Employment services review argues licensing can bring providers to heel

By Stephen Easton

Tuesday January 22, 2019

A government-commissioned review proposes a less punitive, more personalised jobseeker assistance framework, and argues publicly funded employment service providers can be induced to focus on those who need the most help – amid growing calls to abandon outsourcing altogether.

The 16 members of the Commonwealth’s expert panel, chaired by businesswoman Sandra McPhee, brought decades of collective experience to the task as senior public servants, politicians, social workers, directors and corporate executives.

Their report, I want to work, provides a fairly frank assessment of the problems with the current jobactive system, purportedly based on the views of 1400 jobseekers, employers, community groups and funded service providers. It sketches out a new system that aims to address the biggest deficiencies for the three main stakeholder groups, in 11 brief recommendations.

The panel couldn’t help noticing almost nobody likes jobactive — not jobseekers, employers, community-based social services or the case workers employed by jobactive providers. Their first recommendation says reform must “build trust” on all sides.

I want to work recognises providers need to be “held accountable for achieving results” but also promises lower costs and greater “business sustainability” for the best performers in the future system. The plan relies on successful digital transformation, data analytics, integration with mainstream job search tools and self-service channels, with tailored assistance to those who need it, and the bulk of resources spent on those with the biggest challenges.

It calls for joined-up approaches within the public service, because “who sits where in government” is irrelevant to the users of the system, and says bureaucrats need a “flexible mindset where users are at the centre of design” to think beyond the basic framework that has changed little in over 20 years.

It advises that reform must “fix the most pressing pain points” first and work towards a new system “grounded in digital” by expanding and accelerating the existing Online Employment Services Trial and building out a new “digital and data ecosystem” that is ready to go at the start of 2021.

“An environment where solutions can be tested and learned from needs to be created,” says the report. “The focus must be external rather than internal. Most importantly, the job seeker and the employer must always be at the centre. The centre of our thinking, the centre of our design, the centre of our purpose.”

According to the reviewers, public servants need to follow the agile mantra: working iteratively, developing and trialling new ideas in a cycle of “weeks rather than months” then making lots of small adjustments based on regular testing and expanding on them.

They also acknowledge the key problem: the financial interests of employment service providers are not well aligned with those of jobseekers – least of all the long-term unemployed – or employers. There is little correlation between what makes providers the most money and value for the public.

The panel was concerned to find service providers have very high turnover among their own staff; those caseworkers are hamstrung by huge caseloads; jobseekers feel they are shunted through an uncaring, one-size-fits-all system as fast as possible; and employers feel jobactive providers just bombard them with unsuitable candidates.

“The system is geared towards throughput and volume. This must change.”

The government’s only response to the review so far is a media release from the Minister for Jobs and Industrial Relations, Kelly O’Dwyer, which did not mention the various deficiencies it found in the system. O’Dwyer claimed the review found jobactive had achieved “strong results” in recent years, but the report says no such thing.

It simply begins by stating that publicly funded services have placed over 1.1 million people in jobs (of any kind) since 2015, in a national workforce of 13.3m. “But, we can do better,” it adds pointedly. “Much better.”

As the reviewers recognised, the system often fails those who need it the most while employers looking to hire people have turned away from it: 64.9% of current jobseekers have been in jobactive for a year or more, and 19.6% for over five years. Only 4% of employers were involved with it last year, compared to 18% in 2007.

Election-year hot potato

Minister for Jobs and Industrial Relations, Kelly O’Dwyer

The review was meant to inform a new model to take effect when current jobactive contracts expire at the end of 2020, so a change of government this year would leave reform up to Labor. And O’Dwyer has now announced she is leaving politics, regardless of who wins.

The opposition has also been probing jobactive through the relevant Senate committee, where it holds sway, both in estimates hearings and an inquiry now due to report on February 13. In the meantime, shadow minister Terri Butler has also responded positively to the system design proposal in I want to work.

Upon its publication, she said the report confirmed the need for “an extensive overhaul” and argued the government should hold off signing new jobactive contracts until after the election.

“Whoever wins the election and forms government can then make sure any changes can be managed in a considered manner,” Butler argued. “This is too important to be rushed.”

After the holidays, she followed up with a longer article, which essentially endorses much of the panel’s findings on what has gone wrong with jobactive and recommendations to replace it.

“Almost 100,000 people have had between three and six job placements in three years; a further 4765 had seven or more placements; and almost 400 people have started and left 10 or more jobs in that time,” she wrote, quoting figures reported by The Australian.

“We’re paying multiple times for the same people to be placed into insecure work over and over again.”

