Australian Unemployment Rate Analysis: Trends And Implications

Unemployment Framework in Australia

Question:

Write an essay on “Unemployment in Australia”.
 

Unemployment is one of scourge that the economy faces in the levels of economic development. However, unemployment is the basic despair that the below poverty line experience as they are not able to experience the mainstream development. Unemployment, on the whole, creates damage to the development of the individual as well as the family and continues for a longer period of time (Barslud and Gros 2013).

On the other hand, when analysed on the Australian economy, the economy has experienced structural changes that had led to rise of competition by the changes caused in the pattern of consumption of the rise in real income. The ongoing loss of jobs in the production of goods has caused a real decline in the job opportunities that has been evidently shown in the unemployment statistics. The last year data from April 2015 to April 2016 depicts a reduction in the unemployment rate by 0.4% (Australian Bureau of Statistics 2016). However, the assignment holds the importance to be analysed on last three months analysis of the Australian unemployment rate from March 2016 to May 2016 based on the latest news gathered from the newspaper articles.

The unemployment framework in Australian is followed by the following structure as given below.

Figure: People Not Employed

Unemployment framework in any country is based on three dimensions that is employed, unemployed as well as out of the labour force. Conversely, unemployment rate is defined by the total unemployed people (a person who has not been working part or full time in the past week) divided by the total labour force (constitutes of people who is working in production activities as well as the people who are vigorously looking for work or will soon the commence their work) (Boeri and Van Ours 2013). On the other hand, participation rate is the percentage of the working age population which is 16 years and above in the labour force.

According to the Australian Bureau of Statistics, the latest data of April 2016 shows that the unemployed people constituted to be 726.6 (‘000) and labour force (Unemployed + employed) came out to be as (11910.8 + 726.6) 5.7% (Australian Bureau of Statistics 2016).

The trends of the employment in Australia can be best evaluated by the last year data. As depicted in the chart above, the recent data in April 2016 stood to be 5.7% unchanged from the figure in March as well. However, in the past three years the consensus had been stood by 5.8% such that the changes can be evaluated that the economy added 10,800 jobs but the unemployed person in the economy increased by 400 in the past year (Trading Economics 2016).

As reported by Janda (March 2016), there were in total only 300 jobs added and the participation had been falling with the seasonally adjusted figure to depicts a fall of 0.2%. Australian Economy seems to be decreasing in unemployment rate with the fall in underemployment as well. Although, there is still a doubt as though the unemployment rate is decreasing but there is certain uncertainty on the ABS data. The economic outlook of the economy is in the position to generate more jobs n the full as well as part time employment.

Current Trends in Australian Unemployment

However, the capital economics Paul Dales states that the unemployment rate has shown a consistency as the falling has not been statistically significant rather a weak performance in job creating could create statistical noise.

As reported by Husna (April 2016), it is thereby illustrated that the unemployment rate has further dropped down to 5.7% such that the employment rose to a greater extent to 11909.6 and unemployment decreased by 723. There was a certain decline in the seasonally adjusted aggregate as well. The person’s unemployment has decreased since the past year but because of frictional nature, the decreased in unemployed persons has not been significant.

Figure: Seasonally Adjusted Unemployment Rate

However, according to ABS Data, there have been key points that have been noticed in the month of April 2016.

Table: April Trend Estimates

Although, after the decline in unemployment rate in Australia, since then the unemployment rate has been consistent explaining that the jobless rate is steady as a result employment rate growth is relatively growing weak. However, the existence of frictional employment is on a rise as many people drop from the work and gradually start looking for other job. Nevertheless, the drop-off people, who are consistently looking for work, are more concentrated in the part time employment. Moreover, according to the estimated working hours, there has been a steer drop which comes out to be 1.1% because of seasonal adjustment (Junda 2016).

The trend has been consistent due to the basic reason that the quality of jobs has been decreasing. The basic motive of the Australian Government is to employ people irrespective of the jobs offered which lead to frictional unemployment. As a result, people employed are not able to give quality work which is indefinitely causing drop in jobs as the people are not able to cope up with the job specifications. The evident outcome will be seen on low consumption growth and the overall GDP of the economy if the total unemployment continues to be the same or rises eventually.

The trends can be depicted based on the line chart with the comparison of Roy Morgan research, ABS original as well as seasonally adjusted data on the monthly average from 2000 to 2016 is given below.

Figure: Unemployment Monthly Average

Frictional Unemployment – This kind of unemployment has been prevalent in Australia during the consistent unemployment rate as in the need of taking job, the unemployed person is in a voluntary search. Moreover, the person is in a habit of continuous change of jobs due to the changing market condition as well as the people who are not able to cope up with the job (van Meerhaeghe 2013).

Cyclical Unemployment – This kind of unemployment is prevalent during the cyclical trends during boom and depression when the unemployment rate falls or increases respectively. However, this kind of fluctuation is not normal because this prevails with respect to the world scenario (Odekon 2015).

