The Demand for Labour - 17

The demand for labour depends on the productivity of labour. If a skilled worker can produce high levels of output per hour, then this worker will be able to attract a higher wage than an unskilled worker. On the other hand, as productivity rises, less labour is needed to reach a given level of production.

The demand for labour also depends on the relative costs of capital and labour.

If capital is relatively cheaper than labour, firms will tend to substitute capital for labour in the production process. Of course, the price of labour (the wage rate) could fall. However, this is politically a very dangerous thing to do. What would be the ''backlash'' if the Government brought in a new Youth wage for all those under 21 years old, and set the wage at $4 per hour? Many firms would be very happy, and would probably hire more labour. However, many young people would feel exploited, and young people vote!

Employers also must deal with unions who often represent workers when new wage and conditions claims are made.

A significantly large proportion of the unemployed find it very difficult to re-enter the labour market.

UNEMPLOYED PERSONS, Duration of Unemployment - Annual Average

A third of all people who were unemployed in the periods indicated have been unemployed for twelve months or more.

In 1970, the average duration of unemployment was 7.3 weeks and only 6.5% of the total unemployed had been unemployed for 53 weeks or more continuously. [Source ABS 6203.0]. By June 1997, the average period of unemployment had increased to 55 weeks. The reason for this massive increase in average unemployment is simply the large number of people who have been unemployed for years at a time. People in this situation face a life of poverty.

Technological change, and particularly the growth in the use of computers, has never been greater. What will be the effect on structural unemployment of continued computerisation of production? What parts of the labour force will be most effected?