Social Policy Analysis of Unemployment in Australia - Case Study Example

SOCIAL POLICY ANALYSIS OF UNEMPLOYMENT IN AUSTRALIA (Student Name) (Course No.) (Lecturer) (University) (Date) Unemployment is considered one of the most prominent economic and social challenges facing most of the countries in the world today. Although measures of the level of unemployment vary from one country to another, most of the governments and non-governmental organizations rely on their official estimates to combat this menace. According to the Australian government report in January 2015, the unemployment rate in the economy was at 6.5%. This rate was considered the highest since 2002. However, currently, the rate remains at 5.8%. This paper, thus, evaluates the implication of various policy options adopted to lower unemployment while increasing the level of employment in Australia (Australian Bureau of Statistics 2016). Description and Representation Persistent unemployment accounts for the principal failures in the economic policy of Australia. Some systematic observation on the various trends of unemployment is devastatingly a problem to the low skilled workers who are subjected to the impacts structural variation in industries and regions that are shedding labour. Gregory and Hunter (1996) points to the manufacturing sector as the hotspots for labour shedding. The steep rise in long-term unemployment has been a matter of concern in most of the advanced economies (including Australia) since the 1970s. It is one of the major and apparently enduring “scaring impacts” of the major recession periods (Australian Bureau of Statistics 2016). Presently, virtually a third of the unemployed citizens have been unemployed for not less than a year. Thus, these citizens are officially categorized as the long-termed unemployed (Sheehan 1998). Most of the employment opportunities created by the government in the current recovery since 2002, has majorly consisted of casual and part-time jobs. Similarly, significant shares of the new jobs are comparatively poorly paid and insecure thus reflecting a structural change in the economy. Full-time employment losses in the public and manufacturing sectors have in many cases been taken over by employment in the low-end market service segment. Some other factors include changing product cycles; rapid changes in the economic demand structure, and increased competitive pressures with a greater focus on bottom line benefit causing employers to discard the assumptions that strong employment patterns favors economic downsizing and flexibility. ‘Non-standard forms of work have dominated most of the Australian labour market, especially part-time and casual work, which extensively reduces the level of job security. According to Sheehan (1998) only one out five full-time jobs have been lost since 1973 suggesting if there could be a some kind of maintenance in the ratio of population of the working age to the full-time employment through 2002 to 2016, the number of the employed in the Australian economy would have more than 3.2 million. However, this is not the case. The proportion of the fully employed has relatively declined by approximately 72.7% to 65.3% (Campbell 2000). There has been a considerable increase in the income inequality throughout the economy. This can be seen in the major areas of job growth in the service sector such as retail and wholesale trade, accommodation and cafes and other services, which pay below or at average weekly compensation (Goosa & Manning 2007). The current egalitarian distribution of incomes in the autralian economy is thus attributed to this increase in low-wage service employment, equal access to work and unemployment. Australia has an economic model with a range of unemployment equilibria in which price and wage inflation is non-responsive to changes in the rates of employment. Historical roots analysis provides that the employment rate was experienced in the 1960s in Australia at 2%, increased to 5% in the 1980s and currently stand at 5.8%. The unemployment rates range where changes in the rate negligibly affect the inflation is desirable within an economy (Australian Bureau of Statistics 2016). The January 2015’s Government Economic report projected Youth unemployment rate at 15.5 percent which was more than double of the total population’s general unemployment rate. There has a general increase in the trend on the level of the youth unemployment since 2014 through 2015 up to 2016 where it stands at 12.8% (Australian Bureau of Statistics 2016). Almost 50 percent of the unemployed young populations in Australia experience psychological disturbance, and stigmatization. People who are unemployed in the Australian society are twice at risk developing health complications from which they recover slowly compared to the employed population. Most of the individuals engage in a number anti-social behaviors such as drug abuse, smoking, vandalism, and poor diet thus contributing their poor health outcomes and social insecurity in residential areas (Papell &Ghiblawi 2006). Such kinds of individuals (unemployed) have registered a higher mortality rate in the country than the working counterparts. Unemployment has also led to depression, poor mental health, anxiety, non-suicidal self-injuries and suicide among the unemployed segments in the society due to increased financial obligations beyond their capability. Some poor families burdened with school fees and provision of necessities to their children end up neglecting their responsibilities leading increased civil and criminal cases reported in the society (Papell &Ghiblawi 2006). Policy response A number of policy options have been considered by the government and non-governmental Internation actional organization to address the unemployment issue, and it impacts on the social livability in the society. Regarding underemployment and unemployment, social policy stems from the failure of the Australian economy to create enough jobs to mmeet the labour demand in the economy (Papell &Ghiblawi 2006). The policy provides the best practice of providing of alleviating the unemployment menace by focusing on how to create more job opportunities. The government has endeavored in education and skill