The Definition and Measurement of Unemployment in Australia

Discuss About The Unemployment Inflation Job Creation Policies.

The present report highlights on the Australia’s unemployment during the past five years and its effect on the economy. Unemployment in the economy occurs when an individual who is ardently looking for employment has been unable to get any job. It is one of the important macroeconomic indicators used for measuring economic healthcare of the nation (Burd. and Wyplosz 2013). Unemployment rate in the nation fluctuates over time based on social conventions and economic situations. Unemployment generally damages individual’s standard of living and thus increases in poverty level of the economy. Various countries follow various concepts and theories for assessing unemployment rate in the economy. Australia adopts standard international unemployment definition based on International labor organization (ILO) classification. Australia’s unemployment definition therefore encompasses that people are considered as unemployed if they have done any paid work for one hour in previous week, were ardently seeking job and have the ability to accept any job in next week. In context to this, the people who are not actively looking for job are however not included in unemployment computation in the economy. In Australia, people are said to be long term unemployed if they remains unemployed for at least 52 weeks.

Unemployment has been one of the main issues in Australia during the last few decades. There are some major concern areas in this country regarding unemployment such as- underemployment, youth unemployment and deficiency in employment opportunities for old aged workers. However, the people who have more risk of being unemployed in Australia are youth, mature aged person and immigrants. The manufacturing and service sector being main contributors in Australia’s GDP (Gross Domestic Product), huge variation in patterns of these two sectors leads to loss of numerous jobs in this country. However, the Australian government has taken several measures for keeping unemployment rate low in the economy. This study thereby focuses on the policies implemented by the government of Australia for maintaining stable unemployment rate in the economy.

Recent evidences reflect that there has been a declining trend in Australia’s unemployment rate during the past five years. Several factors are responsible for unemployment rate in this country, which includes- economic recession, lack of huge investment, outsourcing of jobs, globalization and so on. Besides this, big projects which were held by the laborers in this nation are now captured by workers of other countries such as Indonesia, USA. Owing to less involvement of workers in manufacturing and service industry, unemployment rate in this country is above the target level (5%) even if it is declining. According to recent data revealed by the Australian Bureau of Statistics (ABS), the unemployment rate in Australia during the last five years had decreased by around 0.2%. In fact, the rate of unemployment in this nation has been hanging in the range of 5.6% to 6.07% during the past five years. It has been evident from the recent data that unemployment rate hit the highest in the year 2014 and lowest in the year 2017. In fact, the monthly trend of unemployment of both females as well as males also reduced by near around 5.5% since the year 2013 (Hutchens 2018). Even the labor force participation rate of both males as well as females became the highest by around 70.8% and 59.9% respectively during the past few years.  However, the trend of monthly full time employment also increased by around 271,000 persons since 2016 (Abdelkerim and Grace 2012). As a result, it leads to near around 335,000 persons rise in employment over the past few years.  It has been found out by some researcher that the unemployment in Australia has not reduced much despite increasing growth of jobs.

Unemployment in Australia: Key Concern Areas and Risk Groups

The Australia economy has recorded reducing wage growth for the 20^th consecutive quarter according to ABS. In fact, the labor market condition also improved during the past five years. Even though the rate of unemployment was above 5% (target level), the rate declined by near about 3.12% between these years. Decrease in unemployment rate occurred with 0.1% rise in laborforce participation rate during the year 2015 and 2016. However, the growth of employment became strong over these years with respect to previous years. The labor market in this country improved during these five years, which has been reflected by the structural shift towards the service sector (McLachlan 2018). This structural shift led to increase in growth of the service based sector during the last five years. In addition to this, the level of employment also enhanced in the health care, mining and retail sector of this nation. It has been evident from recent facts that this strengthening of labor market led to improvement in condition of young aged individuals. As a result, the youth unemployment rate in this country declined marginally over the past few years. Despite decrease in youth unemployment rate, the full time youth employment rate declined by near around 1.0% over these years due to its increase in part-time employment rate (Carvalho 2012). Another group that has high unemployment is the recent migrants. The new entrants in the labor market face several difficulties in finding any suitable job such as lack of fluency, cultural difference, which in turn leads to increase in unemployment rate.

