1Labor Market Trends.docx - Google Docs.pdf

1 Julian maung Unemployment and underemployment rates are crucial markers of an economy's health. Measuring the ability or failure of an economy to use spare capacity in its workforce. For many decades, the Australian labor market has experienced an increase in underemployment and unemployment owin...

1 Julian maung Unemployment and underemployment rates are crucial markers of an economy's health. Measuring the ability or failure of an economy to use spare capacity in its workforce. For many decades, the Australian labor market has experienced an increase in underemployment and unemployment owing to structural and cyclical causes influenced by the global economic environment , government policy, and black swan events. Unemployment is defined as those in the labor force between the ages of 15 and 64 who are unemployed and actively seeking employment. Unemployment falls into four distinct categories. Institutional unemployment - long term unemployment caused by government policies. Cyclical unemployment - people who gain short-term employment when there is high demand for their work but do not stay when there is medium-low demand. Structural unemployment - people who are formally a part of the workforce who were put out of work due to technological advancements, phasing out of a job or entire industry and automation. Frictional unemployment - people voluntarily leaving a company and becoming temporarily unemployed. Underemployment can be defined as the state of being employed yet actively seeking additional work and desiring more hours. To earn a liveable income, the majority of the underemployed work many part-time jobs rather than a single full-time employment. Visible and invisible unemployment are the two primary categories of underemployment. Invisible underemployment occurs when a person is unable to obtain employment in their area of expertise. Underemployment is when a person works less hours than they prefer or are capable of working. The Australian economy has undergone substantial structural change over the last several decades, influenced by internal and external factors such as, government policy, price fluctuations, changing demographics, productivity and growth, technological advances and changing comparative advantage which have reshaped Australia's labour market. The rise in unemployment and underemployment coincided with the transformation of the Australian economy in the 19070s and 80s, The transformation aimed to improve the macroeconomic stability of the economy and curb inflation through the decentralization of wages, tariff cuts, deregulation of banking, floating the dollar while shifting the labour force away from less profitable labour intensive industries to focus on exporting natural resources. “ Australia’s average unemployment rate has risen sharply — from 3.7 per cent in the 1970s to 7.3 per cent in the 1980s and 8.9 percent for the 1990s to date”. These structural changes had a significant impact on the prosperity of Australia as it increasingly became part of the global economy, while making it more susceptible to global conditions. Australia's macroeconomic environment before the Covid-19 pandemic was weak with inflation below target while unemployment and underemployment had been consistently high and low wage growth due to the recession in 2007. With the onset of the Covid 19 pandemic 2 Julian maung (2019-Present) was a black swan event that caused shutdowns,work from home orders, border closures, travel restrictions, and supply chain disruptions and reduced consumer demands. In March 2020 the State,territory and the federal government imposed restrictions on non-essential businesses, and the movement of the population in order to control the spread of the virus. These constraints had a negative impact on Australia's labour market, resulting in a high rate of job losses in a short period of time. As seen in table 1, the number of people in employment after April 2020 had a significant drop as businesses were either unable to operate, reduced operating hours or chose not to operate. Table 1 While the job losses were widespread across all industries according to the National Skills Commission “Accomodation and food industry recorded the largest loss of 164700 jobs. “ while industries such as manufacturing, construction, transportation, education, recreational services, retail and administrative services all had substantial job losses. Resulting in an increase in the unemployment and underemployment as seen in table 2. Underemployment rate increased significantly in April 2020 rising from 8.8% in March to 13.8% in April 2020, the highest level ever recorded in Australia. 