enhancement as means to facilitate employability of most of the young population since the most of the unemployed individuals are in low-skilled labor markets. Critically, more education and training activities do not guarantee creation of job opportunities. Since unemployment is currently most pronounced among the low-skilled workers, the supply-side program advocates argue for wage cut in the low skill jobs. However from the economists’ perspective, a cut in wage rates may not create much employment openings since to some extent, a particular consumer’s propensity to consume is greatly reduced as others is increased (Goosa & Manning 2007). Autralian government have seriously taken the issue of rising market inequality. Traditional tax policy and welfare state interventions have greatly impacted on the treatment of at least symptoms of unemployment experience in the labour market. The impacts of labour market dynamics highlighted above particularly in ameliorating inequality have greatly been solved by the government through taxation, service provision, and cash payments (Goosa & Manning 2007). Microeconomic policies such as monetary and fiscal policies have been employed by the government to facilitate real GDP growth with the aim of reducing the unemployment level in the economy (Goosa & Manning 2007). The affirmative link between the employment growth and GDP growth is robust very strong. The effect of expansionary and contractionary fiscal policies to spur a real growth in GDP relies on the parameters affecting the crowding effect and the modeling assumptions of the aggregate demand. The TRYM model applied in the economic adjustment, a combination of different illusions in the way of anticipation are formed together with the adjustment stiffness to enable a net gain to employment from macroeconomic policies only in the short run and not in the long run. The positive effects of this policy on employment creation and economic growth are also supported by the VAR models (Keating 2015). Low wage policy options have also been considered in dealing with the challenge of unemployment in the Australia. A policy challenge is the presence of mechanism to set labour on costs and wages, at a rate lower than the normal Currently, the governments have adopted the policy of providing the unemployed people unemployment benefits such Newstart Allowance for those who age at the working age of 22 years and Youth Allowance for the youths who are still in educational and training institutions but have reached the working age. Additionally, the government provides monetary assistance to people under special circumstances such as rent payment, mortgage relief payments, and parenting payments. This government system is overwhelmingly complex with nearly 20 income support payment and 55 other supplementary compensations schemes. Moreover, the government funds Job Service Providers who helps the unemployed in looking for job opportunities. The degree of assistance offered by these groups is streamlined to provide those who face severe impediments in the labor market with an upper hand in the job search. Besides, there are specific niche services initiated by the government and the Common Wealth Organization to assist the unemployed individuals in those backgrounds. The commonwealth organization has endeavored to alleviate the unemployment problem in Australia through various ways. First, is the establishment of Australian Investment Approach, which aims to identify the at-risk groups of unemployed citizens and articulating evidence-based relief programs that elevate the outcome of these groups. Secondly, is the implementation of intensive support programs that meant to improve the employment out of the unemployment. Commonwealth Organization has led to the opening of the regional trade and employment boundaries among its members, Australia included. Beyond the challenges and responses highlighted above, another medium-term labour market concerns affecting Australia stems from the demographic dynamics. The constantly increasing population of the country has heightened the competition in the job market such that only those who possess the strongest competitive advantage survives the ordeal. The context in which the best-paid jobs requires the most proficient skills and where economic advancement is greatly associated with the workforce’s talents, Australia will have to lift the education and skill out of the labour force. However, education, skills, and retraining need to be reviewed in a perspective. Conclusion The issue of unemployment in Australia requires effective confrontation based on macroeconomic policies, government intervention policies, tax reforms and integration of the non-governmental organizations. However, the next decades may contain fiscal time bombing originating from the possible costs of education and skill enhancement, ageing population, public infrastructure investment and protection of the environment. New Australian public expenditure may require an of 10% additional growth domestic product (Keating 2015) to achieve a sustained level of employment with a considerable reduction unemployment rate. However, this move might raise many questions on Australia’s fiscal capacity and at the same time, may lead to increased taxes thus causing electoral suicide. References Australia, S., 2016. Australian Bureau of Statistics. Goos, M. and Manning, A., 2007. Lousy and lovely jobs: The rising polarization of work in Britain. The review of economics and statistics, 89(1), pp.118-133. Gregory, R.G. and Hunter, B., 1996. The macro economy and the growth of ghettos and urban poverty in Australia (No. 325). Centre for Economic Policy Research, Research School of Economics, Australian National University. Keating, M., 2015. Who Rules?: How Government Retains Control in a Privatised Economy. Federation Press. Papell, D.H., Murray, C.J. and Ghiblawi, H., 2006. The structure of unemployment. Review of Economics and Statistics, 82(2), pp.309-315. Sheehan, P. ., 1998. Among the barbarians: The dividing of Australia. Royal Blind Society Student and Special Transcription Section.. Campbell, J.Y., 2000. Asset pricing at the millennium. The Journal of Finance, 55(4), pp.1515-1567. Read More