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Describe and account for the recent trends in the Australian labour market

Updated on November 3, 2016

The Australian labour market is evolving constantly and from this changing nature, trends become prevalent. One of the most recent changes is the participation rate decreasing. It is a measure of the percentage of the working age population in the labourforce. Secondly, the unemployment rate, which is a measure in percentage terms of the number of unemployed persons looking for work as a proportion of the labourforce, shows a direct correlation to geography. Moreover, youth unemployment, those in the workforce who are aged between 15 and 19 and do not have a job but is actively seeking work, has recently been increasing. Also, part-time employment, defined as those employees regularly working 20 hours or less per week, has grown significantly in Australia. Furthermore, trade unions, which are association of workers that aims to advance the interests of its members by improving their wages and working conditions, has heavily diminished in recent times.

The participation rate in Australia has steadily decreased since mid 2011. It tends to rise when economic growth is at or above trend because the economy is creating sufficient jobs to attract new entrants to the workforce. Equally, if the rate of economic growth is below trend (the current annual pace of economic growth is 2.3%) potential new entrants to the workforce are discouraged from looking for work because fewer jobs are being created. The participation rate has fallen from 65.4% in June 2011 to 65.2% in June 2012, 65% in June 2013, 64.7% in June 2014, 64.76% in April 2015 and 64.5% in September 2016.

Australia's Unemployment levels 2011 - 2016
Australia's Unemployment levels 2011 - 2016 | Source

This reduction could be attributable to the ‘discouraged worker’ hypothesis, which are potentially new entrants to the labourforce being discouraged from entering while job prospects are low. Another contributing factor is the general ageing of the population. The participation rate for 55-59 years olds is 72%, whereas 93% for the 35-44 year old group. This large discrepancy may be due to the economic reforms, which have displaced elderly and low-skilled workers who find difficulty retraining. Or due to the welfare system that supports ageing retired workers, rather than encouraging participation in the workforce. Ageing itself has been estimated to have subtracted from the labour force participation rate by between 0.1 and 0.2 percentage points a year since the turn of the century. Thus with Australia’s ageing population it is estimated that our overall labour force participation rate could fall to 63.9% by 2025 and 56% by 2042. Furthermore, there has been an upward trend in overall participation by females, from 56.4% in 2004-05 to 58.6% in 2015, this is caused by the changing social attitudes to working wives and mothers plus the improved provision of childcare and declining birth rates.

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Furthermore, there are large differences in unemployment rates between the states and territories of Australia and within them. Unemployment for Western Australia and Northern Territory was 4.9% and 4.3% respectively in August 2014. Whereas NSW was 5.7% and QLD was 6.4%. These figures demonstrate Australia’s ‘two-speed economy’ and the impact of the resource boom. The mining states (WA and NT) achieved low levels of unemployment while non-mining states and regions tend to have higher levels of unemployment. Furthermore, regional areas of Australia often tend to have higher level of unemployment on average than metropolitan areas. For example, in Sydney it averaged 4.9% in 2013, whereas it average 7.5% in the rest of NSW. This is due to higher employment opportunities in metropolitan areas compared to regional areas.

States and Territories Unemployment in Australia
States and Territories Unemployment in Australia | Source

In addition, unemployment remains considerably higher for younger members of the workforce than for the general workforce population. Young people (15-19 years) find it difficult to secure their first full time or part time job after leaving school. The rates of youth unemployment are much higher than for adults who are unemployed. Youth unemployment rates for young males rose from 15.4% in 2007-08 to 26% in 2013-14 and for females from 21.2% to 33.7% in the same period. Compared to workers over 20 years of age, young male and females experience rates of unemployment that are four to five times higher than the national average. Furthermore, of those in the workforce and aged between 15 and 19, some 18.8% were unemployed during May 2014. This rate of unemployment is significantly higher than the pre GFC level of 11.5%.

