How efficient is the Australian labour market? Analysing job matching efficiency for regions, occupations and industries

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Peter Lake
Kishor Sharma
Adam Bialowas
Samuel Shamiri

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Abstract

In an efficient labour market, employers fill vacancies in a timely manner, and those who are unemployed do not remain out of work for long. However, this is not always the case. During an economic downturn, workers who are laid off may possess different skills to those required in sectors that remain strong. As a result, the unemployed may remain unemployed for longer, because they are unable to find work. In addition, the remaining vacancies may go unfilled, as suitable workers cannot be obtained from the unemployment pool. In such circumstances, poor labour market efficiency is at play, and the economic and social costs can be substantial. Consequently, Jobs and Skills Australia (JSA) has been researching this topic by examining the question ‘for a given level of vacancies (demand) and unemployment (supply), how many hires should be occurring in the labour market?’. Using data from both JSA and the Australian Bureau of Statistics (ABS), experimental insights into labour market efficiency for regions and occupations have been derived, paving the way for further research that may provide opportunities to inform economic and labour market policies. Our results tend to suggest that efficiency of the labour market in matching unemployed persons with jobs is currently relatively high and has broadly improved in recent years.

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