Structural Unemployment – Australia has been in the continuous face of structural unemployment because of the consistent unemployment rate that is been fluctuating because there has been a continuous mismatch between the skills the employees possess and the skills the company’s demand. However, this mismatch has been highly prevalent in the Australian economy. Therefore, structural unemployment takes place basically because of production changes, competition, technological as well as policy change. Nonetheless, this type of employment is prevalent in Australian economy (Junankar 2016).

Types of Unemployment in the Australian Job Market

The long term unemployment is taking a toll over the Australian well being because Australian economy has been providing work but it does not match the skill set of the employees (Junankar & Kapuscinski 2013). As a result, this leads to a negative effect of unemployment because as long as the people remain unemployed, the results are likely that the skills will begin to deteriorate because of lack of skill and training. As said by Dr. Nicholas Gruen is that, “the true cost of long-term unemployment was not captured by traditional economic indicators such as GDP.” However, long term unemployment will only result in the social as well as economic damage (Wade 2014).

The economy on the whole results in the inefficiency of the matching demand and supply of labour. The total opportunities available in the economy like Australia has been increasing the employment opportunities such that the people should obtain the job before there are losses in the opportunities. The scenario of frictional as well as structural unemployment in the economy amongst individuals results in the inefficiency of living with the current expenses. However, society as a part of it bears the economic cost as the unemployed people start getting aids from the government such as employment benefits and stop paying taxes as well. This all costs add to the government budget (Argy and Nevile 2016).

The cost on the individual begins with the reduction in incomes as well as the reduced income flow to the community. Moreover, the community can be affected in basic two ways. Firstly, the savings and investments will be reduced more in comparative to the consumption as the unemployed person will cushion oneself on the impact of loss of income. Secondly, the private and government outlays will increase in the meantime because of the se of public services like housing, health and services of the community. Overall, the impact will ascertain to be more severity on the individuals than the community as there will be straining people’s ability to meet the financial commitments. However, the overall impact will be experienced by the children in different areas like education, marriage and relationships (Junankar 2016).

The other two costs that can influence the individuals are psychological cost and social cost. The psychological cost to the family results in low self esteem as well as in anger, frustration and despair due to the long term of unemployment. The other adverse affects causes the individual as a complete loss of control, depression and anxiety and even suicidal behaviour. Social Cost on the other hand, tend to increase in crime related activities as well as other activities like drugs, domestic violence and other social causes which results in excessive costs like hiring of police for the strict actions to be taken (Sandvik 2016). 

Conclusion

To conclude, it can be said that the unemployment condition of Australia has been decreased in the past years but the considerable effect has been shown in the way of increasing jobs of part as well as full time. However, in the last three months from March 2016 to May 2016, unemployment rate has decreased but since April 2016, it prevails to be stagnant. The stagnant unemployment rate has in dominantly affected the structural and frictional unemployment mainly followed by cyclical unemployment. The prevailing unemployment has even lowered the labour participation rate. The direct effects have been viewed by the costs that the individual had to pay regarding low pay and low standard of living followed by psychological costs as well. On the other hand, the cost to the economy is borne by relaxing the taxes and giving aids to the unemployed persons. 

References

Argy, V.E. and Nevile, J. eds., 2016. Inflation and Unemployment: Theory, Experience and Policy Making. Routledge.

Australian Bureau of Statistics. 2016. 6202.0 – Labour Force, Australia, Apr 2016. 

Barslund, M. and Gros, D., 2013. Unemployment is the scourge, not youth unemployment per se: The misguided policy preoccupation with youth.CEPS Policy Briefs, (294).

Boeri, T. and Van Ours, J., 2013. The economics of imperfect labor markets. Princeton University Press.

Janda, M. 2016. Unemployment falls to 5.8pc as job seekers give up. [online] ABC News. 

Janda. 2016. Unemployment steady but job quality ‘deteriorating’. 

Junankar, P. N., & Kapuscinski, C. A. (2013). Long-term unemployment in Australia: problems of memory and. On the Mysteries of Unemployment: Causes, Consequences and Policies, 10, 358.

Junankar, P.R. ed., 2016. Economics of the Labour Market: Unemployment, Long-Term Unemployment and the Costs of Unemployment. Springer.

Odekon, M. 2015. Booms and Busts: An Encyclopedia of Economic History from the First Stock Market Crash of 1792 to the Current Global Economic Crisis. Routledge.

Roy Morgan. 2016. Australian unemployment jumps to 11%.

Sandvik, S., 2016. The Economic and Social Effects of Trial Periods for Employment Contracts.

Trading Economics. 2016. Australia Unemployment Rate | 1978-2016 | Data | Chart | Calendar. 

van Meerhaeghe, M.A., 2013. Economic Theory: A Critic’s Companion. Springer Science & Business Media.