This decline in rate of unemployment did not lead to higher wages owing to excess capacity in labor market and hence underemployment still elevated. Underemployment rate is a crucial macroeconomic indicator of spare capacity of the laborers in this country. It affected the young aged laborers more than old aged laborers in this country. According to ABS, underemployed people are those who are not working at their full capability and hence are caused due to unemployment. It has been evident from recent facts that underemployment in this nation increased at high rate of 8.8% during these five years. In fact, the level of underemployment was higher among the female workers recorded at 10.8% as compared to that of male workers recorded at 6.9%. However, there has been constant increase in this rate of underemployment over these years, which in turn led to increase in level of poverty in Australia (Blustein, Kozan and Connors-Kellgren 2013). The figures revealed by ABS shows that the underemployment level of females was more than that of males over these five years. Furthermore, the proportion of underemployed part- time male workers was higher than that of female workers (Li,  Duncan and Miranti 2015). Also, the data revealed by ABS statistics reflects that the underemployment enhanced with the females age. Hence, the level reached to 9% especially for the females aged between 45 to 60 years. Underemployment for males had been higher for both young aged group of 25 to 35 years and retirement group. It has been predicted by some economists if this underemployment continues, the laborers will lose their ability in updating their skills along with on-job training. Moreover, it has been pointed by some economists that higher rate of underemployment will also impact on wages and job conditions as well as security in future.

The Australian Government’s Job Creation Policies and Their Impact on Unemployment

                                                                  Figure 2: Rate of unemployment in Australia over the last few years

                                                                        Figure 3: Australia’s Youth unemployment rate over the years

                                                                                             Source: (Author’s creation)

High unemployment level adversely impacts the Australian economy over the years. High level of unemployment has led to decline in standard of living and disparity in wealth among the people residing in this nation (Mavromaras, Sloane and Wei 2015). Although unemployment rate declined over the past five years, the proportion of long -term unemployment increased at rapid rate. Long-term unemployment depicts the situation in which the individuals remain out of work for at least one year. It has been evident from recent facts that this rise in long –term unemployment cost the Australian economy higher than decrease in its Terms of trade (TOT). High level of long term unemployment has damaged the Australia’s well- being. This nation has been facing crisis of economic, mental and physical well- being with increase in long – term unemployment.  It adversely affects the skills of the individuals residing in this nation. This indicates that as the Australians remains out of job for longer time, their skills begins to deteriorate due to lack of appropriate training. Besides this, long –term unemployment also adversely impacts social as well as personal well being of Australians such as- housing stress, social isolation, alienation, debt, financial crisis.  The data revealed by ABS shows that, long -term unemployment rate increased by near about 18% during these past five years. Even though large increase in national income in Australia enhanced the well being of Australians, it has been offset due to adverse impact of long term unemployment (Wade 2018). The result obtained from the well- being index reflects that well- being of nation lags in the GDP of Australia.

The people residing in this nation explicitly demonstrate that high unemployment adversely impacts their health.  The ABS has revealed that the Australians who are aged above 15 years and are long -term unemployed have bad health condition as compared to other people in the nation. Some researchers have also found out that the Australians who are long –term unemployed have more mental, physical and behavioral issues in comparison with other employed people (Butterworth et al. 2012). It has been stated by Myles et al.(2015) that, high level of long-term unemployment also has social effect on the people residing in this country. This means that the long term unemployed individuals are highly vulnerable to crime, shame and isolation. Furthermore, long –term unemployment has been significantly intergenerational and hence has connection with young –aged individual’s behavioral issue. Feather (2012) found out that youth unemployment also leads to youth’s homelessness, deficiency in income of youth and family conflicts. Recent facts highlights that youth who are unemployed also have the feelings of low esteem and hopelessness. For the past few years, decline in rate of unemployment improved the health and mental condition of Australians. Apart from this, it also improved their standard of living owing to increase in income. The GDP growth rate of the Australian economy has also increased over the last five years owing to decrease in the unemployment rate. As per the data revealed by ABS, it has been seen that the economy of Australia increased by around 3% during the past five years. Few researchers have found out that this decrease in unemployment rate and increase in jobs growth during these five years also led to rise in optimism of Australia’s economic condition.

