5.6 Different perspectives about the changing labour market

traditional retail stores). This has displaced many unskilled jobs. A recent report warned that by 2030, up to 46 per cent of existing work in Australia (i.e. perhaps up to 6.5 million full-time jobs) could be automated, possibly creating higher levels of structural unemployment. • A mismatch of skills among the unemployed — When firms use new technology, they often no longer need to hire those with traditional skills. This creates a mismatch between the skills held by the unemployed and the skills needed to fill the advertised job vacancies. Skills most recently sought by employers include those of computer programmers, and experts in electronics and robotics. • Business closures and relocation due to high costs, poor profits and a lack of international competiti-veness — If production costs are too high and profits too low, local businesses are uncompetitive. They are forced to close or move to overseas countries with cheap wages, such as India, China and the Philippines. This causes a rise in structural unemployment locally. Recent examples of business closures or relocation include Darrell Lea Sweets, some Heinz food plants, a section of Qantas servicing, the Shell Refinery at Clyde, Pacific Brands (Bonds underwear), car makers GMH, Ford and Toyota during 2017–18, auto parts maker CMI, Toys“R”Us and Footlocker. There are many aggregate supply developments that may push up business costs, erode profits, reduce our international competitiveness, and possibly lead to business closures and hence structural unemployment. These include the following: • higher wages • poor labour productivity • high costs of power and transport • high rates of company tax against rates oversees that reduce after-tax profits. • Some government aggregate supply policies — Aggregate supply policies are cost-cutting, efficiency promoting measures that seek to improve business conditions, reduce costs, grow profits, encourage expansion, and boost Australia’s productive capacity. Especially in the shorter term, some of these policies can lead to higher structural unemployment. Consider the following policy measures: • changes to wage fixing involving some deregulation of the labour market • government trade liberalisation that involves gradually reducing the level of tariff protection of local firms from imports. 2. Frictional unemployment Frictional unemployment is a second type of natural unemployment. It exists when people are unemployed between finishing one job and starting another. This is common in the building trades and in some areas of rural industry. 3. Seasonal unemployment Seasonal unemployment is a third type of natural unemployment. It results from the termination of jobs at the same time each year due to the regular change in the seasons. For instance, fruit pickers, tourist and holiday operators, ski instructors, school leavers and shearers frequently experience this type of unemployment. 4. Hardcore unemployment Hardcore unemployment is another type of natural unemployment. It is often the product of personal attitudes that are seen by some as hostile to effective employment. Sometimes, people lose the work ethic and find it hard to hold down a nine-to-five job. Especially in the past, it was claimed that our over-generous welfare system increased unemployment levels because it made unemployment too comfortable, creating a welfare trap. Sometimes, too, personal appearance, criminal record or a physical disability can prevent individuals from being given an opportunity to work. 5.5.3 Factors that have increased the overall labour force UNCORRECTED PAGE PROOFS participation rate

Participation rates relate to the proportion of those aged 15 and over who are in the labour force. Earlier we saw that in recent time there has been an overall rise in the participation rate from around 60 per cent in the 1960s to a recent high of 65 per cent. Although the male participation rate has fallen, that for females has risen more

than enough to offset this. There has also been a rise in older Australians continuing to work beyond the normal retirement age. These developments mean that there is a greater quantity of labour resources available as a percentage of the population than previously, helping to expand productive capacity, potential GDP, and income.

The rise in the female participation rate has its origins in the change in social attitudes about the roles of women. Once, some thought the woman’s role was to stay at home, do domestic chores and look after the children. This changed in the 1960s and 70s as a part of the women’s liberation movement. Women too should be given a chance to have careers. In addition, there was a change in attitudes towards family size, enabled by the development of a reliable contraceptive pill. This, too, released more women into the labour force.

The increase in the proportion of older people working has been partly caused by a rise in life expectancy. This has mostly been the result of medical progress. In addition, the government has increased the minimum age at which some would be able to access the pension (now 67 years). In the meanwhile, without welfare, many have been forced to keep working longer to pay their bills.

Additionally, growing our population through the arrival of many immigrants has helped to temporarily slow the ageing of Australia’s population that would otherwise have reduced the participation rate and shrunk the labour force.

5.5.4 Factors that have slowed wage growth Overall, wage growth in Australia’s labour market has slowed by 50 per cent the last decade or so. Several factors are at play here. Weaker labour productivity The main reason for slower wage growth is weaker labour productivity (GDP per hour worked). This is partly due to the fact that aspects of worker efficiency that are easily improved, have already been exploited; that is, the low fruit has already been picked. Nowadays, too, rises in efficiency appear to come more from the use of capital rather than labour resources, and from new technology. Owners will therefore receive increased incomes, relative to those for unskilled workers. High levels of immigrationUNCORRECTED PAGE PROOFS Another factor slowing wage growth has been generally high levels of immigration with an annual target set by the government at around 160 000 per year. This has grown the supply of labour, and has tended to slow wage growth.