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Effects of Structural Change

Economics (Year 12) - Structural Change

Christian Bien

Short Term Effects

Higher Structural Unemployment

Constant declining and expanding industries have led to the labour force constantly requiring the retraining of skills. Consider the decline of car manufacturing in Australia. The workers hold obsolete skills and will need to retrain to join an expanding sector, adding to structural unemployment.

Lower Fiscal Budget Balance

Higher levels of structural unemployment will result in a loss of tax revenue and increased welfare payments, positioning the budget towards a deficit or smaller surplus.

Long Term Effects

Higher Levels of Output and Economic Growth

Sectors only decline when they become inefficient, such as car manufacturing. Labour that once worked in an inefficient industry, such as car manufacturing, could retrain to join an expanding and more productive sector such as mining. As the resource (labour) is more productively used, it increases the overall aggregate supply of the economy, increasing economic growth.

Changes to the Structure of the Economy

In the long term, Australia's main industries will change. Australia changed from an agricultural to manufacturing to now a commodity and services-based economy. Over time, structural change has also dictated the growth and declining states of Australia. During the mining years, WA and QLD were seen as the growth states but now the Eastern States is seen as the powerhouse of the post-mining economy.

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