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Quantity of

Demand for

 Qd            Qe         Qs

surplus unemployment



The news article focuses on the increasing rate of
unemployment in Australia. The unemployment has escalated to 7.3% this April.

Unemployment refers to people of working age who are actively looking
for a job but are not employed.The type of
unemployment in Australia, as mentioned in the article, is structural
unemployment.Structural unemployment occurs as a result of changes in demand
for particular types of labour skills, changes in geographical location and
jobs and labour market rigidities. The unemployment is mainly in the automotive
sector in Australia.











The figure 1 depicts the quantity of labour demanded and supplied in the
labour market of Australia. Through the article, it was evident that there are
labours available (Qs) but there are not enough jobs available for them. The quantities
of labour demanded are less than the quantity of labour supplied. (Qd< Qs)  This could primarily be because a large industry such as the automotive industry in Australia could have relocated or could demand a different type of labour. When the industry moves its physical location from one region to another, there is fall in demand for the labours. If the people of Australia cannot move to economically expanding regions, they become structurally unemployed. The unemployment could also be due to the change in demand for particular types of labour. As indicated in the article, 5600 women have entered the labour force in the past two months. However there is a decline in the automotive industry. This could occur as the industry demands a different type of labour force. Further the increasing unemployment rate in Australia could have an adverse effect on the other macroeconomic objectives including economic growth and income distribution.  Economic growth may be the cause for a structural unemployment. This could occur when growth resulting from technological changes results in structural unemployment. Unemployment also has an effect on income distribution.  Unemployment causes inequality when it continues for consecutive cycles. The soaring rates of unemployment in Australia will lead to eventual income inequality. Unemployment in South Australia could have adverse effects on the economy and the unemployed workers of the country. The government faces a loss of real output. As the economy of Australia is not making full use of its scarce resources, it is not producing at its full capacity. There is a loss of income to the unemployed as they are earning less than they would if they were employed. The government encounters a loss of tax revenue as the government obtains taxes from the employed people. This can prove be a loss for the government and economy of South Australia. The government also faces an extra cost while paying unemployment benefits to the unemployed. It can turn out to be a huge opportunity to the economy.The increasing rate of unemployment could affect the unemployed and their families in several ways such as stress caused by inability to secure a job, family issues and other psychological problems. Unemployment also can lead to greater social problems including high crime and violence. This can prove to be a problem in the economy. The government can use several methods and policies to deal with this escalating unemployment: interventionist and market-based policies. The government can set up retraining programs for the unemployed people from the traditional jobs to take up other jobs that require higher labour. The government of Australia can support these training programs through grants and low interest loans and through direct government hiring. The government can also increase the flow of information between employers and job seekers, to know about available jobs. Improved information flow can result from established of job centres, employment agencies and job websites. The government can also undertake market based policies to deal with unemployment. These include labour market reforms that increase the labour market flexibility. One of the reasons for the decrease in the demand for labour in the traditional jobs of Australia, farming, could be due to minimum wage legislation. These measures can prove to be useful as they can reduce the unemployment without negative effect on government budget. They also have direct effect on the unemployment rate. However they have their disadvantages too. This includes income inequity and loss of protection for low-income workers.The government must take actions to control the rate of unemployment as it has serious effect on the economy and the unemployed.

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