Labor Market Adjustments to Shocks in Australia

May 24, 2017

Preview Citation

Format: Chicago

Adil Mohommad. Labor Market Adjustments to Shocks in Australia, (USA: International Monetary Fund, 2017) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Labor markets in Australia have adjusted smoothly to significant declines in commodity prices with little increase in unemployment. This paper examines several aspects of the adjustment, focusing on (i) evidence of increased labor market frictions following the commodity price decline; (ii) flexibility in labor input adjustment in response to demand shocks; (iii) changes in labor productivity in the wake of resource reallocation with the decline in mining investment, (iv) and the role of migration in adjusting to the commodity price and mining investment cycle. We find little evidence of increased labor market frictions with the decline in commodity prices. The relatively smooth transition has been assisted by increased flexibility in adjustment of worker hours over time. Labor productivity growth has sustained its historical average through the transition, despite some temporary drag as the economy rebalances. Finally, migration has played a key role in labor market adjustment through the commodity cycle.

Subject: Employment, Labor, Labor markets, Labor productivity, Production, Unemployment

Keywords: Economic flexibility, Employment, Equilibrium unemployment value, Global, Growth in services sectors, IMF staff calculation, IMF staff estimate, Labor market, Labor market dynamics, Labor market slack, Labor markets, Labor productivity, Labor productivity growth, Labour productivity gap, Unemployment, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/124
Stock No:

WPIEA2017124
ISBN:

9781484301760
ISSN:

1018-5941

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