states and territories
(Source: lmip.gov.au 2018)
Effective policy measures are taken by Australian government to achieve a full employment
level in the economy. Depending on current state and characteristics of labor market, different
schemes are designed to generate employment in the economy. Some previous policies of
Australian government include National employment strategy for aborigines, establishment of
Council of Education and Development Program (CEDP), Indigenous Employment Policy,
implementation of job networking program and other policies for developing employment
(Cheshire 2016). With a change in labor market, characteristics and nature of unemployment
new sets of policies are however undertaken by the government.

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With passes of time, youth unemployment has become most disturbing factor in the
Australian economy. Realizing the problem of youth unemployment government has undertaken
certain strategy in its 2015-16 budget. The budget of the concerned year included employment
packages consisting of new measures of youth employment. The government has eliminated
Commitment Bonus. Changes have also been made in Dole program that are expected to
generate a saving of $494.2 million in the next estimated period (aph.gov.au 2018). Under the
new measure, the job seekers who are ready to join jobs are required to participate in the work
for Dole after a participation period of 12 months in job active rather than earlier six months’
period. This is expected to improve the job opportunity for the job seekers along with
improvement in employability.
Some reforms have also been made in the existing employment promotion schemes. The
new Community Development Program has replaced earlier policy of CEDP. The new scheme
requires a greater involvement of the central government (Morris and Wilson 2014). Under new
policy, emphasis has given on increasing the working hours and non-compliance of the policy is
subject to greater penalties.
In the essay, a brief discussion has made on recent unemployment statistics of Australia.
Different forms of unemployment in Australia include structural, cyclical and frictional
unemployment. The combined effect of different forms of unemployment combined to result in a
steady long-term unemployment. In the last five years, there is an increasing trend in
unemployment on an average. Some improvement in the unemployment has been though
observed but is has resulted mostly from increase in part time employment. The growth of part
time employment give rise to the problem of underemployment and underutilized capacity of the

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labor market. Part time employment are more prominent among female participants that their
male counterpart.
The risk of unemployment is higher for some specific groups in the labor market. In the
economy, there is a persistent problem of youth unemployment. The youth unemployment has
reached to its highest level in recent years. Some job opportunities for young member though
have created in the service industries but this has failed to solve the problem of widespread youth
unemployment. Unemployment tends to be higher among immigrants especially those coming
from Middle East nations. Lack of English knowledge works as a barrier of get jobs in Australia.
A differential in generation of employment opportunity has observed among states and
territories. In order to address the unemployment corrective policy measures are taken by the
government that are expected to solve the unemployment problem soon.

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