The main reason for this trend is that jobs are growing at a faster rate for baby boomers and Australians in their twilight years, than for youth and young adults. Since 2008, Gen Z and Gen Y have lost employment. Gen Z has lost 48,000 jobs, while Gen Y market has shrunk by 54,000 jobs. This is because in an economic downturn, the young and least experienced suffer the most. Their lack of education and work-related skills make them less valuable to their employers when compared to baby boomers and those in their twilight years (workers aged 63 or older). Since 2008, baby boomers have seen 240,000 full-time jobs been added, whereas 79,000 full-time jobs has been created for twilight careers. This is due to their lifetime of work skills, loyalty and reliability, which is being increasingly appreciated by employers.

Trend in Part Time and Full Time Employment in Australia from 2006 - 2016
Trend in Part Time and Full Time Employment in Australia from 2006 - 2016 | Source

Another explanation for the high youth unemployment is entry-level jobs which youths used to occupy no longer exist due to technological change. For example, self-checkouts have replaced the jobs needed at the cash registers at Woolworths and Coles and online shopping has removed the need for sales assistant work.

Moreover, the proportion of employees working part-time has grown dramatically over recent decades. There has been a shift away from full-time employment with most job creation being casual and part-time. Between the years 1990 and 2014 the increase in part time employment has been 110%, compared with only 30% in full time employment. Part time employment now represents around 30% of total employment in Australia. Additionally, Australia has the fifth highest rate of part-time employment in the industrialised world.

Worse Hotspots for Youth Unemployment
Worse Hotspots for Youth Unemployment | Source

One factor explaining this shift is that individuals are working part time because of the choice of their employer and not their own. They would prefer full-time work and are typically regarded as involuntary part-time workers. Employers gain greater flexibility in their staffing arrangements if a considerable proportion of their employees are less than full-time workers. Moreover, employers do not need to face extra overtime costs or the costs of hiring additional staff during busy times as they can just increase hours for their staff. Also, by employing workers on a casual or part-time basis, employers can evade some of the responsibilities they encounter with full-time workers, such as, redundancy pay, holiday leave, sick pay entitlements and long service leave.

Another factor is that individuals prefer part-time work, which allows them to balance their other responsibilities such as family commitments. They are typically regarded as voluntary part-time workers as their individual preferences or needs govern working part-time rather than employer requirements. For example, women still have a dominant role in raising children than men, and this is the overarching reason why 37% of women in the workforce are part-time, compared to just 12% of men.

Additionally, another reason attributing to the growth of part time is the growth in certain service industries, for example, hospitality and tourism, where part-time and casual work is sometimes more favourable.

Trend Decline in Union Membership in Australia
Trend Decline in Union Membership in Australia | Source

Also, Australia has experienced a rapid decline in trade union membership in recent decades. The main reason why unions are formed is to protect the interests of employees in relation to issues such as safety in the workplace, training, employee entitlements and pay. Unions have been an important part of labour markets since the nineteenth century. In the mid-1970s, 55% of workers were union members, however by 2013, just 17% of workers belonged to a union. This staggering decrease in the popularity of trade union membership has occurred for a number of reasons. The decrease in the number of full-time workers in the workplace and the increase in casual, part-time and temporary employment is one of the contributing factors. Union membership is higher amongst full-time workers (18%) than part-time workers (14%). Another reason is the abolition of compulsory union membership in certain industries known as ‘closed shop’ arrangements. Since it is no longer a precondition for employment, union memberships have been significantly reduced. Lastly, industries that have experienced growth in recent years (business services and domestic services) do not have a history of high levels of union membership. Whereas sectors that do, such as manufacturing and government owned business have shrunk as a share of total employment.

Therefore, recent trends in the Australian labour market can be accounted for by the changing Australian economy. It has decreased the participation rate, caused a correlation between unemployment and geography, enlarged youth unemployment, shifted work towards part-time and has led to the demise of the unionised workforce.

© 2016 Billy Zhang

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