Index
The Labour Force - 1
Birth And Death Rates - 2
Migration And Age Distribution - 3
Other Factors Effecting The Labour Force - 4
Attitudes To Work And Leisure- 5
Australia's Population - Statistical Analysis - 6
Population Centres In Australia - 7
Trends In Employment - 8
The Supply And Demand For Labour - 9
Geographical Mobility And Taxation - 10
The Unemployment Rate - 11
Defining ''Employment'' - 12
The Labour Force Reviewed - 13
The Hidden Unemployed - 14
Changes In Employment And Unemployment - 15
Economic Growth And Employment - 16
The Demand For Labour - 17
The Impact Of The Global Economy - 18
Legal Requirements - 19
The ''Casualisation'' Of The Labour Force - 20
Types of Unemployment - 21
Types of Unemployment (continued) - 22
The Labour Force Participation Rate - 23
The LFPR (continued) - 24
The Effects Of Unemployment - 25
Income Inequality - 26
The Distribution Of Household Income - 27
Income Distribution In Australia - 28
Income Distribution (continued) - 29
Income Distribution (continued) - 30
Changes In The Workforce - 31
Net Overseas Migration - 32
Sources Of Migrant Intake - 33
Changes In The Workforce (continued) - 34
Youth Unemployment - 35
''Mature'' Unemployment - 36
Supply Side Economics - 37
Revision Exercise - 1 - 38
Revision Exercise - 2 - 39

Supply Side Economics - 37

''Supply side'' economists look at the costs of production for the causes of unmployment and inflation. Supply side economists argue that minimum wage rates for many workers, especially young people, are too high. Unless wages, in real terms, are reduced, then employers will continue to substitute capital for labour to increase profits. ''Supply siders'' argue that the government can do little to cure unemployment and inflation.

Production (and thus employment) in Australia is strongly influenced by relative wage costs. Australia is part of the global economy. If wages in Australia are too high, firms will substitute capital for labour in production.

Many firms will attempt to outsource their labour needs. Supply side economists point out that permanent employees in Australia receive more benefits than their salary or wage. Permanent employees receive

  • holiday pay
  • a leave loading (or holiday bonus
  • sick leave (usually two weeks per year at full pay and usually accumulative - which means an employee after ten years may be able to take up to twenty weeks on ''sick leave'' at full pay)
  • long service leave - after ten or fifteen years of service, an employee may be entitled to 13 weeks leave at full pay

Many employers argue Australian workers are just too expensive to hire on a permanent basis. Many firms hire employees on a casual basis. Casual workers are paid a rate of pay that includes a ''loading'' for most, but not all, of the on costs mentioned above. Once a worker ceases employment, he or she is entitled to nothing more from their employer. Casual workers are often employed on a short term contract basis, at particular times during the year, and few are able to accrue long service leave, for example.

Many employers argue that even casual rates of pay, as set down in Awards (see the section on ''Incomes policy''), are too generous. Many employers have relocated their manufacturing side of their operations overseas or ''offshore'', to developing nations, where wages are much lower. This change has had its greatest impact in the textiles, clothing and footwear industries. Most jeans, for example, sold in Australia are actually sewn in Indonesia, Vietnam or Bangla Desh, where wages are much lower.

The average rate of pay for a person (usually a woman) who sews sports shoes in Indonesia, for example, is $1.75 Australian per day for an eight hour shift.

Supply side economists argue that firms in Australia must keep up with the latest technology available, and that technology knows no borders. Often the latest technology is imported - from the USA, Japan or Europe. Whether we like it or not, if we want to manufacture, we have to have the best capital equipment to produce goods of ''world quality''. Our competitors have access to the same technology as we do. Australia must focus on microeconomic reform and technological improvement to maintain our international competitiveness. As a result, structural and technological unemployment in Australia can never be ''solved''. We live in a global village. Some jobs cannot be ''saved''.

Supply side economists also argue that government charges also impact on the cost of production. Australian governments, both state and federal, levy charges like stamp duty on financial transactions, pay roll tax (where employers are taxed according to the number of employees they have), as well as company tax and a variety of licence fees. The Australian government has introduced the Goods and Services Tax in 2000. Many of the taxes and charges mentioned above will be abolished or reduced when the GST comes into operation. Taxation on production will be decreased; and taxation on consumption will take its place. The costs of production in Australia will fall. The GST, the Howard government argues, is pro-employment in the long term.

Supply side economists also argue that there is a lack of competition in many markets. Many firms in Australia are too willing to ''pass on'' wage increases in the form of price increases. Oligopolies, for example, dominate many markets and consumers are forced to pay higher prices because they have little choice in the matter. There may only be three or four brands of shoes, or ovens, or whatever, to choose from. If all the manufacturers ''pass on'' increases in wage costs in the form of higher prices, then consumers are ''stuck''.

The solution is to increase competition: lower tariffs and allow more imported goods to be available in the Australian market. Local oligopolies will be forced to be ''tougher'' in negotiations on wage increases with unions and employees.

''Supply siders'' see the market place as the final judge of our efficiency and productivity.