Analysis of Unemployment in the Australian Economy
One of the causes of unemployment within the Australian economy is technological changes and substitution of capital with labor. These have been triggered by the structural change of the Australian economy. It is a common perception that recent technological development and changes have a tendency of being labor-saving in nature, leading to high rates of labor productivity as well as enhancing the productivity gains obtained through substitution of the capital of labor (Borland, 2015). In Australia, the weird issue of structural change which began in the 1970s is that structural change which progressed to happen caused a lot of structural unemployment and has been prevalent and continued in the most critical contraction of the Australian economy for several decades; although in the past they had managed change without a lot of effort. Although it is hard to measure the influential rate of technological change as well as input substitution, productivity can give a reflection of the degree of influence that both have caused in the Australian economy (Coase & Wang, 2012). The technological change experienced in Australia has influenced work processes as organizations have been shifting and adopting new technological advancements.
Work processes are currently digitized and computerized thus requiring highly sophisticated and ambitious individuals who can operate these technologies efficiently. This has led to unemployment of the old population since they are believed to be incompatible with the current technological changes (Borland, 2015). Due to this reason, it has resulted in an increased population of unemployment especially the old and those believe to be incompatible with the technology changes. Moreover, technological changes such as the invention of robots have led to human replacement as a source of labor thus contributing to significant unemployment in the country. Productivity has been noted to have significantly increased due to technological changes which have triggered increased input substitution of capital to labor (Borland, 2015). This change is said to have been caused by the real-wag explosion. Indeed, real wage increases have significantly influenced unemployment though in an indirect manner through substitution of capital to labor.
The presence unemployment benefits marginal tax rate and limited incentives
The effective marginal tax rates, as well as the lack of incentives or limited incentives, have discouraged the unemployed people, especially the youths from accepting to take up employment, especially part-time employment. As a result, this has contributed to the increasing unemployment in Australia. Actually, in Australia, there is an effective 100% marginal tax rate of the unemployment benefits for every dollar acquired above $3 on a weekly basis which offers no incentive to those unemployed to work except is they can earn more than those under the employment benefit (Borland, 2015). Moreover, the increasing rates of youth unemployment benefit since 1972 has significantly contributed to the change in the comparative prices of either being employed or unemployed, either part-time or full-time (Coase & Wang, 2012). These factors have made a significant contribution to the increased rate of unemployed people especially the youths getting into the labour force who might have accepted part-time jobs.
As a matter of fact, since 1974, it has been very unlikely that unemployed youth to accept part-time work and consequentially give up a dollar of benefit out of every dollar acquired. Essentially, the reasons are just that the unemployment benefit is considered among the Australian youths and other unemployed people to be of great significance as a source of income which has led to increased unemployment (Borland, 2015). Moreover, while some may have been able to have accepted part-time employment, they end up receiving less incentive because the unemployment benefit represents a significant amount of what could be acquired in part-time work.