3 Julian maung Table 2 While traditional data collecting on the labor market was suspended during the pandemic, the Treasury department measured unemployment through the effective unemployment rate. Using this measure people who worked zero hours but were still connected to their employers were not counted as unemployed. As seen in Table 3 had they been counted the unemployment rate would have been around 18% in April 2020. Table 3 4 Julian maung A range of economic support was introduced in March 2020 by the Federal Government to support those affected by shutdowns and slowdown of economic activity. ● ● ● Job Keeper : a wage subsidy, given to employers to be paid in full to employees to keep them employed and help support business trading through the pandemic. Job Seeker: Consolidating several other government payment job seeker allowed Newstart Allowance. CoronaVirus Supplement: Available from April 27th 2020, additional unemployment payments which came as forms of financial supplements for people who were already receiving government benefits before the pandemic. Originally the amount of money given was at $550 every two weeks then adjusted to $250 every two weeks from September 25th 2020. Later to be adjusted again to $150 from January 1st 2021 before being entirely abolished. The macroeconomic policy response to the downturn arising from the pandemic has played an essential role in reducing unemployment. The Federal Government along with State and Territory Governments have introduced a range of packages for business and individuals ranging from dinner and travel vouchers, hire subsidy schemes and tax exemptions for business. An example of this is the “$4 million ‘JobMaker Hire Credit’ scheme to assist 450,000 young people into work. Under the scheme, employers receive a $200 weekly subsidy for every new job created and filled by a worker aged 16–30 years.” in an effort to stimulate the economy and support struggling businesses. Due to government actions and economic stimuli, the labor market recovered rapidly from the covid-19 restrictions. As skilled emigrants were barred from entering the country to fill vacancies, labor market shortages precipitated a sharp decline in unemployment. Unemployment dropped from 7.48% in July 2020 to 4.65% July 2021 according to the ABS. Many migrants left Australia due to shutdowns and lack of work, migrants were excluded from government financial support during this period. “In the data released on Friday, 17 December, it was revealed that Australia recorded a net loss of 88,800 people in 2020-21 due to the impact of COVID on overseas migration.” The departure of migrants has led to a skills shortage in Australia with many employers unable to fill vacancies. While many who had previously struggled to obtain employment prior to covid have now become now employed. While Australia's underemployment rate is currently low as seen in table 4, the amount of hours worked has increased, “Hours in New South Wales and Queensland increased in April following the impacts of the floods in March. The number of people working fewer hours than usual due to bad weather dropped from its March peak of over 500,000 to around 70,000 people in April.” From July of 2021 to February of 2022, the rate of underemployment has dropped from 9.088% to 6.422% while the average amount of hours worked has risen from 94.1 in January of 2022 to 103.6. While underemployment is still a persistent problem in the labor market, the rapid rebound has shown Australia's economy to be strong. 5 Julian maung Table 4 The war in Ukraine has impacted an already broken supply chain. Pushing up inflation and the cost of living. High energy prices, shortages of supplies and the RBA policy of interest rate increases to curb inflation will more than likely push the unemployment rate back up as consumer demand drops.l Birch, E. and Preston, A. (2021). The Australian labour market in 2020. Journal of Industrial Relations, p.002218562110022. doi:10.1177/00221856211002224. www.nationalskillscommission.gov.au. (n.d.). 1.1 Impact of COVID-19 on the Australian labour market | National Skills Commission. [online] Available at: https://www.nationalskillscommission.gov.au/reports/shape-australias-post-covid -19-workforce/part-1-labour-market-update/11-impact-covid-19-australian-labour -market. 6 Julian maung www.ceicdata.com. (n.d.). Australia | Underemployment Rate | Economic Indicators. [online] Available at: www.nationalskillscommission.gov.au. (n.d.). 1.4 Industry employment through 2020 | National Skills Commission. [online] Available at: https://www.nationalskillscommission.gov.au/reports/shape-australias-post-covid -19-workforce/part-1-labour-market-update/14-industry-employment-through-20 20 [Accessed 10 Jun. 2022]. Australian Institute of Health and Welfare (2021). Employment and unemployment. [online] Australian Institute of Health and Welfare. Available at: https://www.aihw.gov.au/reports/australias-welfare/employment-unemployment. Fahrer, J. and Pease, A. (1993). The Unemployment-Vacancy Relationship in Australia. The Australian Economic Review, [online] 26(4), pp.43–57. doi:10.1111/j.1467-8462.1993.tb00810.x. www.abs.gov.au. (2022). Unemployment rate at 3.9% | Australian Bureau of Statistics. [online] Available at: https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-39. 7 Julian maung www.nationalskillscommission.gov.au. (n.d.). 1.1 Impact of COVID-19 on the Australian labour market | National Skills Commission. [online] Available at: https://www.nationalskillscommission.gov.au/reports/shape-australias-post-covid -19-workforce/part-1-labour-market-update/11-impact-covid-19-australian-labour -market. 8 Julian maung 9 Julian maung \ 10 Julian maung