5.2 Definition and nature of the labour market

FIGURE 4.38 Monthly changes in the level of Australian consumer confidence (measured by an index using a base of 100 points where the number of optimists equals the number of pessimists)

120 118.8

115

113.1

110

105

100

95 107.2 Apr 2021 Jul 2021 Oct 2021 Jan 2022

108.8 104.0927 106.225 105.2999 104.6419 104.2771 102.2016 100.8 96.6

Source: Trading Economics, Monthly changes in Australia’s consumer confidence, see https://tradingeconomics.com/australi a/consumer-confidence. a. Define the term, consumer confidence. (1 marks) b. Referring to graph statistics, describe the overall change in consumer confidence between November 2021 and March 2022. (1 mark) c. Explain whether consumer confidence is an aggregate demand or aggregate supply factor. (1 mark) d. Other things remaining constant, explain how you would expect the recent change in consumer confidence to affect each of the following? • level of economic activity and GDP • the unemployment rate and level of disposable income • the inflation rate. (3 marks)

Question 7 (4 marks)

Explain the ways in which the ABS’s Measures of Australia’s Progress provides a more complete picture of changes in living standards over time, than simply using changes in real GDP per head. (4 marks) Hey Teachers! Create custom assignments for this topic

Create and assign unique tests and exams Access quarantined tests and assessments

Track your students results Find all this and MORE in jacPLUSUNCORRECTED PAGE PROOFS

5The changing labour market

UNIT 2 AREA OF STUDY 2 Applied economic analysis of local, national and international economic issues OUTCOME 2 Explain the factors that affect two economic issues at a local, national and international level and evaluate actions to address the issues. LEARNING SEQUENCE 5.1 Overview ......................................................................................................................................................................2 5.2 Definition and nature of the labour market .....................................................................................................4 5.3 Measures of Australia’s changing labour market .........................................................................................8 5.4 The reasons why changes in Australia’s labour market are important ..............................................20 5.5 The economic factors influencing changes in Australia’s labour market .........................................22 5.6 Different perspectives about the changing labour market .....................................................................30 5.7 The Australian Government’s economic responses to address changes in the labour market .......................................................................................................................................................... 32 5.8 Review ........................................................................................................................................................................40 Permission clearance pending UNCORRECTED PAGE PROOFS

Hey students! Bring these pages to life online

Watch videos Engage with interactivities Answer questions and check results

Find all this and MORE in jacPLUS

5.1.1 Introduction Labour is a key resource for any economy. Without it, nothing can be produced. Labour involves the mental talents and physical power of people who make up Australia’s work force. Like almost any other commodity, labour resource can be bought by firms and sold by its owners at a market price or wage in the labour market. Here, the wage will largely reflect its relative scarcity. On the one hand, employers want to hire the best staff at the lowest wage, while workers want the best paid job that most suits their situation. In the end, both sides of the labour market are forced to compromise. Over the last few centuries, the conditions under which labour is bought and sold have changed dramatically. At various stages dating back to 6000 BC or more recently in America between the 1600–1800s, slavery existed. Even today, some estimates suggest that in some countries between 20–40 million people work under some form of slavery, perhaps exploited in backyard sweatshops. Under these conditions, labour was not free to negotiate its supply, wages and conditions of work. At other times, employers have held the balance of power in the labour market, without being held to account. Typically, wages were awfully low, especially when there were depressions. Employment was insecure and often had to be negotiated on a daily basis, and working conditions were often unsafe. Especially during the 1700s and early 1800s, child labour was commonplace since education was only for those who could afford it. It still exists in parts of the world today. Then there was the rise of the trade union movement, mainly starting in the late-1800s. This shifted the balance of power in the labour market. Through unity in action and the ability to withdraw their labour supply and go on strike, trade unions allowed workers to improve their pay and conditions, reduce hours of work, and lift living UNCORRECTED PAGE PROOFS standards. Another important development that further changed labour markets, and occurred in the early 1900s, was that some governments stepped in to set minimum wages and conditions. Australia was one of the first countries to have a minimum wage. This started in a limited way and expanded from a famous court decision back in 1907,

well before the USA in 1939 and, more recently, the UK. Today, Australia’s Fair Work Commission (FWC) manages our wage systems.

More recently, in some countries, there has been a reaction by some against excessive government regulation of the labour market. Critics of government intervention claimed that regulation increases costs, depresses business profits, and reduces the international competitiveness of firms and countries. As a result, there has been considerable deregulation of some labour markets, including Australia’s, starting in the 1990s when there was a move towards firm-by-firm enterprise bargaining — a system of setting wages by negotiation between workers and employers on a firm-by-firm basis. Under this system, wage rises are linked to increases in worker productivity. Here, unions play only a minor role.

However, there have also been many other changes in Australia’s labour market. There have been changes in the size of the labour force, the unemployment rate, participation in work, in the type of industries where people are employed, in labour unionisation, and in the hours of work. In this topic, we will touch on many of these developments.

5.1.2 What you will learn KEY KNOWLEDGE Use each of the following points from the VCE Economics Study Design as a heading in your summary notes. • the definition of the selected economic issue, including relevant measures and statistical indicators • the reasons the issue is of importance to the economy at a local, national and international level • the economic factors influencing the extent of the selected economic issue • the different perspectives of households (consumers and workers) business, government and other relevant economic agents regarding the selected economic issue KEY SKILLS • define key economic concepts and terms and use them appropriately • gather, synthesise and use economic information from a range of sources to analyse economic issues • identify trends, patterns, similarities and differences in economic data and other information to draw conclusions • evaluate the economic responses undertaken to address economic issues Resourceseses Resources Digital document Key terms glossary (doc-37942) UNCORRECTED PAGE PROOFS