Population and Employment

We know that unemployment can become a significant problem, and that the government will do what they can to avoid it. Each of the three general policy areas that we examined previously can be used in some way to affect the unemployment rate.

Monetary Policy

You will recall that monetary policy is largely to do with the way in which the Reserve Bank of Australia changes interest rates. When interest rates increase, businesses are less likely to borrow money, and as a result investment spending will fall. This will cause the aggregate demand curve to shift to the left, and unemployment might increase.

It follows, therefore, that if the RBA wants to help in reducing the unemployment rate they could act to reduce interest rates. When you study Unit 4 Economics you will learn that one of the charter goals of the RBA is to achieve full employment. This is the theoretical situation in which all those who are willing and able to work are able to find a job. (In reality an allowance is made for natural unemployment, and so a small percentage of people being unemployed is considered acceptable.)
Fiscal Policy – The Federal Budget

You will recall that every year in May the federal government makes a statement about the way in which taxes will be collected in the next year, and how that money will be spent. In addition, you might also recall that this policy used to be used to manipulate aggregate demand through the regulation of government spending, but it isn’t used that way any more. Today the specific programs within the budget are far more important.

It is possible for the government to fund programs that will help people to gain employment, and this has certainly happened in the past. In 2002 Peter Costello announced significant funding for a program known as “Australians Working Together”. This was designed to target those people who were experiencing unemployment for an extended period, and find ways for them to re-enter the workforce.

Each year there are programs designed to target unemployment in one way or another. Training programs such as how to write a job application, or transition to work programs for those who may have spent time in prison are just two of the programs which run every year.
Microeconomic Reform

The process of microeconomic reform is generally designed to shift the supply curve in a particular industry to the right. This is achieved through an increase in efficiency. As you know, improvements in efficiency do not necessarily result in lower levels of unemployment; only supply factors affecting production costs can be said to have that effect.

However, in 2005 the federal government introduced WorkChoices. This was a very controversial set of laws, and the impact is certainly debateable. The former Prime Minister, Mr John Howard, argued that part of the fall in unemployment experienced between 2005 and 2007 was due to the willingness of employers to create new jobs, and that this willingness arose due to flexible workplace laws. The Prime Minister, Mr Kevin Rudd, has suggested that this is certainly not true; far more jobs were created in States which were benefiting from the boom in resource prices, and if the workplace laws really were leading to improvements then we should have expected the gains to be more evenly spread.

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