Case Study: “Go and Get a Job”
This paper analyzes a case study of the unemployment rates report in Australia. As elaborated in the case study, the rates of unemployment in Australia recorded an all-time low in 2003 within a period of two decades. Following this report, an Australian Treasurer, Peter Costello advises the Australian community to seek employment as the job opportunities were available. Based on Costello’s advice, this paper analyzes various aspects of unemployment in Australia. The author responds to the questions asked in the case study.
Question 1: Unemployment
Unemployment is an economic issue in which people that is able and willing to work cannot secure a job. Individuals are said to be unemployed if they have been actively looking a job within the last one month. However, people who are not working but are not engaged in any job search efforts are not termed as being unemployed even if they are capable of working. For instance, a career woman who chooses to look after her kids instead of taking up a professional role is not included in the unemployed lists. The rate of unemployment, expressed as the ratio of the unemployed people to the total labor force, is among the major indicators of the economic stability. Lower rates of unemployment show that a country is economically healthy while high rates indicate that the economy is straining.
According to economists, there are three primary types of unemployment, classified as per the cause and structure of the joblessness scenario. The first type is the cyclical unemployment that results from the changes in economic performance. When an economy is growing steadily, there emerge several job opportunities as a result of increased economic activities. Therefore, the rates of unemployment are usually small. When the economy experiences a recession, several jobs are lost, as a result of shrinking economy. People who are willing to work but cannot find jobs during the recession are said to be experiencing cyclical joblessness. The cyclical unemployment occurs in cycles just as the economy expands and shrinks sequentially.
Aside from the seasonal, cyclical unemployment, a country always experiences a certain degree of joblessness caused by the dynamics of the economy. This persistent unemployment that results from the normal economic changes is called the frictional unemployment. As Pettinger (2011) elaborates, frictional unemployment is usually temporary, happening as a result of workers’ lack of information on existing opportunities. For example, fresh graduates may be temporarily jobless as they try to locate an opening that matches their skills. It is also caused by the average turnover in the market as employees keep on switching from one employer to another in search of better terms of employment. Often, workers become unemployed for a short period when they change from one job to another as it takes some time to find a new employer, interview for the position and start working.
The third major category of unemployment is the structural unemployment. As Pettinger, (2011) explains, structural unemployment is closely related to frictional unemployment. However, structural unemployment results from the mismatch between the skills possessed by an employee and the practical skill needed in the job market. Mostly, structural unemployment occurs when there is no demand for particular skill in the market, which may cause the changes in the economy. For instance, the growing technology contributes to structural unemployment as machines and computer programs take up the jobs previously done by human beings. For example, workers who worked in tea farms were rendered jobless by the introduction of the tea-picking machines.
Increased rates of unemployment have far-reaching effects to the unemployed people and the economy at large. As Griep et al. (2015) explain the state of being jobless cause psychological trauma to an individual. A person who is unable to secure a job for a long time feels inadequate, has a low sense of self-worth, and may often become depressed. They tend to withdraw from the society and the normal life activities. Some lose hope of ever getting a job and may withdraw from the labor market. As Griep et al. (2015) expound, they tend to become unproductive in other ventures, resulting in reduced input to the economic growth. Further, the longer an individual stays without a job decreases his or her chances of securing a job in future. According Nunley et al. (2014), employers are not willing to hire people who have been jobless for a long time, as they prefer those who have had the job market exposure.
The adverse effects of unemployment also affect the employed population. For instance, the working groups have the burden of supporting their jobless friends and relatives. They are, therefore, denied an opportunity to enjoy their salaries as they share with the unemployed. High rates of unemployment may also cause social problems such as insecurity in the community. This is because unemployed people have are unable to meet their daily need and may be tempted to join criminal gangs. Thus, the entire community experiences the impacts of unemployment by bearing the cost of unemployment to the economy.
Question 2: Joblessness in Australia in 2003
According to the Australian Bureau of Statics, the country’s joblessness rate stood at 5.6 percent in 2003. While this may be the rate as per the international standard ways of estimating unemployment, I do not think that this was the natural situation of unemployment at the time. This is because the national classification of unemployed people ignores some of the people who have given up on the job search. People may stop looking for jobs not because they have found a job or are not willing to work, but because it has taken too long for them to secure a job. This hopeless population are termed as ‘not actively looking for employment’ and hence, out of the labor market. However, these people are also unemployed and frustrated and depressed than those that are actively looking for a job. Additionally, the estimation does not include those who are working in part-time or unsatisfactory jobs because they are unable to secure their satisfactory job. Although these groups may also be looking for a job, most of their time is occupied by the unsatisfactory engagement that they per take while waiting to secure a job. Therefore, the real rate of unemployment in 2003 may have been slightly higher than 5.6 percent. However, this estimate is acceptable as it is the internationally standard measure of joblessness.
