Consumption and employment- Australia
1. Is our consumption supporting jobs in Australia?
2. How safe are our jobs?
Consumption — needs vs wishes
Household Consumption is defined as “all purchases made by resident households to meet their everyday needs: food, clothing, housing services (rents), energy, transport, durable goods (notably cars), spending on healthcare, on leisure and on miscellaneous services”.(OECD definition)
We may put consumption in two categories
1. Basic needs (food, clothing, basic housing, basic healthcare, energy, transport)
2. Self-fulfilment + higher needs (leisure, advanced health, durable goods)
In our lifetime, Australian economy has gone through several economic ups and down, some of it is influenced by global trends and some due to internal issues. During good economic conditions when unemployment is low, consumer spending and confidence is high, there is a demand for things that are “basic” as well as “good to haves or self-fulfilment”. We not only eat and drink well but also go for holidays, build houses and buy luxury cars. There is plenty of cash flow. Guess what happens when times are bad! We tend to fulfil our minimum needs, avoiding any wastage of money. We cut down on our holidays, luxuries and higher education and focus on basic living.
To understand the basic philosophy of consumption — spending pattern, it’s important that understand the price — necessity relationship.
On the one hand, quadrant III, comprises basic food, clothing, transport and healthcare — we need it at all times (basic need — low price). Diagonally opposite is quadrant II, comprising luxury things such as holidays and higher education (High value — good to haves).
People who are employed in the businesses in section III will probably will have their jobs intact even in bad times as they cater to the basic necessities of population. On the other hand products / services in section II are only consumed when we have spare money to spend and consumer confidence is high and reject these the moment there is a dip in our economic condition.
Consumption continuity is an indication of ensure job safety.
Let’s analyse
Our largest employers in Australia are retail trade (1.2 mill), construction (1.2 mill), Professional services (1.1 mill) and accommodation and food services (0.9mill).
What does this mean? Well employment in these sectors are very sensitive to economic ups and downs. During current times when coronavirus pandemic is pulling our economy down, all people employed in these sectors will get affected. You may argue coronavirus is once in a century kind of event, however, we have seen in previous economic downturns employment in these sectors have been affected more than any other sectors such as manufacturing or healthcare.
The federal government is handing out monetary help through finance schemes such as jobseeker help to kick-start consumer spending as many would have been laid of jobs due to the pandemic. And now the government has also announced a $25,000 construction bonus for buying and renovation of homes. These two incentives will directly be benefitting retail and construction industries.
Note — Manufacturing in Australia employs 965,000 which is only 3% of total employment. Comparing this with Germany which employs 6 million which is 15% of its workforce. (deutschland.de — 2018 data)
by Partha Mazumdar
