Pearls and Irritations

Australia’s employment services system is about to have a major shake-up commencing on July 4^th. The lamentable ‘jobactive’ (no capital ‘j’) is being replaced by a new program ‘Workforce Australia’. Will Workforce Australia be any better than previous designs?

This is the fourth major redesign of Australia’s publicly funded employment services since the closure of the Commonwealth Employment Service in the 1980’s. With Workforce Australia, unemployed people who are assessed as ‘job ready’ will self-manage their job search online, while those who need more support will be streamed into face-to-face services called ‘Workforce Australia Services’ that will operate much like the existing jobactive program. Both service streams will require jobseekers to report their activities via a ‘‘Points Based Activation System’ (PBAS), with each employment related activity worth varying points. An algorithm will determine if enough points have been earned to qualify for Jobseeker payment – typically 100 points per month. Those that don’t earn enough points will have their payment suspended.

Since at least the end of the First World War, three broad functions have featured in the policies governing publicly funded employment services in Australia:

1.    A labour exchange,

2.    Training and support for the unemployed to prepare for, and adjust to changing demands in the labour market, broadly known as ’employability’, and

3.    Some form of work test that assesses ‘genuine’ unemployment, mostly referred to in Australia in recent years as ‘Mutual Obligations’.

Each of these functions serve different purposes for different stakeholders. Industry needs labour with the right skills, experience, and knowledge to match its needs, the unemployed worker needs a job or help to improve their employability, and the government requires public outlay to be limited to only those who need it. These functions are not mutually exclusive but at times have been out of balance. For example, too much focus on the supply of labour has led to criticisms of labour market churn and failing to address the risks of long-term unemployment; too much, or a misdirected focus on training and development can lead to complaints of creating ‘job-snobs’ or a labour pool with skills that don’t match the labour market’s needs; and too much focus on Mutual Obligations can lead to a system that has little use as a labour market program with social security and employment services being seen by many as interchangeable or blurred concepts.  A fundamental point here is that employment services in Australia have always been part of the Ministry responsible for Employment, never Social Security, and therefore the labour market, at least in theory, defines the policy context for services.

A regular criticism of jobactive was that providers were gaming the system for profits rather than focussing on providing a meaningful labour market program. Unemployed workers reported that if they found their own job, they were hassled for months to provide payslips so a provider could receive an ‘outcome’ payment, , sometimes worth thousands of dollars. In 1986, 41 per cent of the advertised vacancies in Australia were listed with the CES. By 2018, fewer than four per cent of Australian employers were registering vacancies with jobactive.

In pay-by-outcome, marketised employment services systems such as Australia’s, employment providers respond to the financial pressures to the financial pressures and incentives of a system by calculating which unemployed workers offer the best return on investment and thus favour those likely to be placed into work quickly and inexpensively (creaming) while neglecting those with more complex and thus more time consuming and expensive needs (parking). Workforce Australia has effectively removed this perverse incentive by moving the ‘cream’ of unemployed workers into online services and thus no longer paying providers for employment outcomes that quite likely would have happened with no intervention.

This is probably not a bad thing in terms of public outlay. In return, a slightly smaller pool of providers will work more intensively with a much smaller pool of unemployed workers to help them into employment.  Again, this sounds good in theory but will be dependent on having the right streaming mechanism in place so that the right unemployed workers are in the right stream. What could go wrong? Given the opacity of the proposed streaming system, who knows? Nonetheless, there appear to be some mechanisms built into the system for an unemployed worker to switch from one system to the other.  Success will also depend on these more intensive services having the skilled workers who can genuinely assist those with the most disadvantage into the labour market. Given that many of the providers in Workforce Australia Services are the same as were in jobactive, this assumption is at least of modest concern.

However, the main concern about Workforce Australia is that like jobactive, it commences with the same underlying assumption reinforced by every whining café owner or fruit-grower who can’t find anyone to work for them: that unemployment is a deliberate choice and that the unemployed therefore need to continually prove that they are genuine in order to be worthy of support. Workforce Australia is overly focused on the newest iteration of the work test – the PBAS. As a result, the balance between the labour exchange function, the employability function and the work test function remains heavily skewed towards the work test – a function that serves no purpose for either employers or unemployed workers. In times of low unemployment, it also has little purpose for the government.

If Workforce Australia is to have the best chance for success, it might be worth remembering that it is first and foremost a labour market program and its centre of gravity needs to be firmly within its labour exchange and employability functions. The PBAS component can be buried in a deep hole with little risk to the economy.

David O’Halloran lectures in Work and Labour Market Theory at Monash University

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