The 5.6 percent unemployment rate of 2003 was the best rate that Australian had recorded in the last 12 years. There are various factors that may have contributed to the impressive decline in unemployment. For instance, there are various government policies that may have contributed to improved employments. The government policies can be classified into toe broad categories; mainly, the demand side and the supply side policies. The demand side policies are usually employed to curb the cyclical unemployment that results from economic recession by increasing the overall demand for goods in the market. The demand side policies are proposed by the Keynesian theory of economics as a key solution to the economic depression. According to the Keynesian theorists, unemployment occurs because the economy is unable to regulate itself without the government’s intervention. Therefore, this schools of thought advices the government to initiate demand causative policies so as to create job opportunities.
There are two common demand side policies, the fiscal and monetary policies. According to Pettinger (2011), fiscal policies are government’s tools of market intervention, utilized during recessions. The fiscal policies include increasing government spending so as to increase the amount of money in the economy. On the other hand, monetary policies include cutting taxes so as to encourage people to invest and utilize the idle labor in the market. Reduced interest rates ensure that there are increased investments, leading to the creation of job opportunities. Additionally, increased flow of money ensures that there is more money for spending that increases the aggregate demand of goods. Therefore, firms increase production and thus require more labor input. The graph below demonstrates the impact of increased aggregate demand in the economy.
Fig1.The impacts of increased demand. From Pettinger, T. (2011). Policies for Reducing Unemployment. http://www.economicshelp.org/blog/3881/economics/policies-for-reducing-unemployment/
The demand side policies are usually employed during recession recovery. The monetary and fiscal policies are short-term measures implanted to curb an urgent problem. However, the scope of these policies in regulating unemployment is limited. Although they solve economic depression, the economy continues to experience frictional and structural unemployment in even in the normal economic conditions. Therefore, the government implements the long-term anti-joblessness policies through the supply side policies. These are the policies that empower the labor force to increase employability. The supply side policies take long time and target individual employees. However, scholars concur that these measures guarantee longer-term economic stability.
There are diverse supply- side policies used to reduce the structural and frictional unemployment. According to Pettinger (2011), funding education and training programs are among the most effective supply-oriented policy. Under this policy, the government does not only invest in education, but also reviews the scope of an education system. They ensure that the educational curriculum equips learners with the skills that are relevant in the job market. According to Nunley et al., some educated people remain unemployed due to lack of employability skills (2014). Therefore, the government’s focus in education aims at ensuring that students are not only trained in educational matters, but they are also prepared to fit in the modern workplace.
The government may also reduce unemployment by increasing geographical mobility within the country. According to Nunleyet al., allowing people to move and settle in different places increases their chances of securing a job (2014). Often, jobs are available in urban areas than in rural areas. Therefore, the ease of people’s movement allows people from rural areas to work in urban centers.
Question 3: Teenage Unemployment
While the national unemployment rate in 2003 stood at 5.6 percent, the teenage jobless rate was at 19.3 percent. Although the country had also witnessed an improvement in youth unemployment rate, this rate was way high compared to the national unemployment rate. Similarly, the teenage jobless rates have continued to be extremely higher than the national unemployment rate. In 2014, for example, youth unemployment rate hit 12 percent while the national rate remained 5.8 percent. Although some of the factors that cause unemployment rate for the adult such as recession and economic frictional factors also affect the youths, there are peculiar reasons that contribute to rising teenage unemployment in Australia. However, it is important to note that the youth unemployment trends in Australia are similar to other countries in the world such as US. Ordinarily, teenage jobless in any economy is usually higher than the national unemployment (Das, 2011)
One of the major causes of youth unemployment is like of the necessary skill. Mostly, teenagers in the labor are school leavers and school going teens during vacation. Thus, they like any professional skill to handle expertise positions. Most teenagers can only take jobs that require minimal skills such as restaurant attendants. However, most youths are not willing to take these jobs due to the ego and low wages paid. As Tanveer et al. (2012) elaborate; teenagers have unrealistic expectations of the duties that they should perform in the workplace. They also have a high expectation of salaries and remuneration. However, the present Australian economy does not meet these expectations, rendering youths to remain unemployed.
The youth unemployment in Australia had been declining from 1990s to 2008. However, the recent years have recorded a rising trend in teenage unemployment. According to Tanveer and others, the increasing rates of youth unemployment results from the lack of employability skills in young people (2012). In the modern economy, it is becoming harder for a fresh graduate to secure employment due to lack of practical job skills. Therefore, the Australian government should invest in strategies that improve youth’s employability skills. The graph below shows teenage employment trends in Australia
Fig2.Youth unemployment rates in Australia from 1990s to 2011. From Das, S. (2012).Look left – the human cost of the government’s inhumane welfare reforms. Retrieved from http://leftfootforward.org/2012/01/look-left-20-01-12/
Question 4: Unemployment Rates and Interest Rates
If employment continued to grow in 2004, Australia would have experienced a total employment, where every individual who is willing and able to work can get a job. If more job opportunities continue to emerge past the full employment point, the country would have experience a shortage of skilled workforce, where employers cannot find skilled workforce to higher. However, this scenario is not possible as several other externalities would have occurred prompting the government to intervene. For instance, the extreme decrease in rates of employment would have led to high rates of inflation. According to Griep et al., an increase in employment opportunities increases the amount of money for spending by the consumers (2015). The increase in income increases the demand for good that results in increased prices. Consequently, there is a rise in inflation due to over hiked prices of commodities.
