Unemployment is the state at which the number of people without jobs is assessed. It is the rate at which people are jobless. In the global market context, there are countries that are experiencing high unemployment while others are experiencing low unemployment rates. It all depends on the growth of the economy and the systems the government has put in place that help to create jobs for the people (Morrison 2013). In a country with high unemployment rate affects the well-being of the people and this is because they cannot provide their families with adequate needs and wants. The purpose of this paper is to discuss the unemployment rate in Australia including the causes, the impacts and the strategies to sustain the unemployment rate.
The rate at which unemployment rate is changing in Australia has changed and keeps on fluctuating implying that there are various economic conditions. In the latest news, the number of jobs created in March 2016 in Australia was 60,000. However, some of these jobs are seasonal but the unemployment rate remained constant at 5.9%. This rate is manageable meaning that most of the people have jobs and they can provide for their families (Focus Economics 2017). This unemployment rate is not worrying because it has not passed the plus-mark of 6%. The government is operating within a sustainable range and that is why it is creating jobs for the people.
Specifically, the unemployment rate in Australia has been declining showing stable economic conditions. In 2012, the rate was 5.6% and it reduced to 5.2% and eventually 5.1% in 2014. However, the rate started to increase in 2015 where the country recorded an increase to 5.2% and in 2016 it further increased to 5.7% (Focus Economics 2017). The information shows that the country has not recorded the pass-mark that is worrying. If the statistics reach 6%, then the country will be worried because of the high number of individuals who are jobless. The diagram below shows the unemployment rates in Australia.
(Focus Economics 2017)
In the graph below, one can identify that the rate of unemployment in the country has been fluctuating but it is manageable (Focus Economics 2017). The highest rate on unemployment was recorded in 1993 with 11% but since then it has declined to a manageable number. The lowest rate was 2008 with less than 5%. The information is shown in the figure below.
(Focus Economics 2017)
The government has regulated its policies to ensure sustainable economic growth. In 2016, the rate fell unexpectedly to 5.7% in April 2017. This is because in March 2017, the rate of unemployment was high at 5.9%. Therefore, the information shows there was a decline in the unemployment rate because of the additional jobs added into the economy in the same quarter (Trading Economics 2017). It was at its lowest with 5.5%. The government of Australia is putting in place strategies that can help to create more jobs in various sectors thus regulating the employment and unemployment rates. In the graph below, anybody can understand that the employment rate is increasing while the unemployment rate is declining.
(Trading Economics 2017)
Causes of Unemployment
After understanding the unemployment rates in Australia, one can investigate its main causes. The first and foremost cause of the unemployment is the shutdown in various industries. The rate of unemployment increases in some period because the employers in various industries shut their business and relocate to different parts of the world where they think their businesses can perform better. For instance in South Australia, the industries there cannot absorb all the workers in the state and this increases the unemployment rate (Sebastian 2015). The sectors such as Agriculture and textile are not doing well in the state and that is why there is high unemployment turnover affecting creation of jobs. On the other hand, the government is not adequately planning for the workforce to prepare them for transition from one industry to another. In this regard, when a business closes in an industry, the employees find it difficult to transit from one industry to another.
Infrastructure is another factor that influences the rate of unemployment in Australia. When the infrastructure rate decreases, the private and public sectors find it difficult to invest in various sectors and this leads to a decline in business operations. Some employees relocate abroad to search for better jobs. Due to infrastructure, the employers close their businesses and move to areas with effective transport and communication network (Morrison 2013). This is the reason why some regions experience low unemployment rates while other record high employment rates. For instance, the government of South Australia used its workers to engage in various projects. On the contrary, the local employees said that they did not pick up the jobs because the government used employees from different states. In this regard, the rate of unemployment in various states differs because of the differences in infrastructure.
