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Australian Labour Policy Essay

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The Australian labour market outcomes in the economy receive influence from the effects of two key government policies: Pacific Australia Labour Mobility and the Minimum Wage policy. These policies have effects on the outcomes of the Labour Force Participation Rate, underemployment, unemployment and economic stimulus. The PALM policy is a government initiative used to address labour shortages in rural areas by increasing labour participation from international workers. This policy operates on the principles of the price mechanism. Minimum Wage Policy is the lower limit for labour wages, therefore has significant effects on unemployment and economic stimulus in the labour market of the Australian Economy. Search Theory explains why unemployment …show more content…

PALM policy has a strong effect on the LFPR and underemployment. William Wilson and Michael Piore’s Dual Labour Market Theory splits the labour market into primary and secondary markets. The primary market is the main market in Australia consisting of higher paying jobs with more secure roles. The secondary market in the labour market is the low-status jobs that most Australians aren't willing to work [Bamboo HR]. Outlining that PALM provides the opportunity for migrants seeking work to work in high demand rural jobs as an opportunity to develop skills, earn income and contribute to Australia’s labour force. Providing an in-demand sector with workers in areas of low labour force participation, consequently minimising frictional unemployment and length of vacant jobs. Using the price mechanism when there is excess supply there is a surplus of labour and when there is excess demand there is a shortage of labour. The PALM policy gathers the workers during a shortage and fills the gap to reach market equilibrium. Providing increased employment and capitalising on new labour market participants to stimulate economic …show more content…

As of July 1st, the 5.75% increase in minimum wage [Fair Work Ombudsman, 2023], led to a tighter hiring budget and increased unemployment in the labour market. Diamond, Mortensen, and Pissarides Search Theory explains the existence of unemployment as a result of frictions in the labour market. Search Theory outlines that finding a suitable job isn’t instantaneous and involves determining the best suitable job and wage, leading to periods of temporary unemployment [Michael J Boyle, Investopedia, 2021]. The negative relationship between minimum wage and unemployment is understood by the concept of price floors. The government sets minimum wage as a price floor. At minimum wage the quantity of labour demanded is QD and the quantity supplied is QS. The minimum wage increase stimulates consumer spending due to increased disposable income, consequently boosting the Australian economy. The minimum wage has negative effects on the economy, such as increased unemployment as businesses adjust their workforce, by reducing hires and limiting hours of work to manage the increased labour costs. The inflationary pressures caused by an increase in minimum wage are a source of cost-push inflation and the wage-price spiral. Despite shrinking the gap between the equitable distribution of income the economy suffers greatly from the

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