If employment continued to grow in 2004, there would be high rates of inflation. To curb inflation, the government would have employed monetary policies to regulate the demand for goods and at the same time control the prices of goods. One of the viable policies at this point would have been to increase the cost of borrowing to encourage savings. Increasing the interest rates discourage spending as people opt to put their money in banks. Consequently, the demand for goods reduces which in turn lowers the prices. While this policy regulates inflation, it would lead to increase in unemployment. As a result of a decline in demand, companies would cut their level of production. Decreased level of productions results in reduced employment opportunities since some staffs are laid off. Additionally, increased interest rates discourage investments, a situation that results in a reduction of the number of new job opportunity.
The unemployment rates as recorded by the Australian Bureau of Statistics in years 2004-2014 was consistent with the above explanation. As illustrated in the Table 1 and its corresponding graph in Fig 3 below. Typically, the unemployment rates continued to fall through 2004 to 2008. Even before the country could experience full employment, there were changes in the economy and the unemployment rates began to rise again. The falling rates of unemployment may have prompted the government to increase the interest rates to establish a balance between unemployment and inflation.
|Average Unemployment Rate(%)||5.94||5.4||5.04||4.78||4.35||4.26||5.55||5.21||5.075||5.21||5.66||6.5|
Table 1.Average annual employment rates. Data from Australian Bureau of Statistics
Fig 3. A graph of unemployment rates since 2003 as per the data in Table 1.
Question 5: “Go and Get a Job.”
In the case study, the Treasurer Peter Costello instructs the people of Australia to “go and get a job.” In my opinion, the statement was meant to indicate that there are plenty of job opportunities at the time. He simply was emphasizing in the fact that employments rates have improved, meaning that more and more people could secure jobs. The statement was meant to encourage the people of Australia to be confident with the economy. Often, people fail to find jobs because they are convinced that there are no jobs. By announcing that unemployment has improved; therefore, Costello intended to encourage the unemployed people to continue with the job search.
Although a falling rate of unemployment is good news to the unemployed population, it does not guarantee that every jobless person can get a job. The fall in unemployment rates indicates that the cyclical unemployment incidences are minimal. However, people who are experiencing structural and frictional unemployment may continue to experiences joblessness despite the improving national unemployment rates. Therefore, I do not agree with Costello’s notion that every Australian should be able to get a job. However, Australians have a higher chance of getting employment when the unemployment rates are law. Additionally, jobless rates measure the jobs that were available and were taken. It does not measure the number of opportunities that are available yet to be filled.
Unemployment is a wide topic that covers both the economic and political views of a country. Low rates of the national joblessness do not only show that the economy is health, but also implies that the government’s fiscal and monetary policies are effective. Although various people uphold increased employment, a country cannot enjoy low jobless rates at all times. This is because increased employment may result in inflation, which is also an economic externality. Therefore, the government utilizes various policies to regulate both the inflation and unemployment.
Australian Bureau of Statistics. 2015. Unemployment. Accessed on 29/5/2015 from <http://www.abs.gov.au/AUSSTATS/abs@.nsf/ViewContent?readform&view=ProductsbyTopic&Action=Expand&Num=1.10.18>
Das. S. 2011.Look Left – the Human Cost of the Government’s Inhumane Welfare Reforms.Accessed on 29/5/2015 from Retrieved From http://leftfootforward.org/2012/01/look-left-20-01-12/
Griep, Y., Kinnunen, U., Nätti, J., De Cuyper, N., Mauno, S., Mäkikangas, A., & De Witte, H. 2015. The effects of unemployment and perceived job insecurity: a comparison of their association with psychological and somatic complaints, self-rated health and life satisfaction. International archives of occupational and environmental health, 1-16.Accessed on 29/5/2015 from <http://link.springer.com/article/10.1007/s00420-015-1059-5#page-1>
Nunley, J. M., Pugh, A., Romero, N., & Seals, R. A. 2014.The Effects of Unemployment and Underemployment on Employment Opportunities: Results from a Correspondence Audit of the Labor Market for College Graduates.Accessed on 29/5/2015 from <http://johnnunley.org/under_unemp_april_2014.pdf>
Pettinger, T. 2011.Policies for Reducing Unemployment.Economics Help.Accessed on 29/5/2015 from <http://www.economicshelp.org/blog/3881/economics/policies-for-reducing-unemployment/>
Tanveer Choudhry, M.,Marelli, E., & Signorelli, M. 2012.Youth unemployment rate and impact of financial crises.International journal of manpower, 33(1), 76-95.Accessed on 29/5/2015 from <http://www.emeraldinsight.com/doi/abs/10.1108/01437721