“Marketisation has failed”: Rebuilding the Commonwealth Employment Services

Dec 9, 2023
Human resources. Teamwork of business

When the Howard government privatised Australia’s Employment Services system it promised more innovative, effective and efficient services. Almost 25 years later, it’s clear that the giant experiment of full privatisation has failed. And the most vulnerable Australians pay the price.

It’s harsh but true to say that Australia no longer has an effective, coherent national employment services system; we have an inefficient, outsourced, fragmented social security compliance management system that sometimes gets someone a job against all odds. This in no way is meant to denigrate the wonderful, caring people who work to support unemployed people–to paraphrase Bill Clinton, ‘it’s the system stupid!’

Rebuilding Employment Services is the only first principles review of this multi-billion dollar system in nearly 30 years. It reveals a failing system. Businesses have been scared away, the system is drowning in red tape, and too often people are made less rather than more employable by being forced to do pointless things that don’t help them get sustainable work.

Australia’s system has for decades been underpinned by two flawed theories.

Firstly, that unemployment is always an individual choice, so if you only beat disadvantaged people hard enough, they’ll magically get a job. Secondly, that ever more choice and competition in human services sector inevitably results in better outcomes for vulnerable people.

Both theories have proved to be rubbish. Even the previous government’s I want to work review found the majority of unemployed people want to work – yet we’ve continued to design the entire system around the small minority who try to cheat the system.

Mutual obligations as currently designed are clearly not supporting people into work. Employers have fled the system, dodging floods of inappropriate job applications. It is ridiculous that more than 70 per cent of people with providers receive payment suspensions despite no evidence that 70 per cent of people are cheating.

Providers are forced by payment and performance frameworks to repeatedly try to place jobseekers in unsuitable vacancies to receive outcome payments and be able to pay their staff.

Frontline staff come to work to help people, but must fight a system choked with red tape and inefficient IT systems. They’re now forced to spend more than half their time on administration and compliance, rather than collaborating with clients and employers to secure work for people.

The result is an industry with more than 40 per cent annual staff turnover, and more than 150,000 people who have been stuck in the system for more than five years.

It should not be controversial to state that full privatisation has failed. Even the previous government–which lived and loved to outsource everything they could get away with–implicitly admitted this when Workforce Australia brought the largest chunk of the caseload back under public sector management.

The extent of competition is excessive, and the benefits of choice and contestability are not being realised. In numerous regional towns and disadvantaged suburban centres there are employment services providers operating seemingly on near every street block, yet providing largely the same service.

It’s like having five ice cream shops all lined up, side by side, selling the same vanilla ice cream. Meanwhile, the department studiously manages market share so that everyone gets a lick. There seems to be more focus on provider viability than in carefully assessing people and connecting them with the right supports.

A key finding was the enormous disconnect between the Commonwealth and services on the ground. The Department has literally no view these days on what an effective service model is. They’re like the puppet masters, way up in the rafters, jerkily pulling strings but way too far from the action.

Local connections and social capital carry little weight. Bafflingly, in the last contract round more than one in five regions had 100 per cent of the providers removed – resulting in devastating impacts on local relationships.

Such significant and numerous issues cannot be addressed by small tweaks to policies and programs. Our 75 recommendations articulate an ambitious blueprint to rebuild the system.

Government must move away from obsessively contracting services out and denying responsibility, to a system where service partners are contracted in to work alongside public agencies and employers in local communities.

A public sector core to the system must be rebuilt, consistent with the world’s best employment services and other human services – like TAFE, education, health, and aged care.

That doesn’t mean recreating a giant new bureaucracy that does everything, but it’s obvious that the complete hands-off approach must stop.

A new public stewardship and service delivery entity is proposed, Employment Services Australia, alongside an Employment Services Quality Commission.

A rebuilt system also requires an enhanced and, in some respects, radically different service model in local areas which recognises that people have vastly different pathways to social and economic participation and employment. An enhanced assessment process, facilitated by physical ESA regional hubs, will assist clients in navigating the system and allow for referral to other human services and contracted partners. Like how a GP helps people navigate the health system.

Policy objectives for too long have focused solely on kicking people off welfare. Of course, moving people off income support into work must remain a primary goal. But a rebuilt system should also value things like economic security, sustainable employment, productivity, skills, and workforce participation, and respond to industry transitions and workforce needs.

Mutual obligations should be broadened and tailored to the individual through their Participation and Jobs Plan. A realistic, tailored pathway to employment based on a person’s needs, capabilities, strengths, and goals. A new compliance framework is proposed, not to go soft on the small number of people who try to cheat. But as it’s patently ridiculous that the entire system is now designed around that small minority, while lumping everyone else into the same paradigm.

We’ve also recommended rebalancing focus on employer engagement. The current system directs most effort to conditioning supply–making unemployed people do things–with only stunted connections with demand; to employers who actually have or can create jobs.

These are ambitious proposals. Rebuilding the system will be a multiyear project requiring bold and sustained political leadership and changes in culture led by the bureaucracy. Yet only with real change can Australia can get better value for money and better outcomes for disadvantaged and long-term unemployed people.

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