The effect of off shoring can also influence the rate of unemployment. Some countries and states offer tax incentives with the aim of improving the working conditions of the employees. The aim is to ensure that the employees work in better working conditions and they can get adequate income that can sustain their living. Since the western countries started to implement the tax incentives, the rate of unemployment in Australia started to increase because workers moved across the borders to search for better jobs (Sebastian 2015). The manufacturing and offshore jobs are overseas and investors are investing in these countries because of the effectiveness in the labor industry. As such, the country is more like a service industry rather than a manufacturing country. It means that the country is creating little jobs to meet the demand for the rising population. In this regard, the government has to do something with regard to tax incentives so as to maintain the investors and the workforce in the country and this will help to reduce the high unemployment rate.
The economic recession is another factor that caused the increase in the unemployment rate in Australia. To start with, the global financial crisis that hit the globe in 2007/8 affected the economic development of various countries. Australia is one such country. Its companies encountered various problems because of the economic issues they faced (Mankiw 2014). The companies have to tighten their operations so that they can sustain their activities. The effects of the recession include retrenchment and this led to high unemployment rate. In fact, eve the government employees lost their jobs because of redundancy. Every business was facing serious issues such as financial difficulties and they had to lay off some workforce so as to sustain their operations. This is why the country is experiencing fluctuations in the employment sector (Colander 2008). It is important to note that the global economy keeps changing affecting the Australian and other economies as well as business enterprises and that is why Australia is experiencing dynamics in the employment sector.
Besides, the immigration policy in the country is also influencing the unemployment rate. The effect of the 457 visa can be felt from the employment point of view. The government has allowed the mining companies to bring in their employees from other countries to work in their mines. The companies also support international students to acquire relevant skills and knowledge in the various fields (Sebastian 2015). This means that the international employees are increasing in the country and they are competing for the jobs. As a result, the local workers are left jobless especially when the international workers possess competent skills. In the process, the unemployment rate is high in the labor market because of the international workers. This is because the supply of labor increases than the creation of job opportunities. There are conflicts between the local and international workers because the locals think that they are taking their jobs. The labor supply and demand do not match leading to high unemployment rate. Therefore, the government should regulate immigration issues with the aim of protecting the domestic jobs for its people first.
Some economists say that that technology is another primary cause of the high rate of unemployment. The rate at which technology is developing has positive and negative effects on the labor market. Some argue about the positive effects while others argue about negative effects. In the manufacturing industry, the use of technology reduces the number of workforce required in an industry. This is because technology such as robots can handle many tasks that can be handled many people thus reducing the number of people hired in the industry (Begg 2011). On the other hand, personal computers are used to store large amount of information and processes thus reducing the number of people. In the end, people lose their jobs because the machines such as robots can multi-task and work for long hours without stopping unlike people who can get tired and get paid overtime. However, it is necessary to safeguard important handwork skills but most of the employers are using technology to enhance their processes as well as reducing the cost of production.
Another cause of high unemployment rate in Australia is because of the natural disasters. For instance, people who work in plantations such as banana plantation that are in cyclone regions like Queensland, the unemployment rate can change when there is changes in the environmental conditions. This is a major source of unemployment especially in the Agricultural sector (Sebastian 2015). When there is drought, the rate of economic activities decline because of the natural disasters. During these moments, the employers lay off some of their employees leading to unemployment. The government can put in place strategies to ensure favorable weather conditions so as to avoid harsh economic conditions. In this regard, one can identify that the unemployment rates in the country is caused by natural and artificial causes. For the artificial causes, the public and private sectors can take necessary steps to reduce the situations that can lead to unemployment.
Impacts of Unemployment
The government of Australia is worried about the unemployment rate because of its effects in the society. The first impact of unemployment is the financial impact. According to treasury, the rate of unemployment in the economy reduces the ability of individuals to save for their retirement and other benefits individuals enjoy at old age (Mankiw 2014). It is because the rate at which the individuals save is directly proportional to their income and when they lose their sources of income, their savings decline. In the end, the government will spend more to cater for the needs of the aged people because they did not save enough because they were unemployed.
