Australian Unemployment Causes and Government’s Policies - Samples

Question: Discuss about the Australian Unemployment Causes and Governments Policies. Answer: Unemployment Causes: Production costs The higher production costs for the Australian manufacturing sector are discouraging investment in this sector; the lower the level of investment the lesser the labor demanded. The high costs discourages business expansions; contraction of businesses results in a lay-off of some workers and the unemployment rate hikes. The unemployment caused by these factors is referred to as cyclical unemployment. The high costs at the extreme case cause structural unemployment; this is where businesses in a certain sector decided to evade the high production costs by transferring their operations to overseas where they find favorable costs (Sebastian, 2015). Fast Population Growth The fast growth of Australian population is responsible for the hiking unemployment rate. High population leads to the exhaustion of the available limited resources. This explains the presence of high unemployment rate in the Australian states with the highest size of population. Population growth influences the size of the labor force; a large size means that there is an increased supply of labor (SyamRoy, 2017). According to Farrer (2015), the population growth for the working-age is greater than the rate of job creation. The oversupply of labor in the labor market results in an increased unemployment rate given that this market is not flexible. Minimum wages This is a higher wage set above the market equilibrium wage meant to promote the workers standard of living. There has been some discrepancies of whether the minimum wage results in a reduced or increased unemployment. In one case it is argued that the minimum wage is meant to promote creation of employment. How? The minimum wage raises the workers income enabling them to raise their demand in the economy; the higher demand creates a need for increased production and thus a need for increase labor demand. However, on the direct impact, we can consider a higher minimum wage to raise the unemployment rate. How? The high minimum wage on employers raises their production costs since it is an additional cost. Thus, at a higher cost, the profitability falls and thus employers cut some of their workers (Neill, 2015). The price for labor is wages; economically, demand falls when the prices are high. The minimum wages leaves the employers with only two option for all those workers whose wages were below the set minimum wage; they can either stick to the regulation and raise their income to be equivalent to the minimum wages or they can lay them off. Neill (2015) noted that the impact of minimum wage on raising the unemployment rate is felt mostly in the long run since businesses may opt to shift from labor to capital intensive production; the demand for labor falls. Structural Changes This influence the matching of those without jobs to the available vacancies. Technological changes and globalization contribute to these changes; a worker may be lacking the skills necessary for fitting into a certain job vacancy and thus remain unemployed. Changes in technology have created a requirement for workers to possess certain skills failure to which some have been laid off. The process of acquisition of skills is time consuming and thus the unemployment rate hikes. This is the case for the Australian mining sector, its deterioration has contributed to a transition from labor to be capital intensive; many people have lost their jobs (Rba.gov.au, 2013). Governments Policies The governments policies for stimulating productivity when the costs are high is to lower corporate taxes so as to lower this important production cost. Otherwise, the government can subsidized the manufacturing companies to ensure they are able to produce the same output level even when costs are unbearable. High levels of production would me that many employees would retain or get new jobs. For the fast population growth, the government may raise its spending on areas with high population growth so as to facilitate the creation of more jobs. The government may also consider easing the requirements for job start up to ensure that more jobs are started and many people are employed. The minimum wage regulation should be lowered such that the costs of employing labor for businesses comes down. A lower minimum wage would stimulate additional unemployment in Australia; the high minimum wage is discouraging employment. It is thus important for the government to ensure that the current minimum wage is lowered to a level favorable to both the employees and the employers but still above the equilibrium point. The unemployed are assisted by the government by giving them various welfare funding. For instance the Newstart allowance is given to those without jobs to help them in finding jobs. Enabling the fast acquisition of skills by the government at a cheaper price could help in solving the problem of unemployment from structural changes. Bibliography Farrer, M. (2015). Unemployment in Australia rises to 6.4%, highest for 13 years, ABS figures show. [Online] the Guardian. Available at: https://www.theguardian.com/business/2015/feb/12/unemployment-in-australia-rises-to-64-in-january-abs-figures-show [Accessed 11 Sep. 2017]. Ncoa.gov.au. (2017). Unemployment benefits and the minimum wage. [Online] Available at: https://www.ncoa.gov.au/report/appendix-vol-1/9-11-unemployment-benefits-minimum-wage.html [Accessed 11 Sep. 2017]. Neill, B. (2015). The Minimum Wage and Unemployment in Australia. [Online] Mises.ca. Available at: https://www.mises.ca/the-minimum-wage-and-unemployment-in-australia/ [Accessed 10 Sep. 2017]. Rba.gov.au. (2013). Box B: The Increase in the Unemployment Rate | Statement on Monetary Policy November 2013. [Online] Reserve Bank of Australia. Available at: https://www.rba.gov.au/publications/smp/2013/nov/box-b.html [Accessed 10 Sep. 2017]. Sebastian (2015). Causes of unemployment - common causes in Australia. [Online] adelaide-southaustralia.com. Available at: https://www.adelaide-southaustralia.com/money/causes-of-unemployment/ [Accessed 11 Sep. 2017]. SyamRoy, B. (2017). India's journey towards a sustainable population. Switzerland: Springer International Publishing.