Recent Trends in Australia’s Unemployment and Underemployment Rates

It has been pointed out by few economists that despite decrease in unemployment rate over the last few years, the economic activities slowed down in this nation as the rate remained above 5% which is the target level. Due to this the job creation level also decreased in this economy, which in turn affected these unemployed Australians. Recent facts show that the impact of unemployment rate has been mainly felt in rural areas of this nation because of its small scale. The enterprises operating in these rural areas have declined their employees working hours in order to pay them less wages. As a result, it decreased the opportunities of job of those laborers working in these organizations and thereby several problems continued in these areas. On the contrary, the employment rate increased in the urban areas of this nation as the unemployment rate decreased. For this reason, several people residing in these regional areas migrated to cities in search for job. However, this led to increase in unemployed people in the cities, which in turn caused several issues for mature-age job seekers.  Since these mature-aged job seekers tend to have more links in the society, cost for high relocation created issues for them (Board 2012) . The competition level in acquiring jobs increased in the cities, which also caused severe issues for the skilled laborers. In addition to this, the enterprises also have to face issues regarding shortage of skilled laborers, which in turn led to lower profit margin in business. Overall, it can be seen that both rural and urban areas of Australia faced stern economic disturbance owing to high unemployment rate.

Over the past five years, the Australian government has adopted several comprehensive reform measures in order to decrease the unemployment rate and enhance the economic performance. The policymakers of this nation has also changed the fiscal as well as monetary policies, labor policies and welfare policies for keeping the unemployment rate stable in the nation. The policies as well as strategies implemented by the government of Australia are discussed below:

• In order to improve the laborforce participation rate in the economy, the Australian government has changed several policies involving- rise in incentives of the workers, introducing welfare to workers package and so on. Apart from this, they also declined marginal tax rate, personal income tax and improved family tax in order to increase returns to job. The policymakers have also taken several measures of changing superannuation and increasing flexibility in the labor market (Healy 2014). In addition to this, they also decreased tax for the mature-age workers and introduced programs for enhancing participation rate in the economy (Gregory and Smith 2016). NRA (National Reform Agenda) has also been adopted by the Council of Australian government in order to raise workforce participation rate.
• Political factors in allocation of fund impact the unemployment rate in Australia. The government of Australia has implemented programs named as- “roads to recovery” during election period for improving activities in the economy and declining unemployment rate. Also, the keyholders have maintained the budget balance, fiscal risk, national saving adequacy in order to decline unemployment and achieve growth in the economy.
• In order to curb high youth unemployment rate in the economy, the Australian government has implemented few strategies. These strategies generally includes different measures which aims at enhancing participation of young people in job and ensures that they donot remain out of work for longer term (Ghayad and Dickens 2012). In addition to this, these policymakers have also restructured various arrangements for providing wage subsidies through consolidating programs of wage subsidy and establishing single wage subsidy.

Conclusion

It can be concluded from the above discussion that unemployment rate has adverse impact on both the individuals as well as the nation. It decreases the standard of living of individuals and GDP growth rate of the economy. Decline in unemployment rate in the Australian economy over the last few years reduced the poverty level and improved the standard of living of Australians. Moreover, the Australian government also plays the major role in decreasing unemployment rate in the economy. The policymakers have changed many policies and implemented new policies in order to enhance workforce participation rate and reduce unemployment rate. They changed fiscal policies, monetary policies and labor market policies such as flexible conditions of wage, employment arrangements for improving labor market condition. This adoption of policies resolved the exacerbating problems relating to inequality among Australians and increased employment level in the economy. Thus, the economic condition of Australia improved due to decline in unemployment rate during the past five years. 

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