In many ways, the shadow minister was singing from the same song sheet as the government’s expert panel, which called for more “positive behaviour reinforcement” alongside penalties, and more capacity to recognise individual circumstances. Assessments would note the jobseeker’s strengths, not just weaknesses and challenges they face, and the assessment of their employability could change over time, instead of being set in stone when they first apply for a Centrelink payment.

Their report says jobseekers who need the least assistance should be left to find jobs for themselves and “self-manage” meeting their obligations to continue receiving support payments. Applying for jobs would still be the main responsibility, but there would be a “points-based” system that counts a wider range of job seeking activities, is more personalised via input from the jobseeker, and focused on the quality rather than the quantity of applications. It points to surveys showing the vast majority want to find suitable jobs, not stay on welfare.

The panel says contracts should give way to licences for a set number of providers in a series of regions, issued for five years at a time with quick renewal for the best performers and the worst having theirs revoked early, along with “place based approaches” that involve local community groups working together with the licensees.

Smaller caseloads would be offset with higher payments and new incentives for working on the most challenging cases. The proposed system would aim to foster collaboration between providers, while also providing consumer choice and more competition in the market, which has become heavily consolidated from over 300 companies in 1997 to just 85 in 2014.

Calls to bring back the CES

The public servants’ union can always be relied on to advocate for direct service delivery over outsourcing, and regular public servants over the contractors who now abound in the public sector.

But in this case they are far from alone in arguing that privatised employement services have consistently provided poor value for money since their introduction in the 1990s and should be abandoned. Their calls to bring back the Commonwealth Employment Service are increasingly attractive to those representing both jobseekers and business owners.

The success of outsourced service delivery depends on factors like good contract design and management, market stewardship and regulation, evaluation of outcomes and, importantly, having public servants who understand the delivery of the service being contracted out.

The CPSU’s submission points to the Centre for Policy Development’s 2015 report Grand Alibis to argue the federal employment bureaucracy has progressively lost its “institutional memory of how employment services operated” in the years since the CES was abolished.

“In the early years after employment services was privatised, the high number of Departmental employees with former experience in the CES ensured a workforce with previous training in assisting jobseekers, case management and labour market management.”

The union told the panel that now, the Department of Jobs relies on “the input and feedback of service providers and, to a significantly lesser extent, service users” to understand the system. “However, lines of communication between the Department and providers are not strong.”

There’s little research evidence to support a black-and-white view that either private-sector providers or government agencies will necessarily do a better job of public service delivery. But it is far easier to privatise a government-run service than to uncrack the egg and go back the other way, especially after more than 20 years, and especially if the required expertise and capability is gone.

Small business lobbyist Peter Strong has also called for a return to a modern version of the CES in an article at the end of October, coming at the issue from quite a different perspective as one of its former employees.

The head of the Council of Small Business of Australia argued governments of both persuasions had been led astray by “text book driven policy makers” who told them the private sector would do a “better job” than the public service in this particular role. He believes publicly funded employment services have failed, but does not blame the providers who tendered for jobactive contracts and worked to maximise profits.

“The private sector will always do a more efficient job. But many believe that no private sector organisation should make a profit from the ills of the needy unless they can do so of their own accord without government support. …

“These businesses do what a private business must do, they make a profit otherwise they would fail as businesses. As a result there will be cost cutting – like a good business should do – and services to clients will probably be at the most minimum level possible — are we happy with that?”

Like many others, however, Strong wonders why jobactive has “created some millionaires” while the primary stakeholders on both sides of the equation are poorly serviced. “Perhaps if the system had been designed better the private sector could have succeeded but we need a fix and we need it now,” he adds, and he believes that fix is a new federal agency.

He imagines a one-stop shop running all forms of jobseeker assistance and special-needs work placements, the apprenticeship system and skilled migration, as well as checking the employment status of welfare recipients, skills development and other labour market programs.

It is understandably an attractive idea to cut out for-profit providers, but replacing them with a nationwide network of government job centres would be a risky undertaking that goes entirely against the grain of the past couple of decades of public administration.

Given the failure of successive governments to create a successful privatised employment services system over two decades, however, it’s clearly becoming harder for stakeholders to believe that an attempt to fix or rebuild the system is any more likely to succeed.

It’s easy to say that government just needs to re-align the incentives for providers, improve the regulatory model, encourage competition, introduce consumer choice and listen to what jobseekers, social workers, employers and overworked case workers are saying. It’s much harder to do it.

While I want to work explains what is wrong with the current system and describes broadly what a better one would look like, it is far less prescriptive about how to build it and where to start.

As such, the report could easily be picked up by a government of either persuasion but, on the other hand, its proposed licensing system is unlikely to counter the campaign to bring back the CES.

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