On the other hand, the unemployment rate in Australia has impacts on the mature aged people because of the commitments they have such as mortgages and obligations to support their dependants. The trend is likely to affect the well-being of the people in various households. When an individual has many dependants with limited income, this can lead to health effects because of stress and the individual cannot save enough to invest in various businesses (Begg 2011). The people will not meet their obligations such as the financial obligations in their families. It is worth to note that as a person grows old, they need to save so that they can be productive even at their old age. However, with an increase in the unemployment rate makes this an impossibility affecting the well-being of the people at an early age.
Another financial impact to the government is the growth of the dependency ratio among the mature-age people. The Department and Community Services is the department empowered to consider the living standards of people in the country (Colander 2008). It is worried that if the rate of unemployment increases the department will experience high rate of number of mature dependants who are supposed to be productive but instead are dependants. The prolonged rate of unemployment can lead to erosion of skills and decline in personal savings increasing the number of people living in poor conditions.
Another impact of unemployment is that it affects the budgeting process. From the government point of view, unemployment reduces the current and future tax revenue because of the reduced number of individuals earning taxable income (Bade and Michael 2001). The number of people paying tax to the government decline and this reduces the government income. The government that depends on its income to engage in development projects, it will experience difficulties in implementing the projects because of the limited income to tax decline. Therefore, it affects the overall economic growth of the country.
The government will incur high expenses because of the payments in form of pensions it gives to the individuals who opt to retire at an early age. When the government is facing financial difficulties, it can allow individuals to retire at an early age but it must pay the pension (Gregory and Butlin 2002). On the other hand, when the workers in the public sector think that they do not have job security, they can opt to retire early and in the process the get pension. This is an extra expense to the government and workers as well. Therefore, the government can e counter high pension because of the early retirement when the rate of unemployment is high.
The government spending on social amenities like education and health is likely to increase when there is high unemployment rate. This is because the individuals have limited income hence they will not take private covers that cater for their families and other dependants (Samuelson and William 2011). As a result, the government has to spend more on its citizens but collect limited revenue from the same people because they are unemployed. The employed people save sufficient amount to cater for their needs when they grow old. In the end, the government expenditure increases affecting the investment in development projects.
Finally, unemployment rate can lead to low growth of the economy. This is because the government can spend a lot of its financial income in providing basic needs to its people but the people are not engaging in activities that promote the development of economy (Morrison 2013). It is because of the high dependency ratio as well as a decline in the government revenue collection. It is necessary that in any economy mature individuals should engage in constructive activities that can enhance the growth of the economy as well as reducing the dependency ratio.
On the other hand, the government can engage in activities that can reduce unemployment rates. In the first place, it can introduce the policy of tax incentive. This is the strategy the government can use to attract more investors into the country by lowering the taxation rate (Mankiw 2014). The aim of any business is to make profits and they can invest in markets where they think their businesses can do the best. In this regard, multinational corporations can enter into the market and create more jobs for the people. However, the government should do this tactfully to avoid making mistakes that can otherwise affect income generation.
Moreover, the government can introduce an immigration policy that focuses on limiting the number of workers entering the country. This is necessary because it ensures sustainability of the jobs created where the demand meets the supply. Every government wants to give priority to its people first before considering the international workers (Begg 2011). Regulating the workers entering into the country is necessary because it allows sustainable growth of the economy since the supply of labor is adequate to provide required services in various industries. This strategy can help to reduce unemployment rate because the international workers are limited. However, when the demand for labor is higher than the supply, the government can adjust the legislation to attract international workers.
Unemployment is an issue that every government is trying to eliminate. Governments are implementing strategies that can reduce the unemployment rates. In Australia, the government has created jobs to sustain the population growth. Nevertheless, some people are unemployed because of various reasons. The causes of the unemployment include shutting down businesses in various industries, infrastructural changes, off shoring, recession and developments in technology that has led to lying off of the employees. The effects of unemployment include high dependency ratio, increased government expenditure, low quality of life and reducing government revenue. However, applying tax incentives and adjusting immigration policies can help to reduce the rate of unemployment.
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