Saving the long term jobless

It is ten years since the federal government shut down the Commonwealth Employment Service and replaced it with Centrelink and the Job Network.

Centrelink was given responsibility for registering job seekers and assessing their eligibility for benefits and their need for assistance. The task of helping job seekers find work, and providing them with specialised assistance where appropriate, passed to more than 200 members of the new Job Network who signed service contracts with the government and were paid by results.

This system has evolved during the last ten years in the light of experience and in response to changing circumstances. The number of Job Network members has more than halved and price competition for contracts has given way to fixed-price tenders. Fees and outcome payments have been amended to stop unscrupulous agencies from milking the system, and a new code of practice and service guarantee have been agreed.

Funds have been provided for jobseeker training, travel to interviews and subsidised placements, and employment agencies operating outside the Job Network now share and contribute to a common vacancies database. In 2003, a new “Active Participation Model” was established under which job seekers progress from job search support, through job search training and mutual obligation, to “customised assistance”, all with the same service provider.

Like any huge service delivery system, there have been hiccups and problems. Procedures have become more complex and service providers have complained about high administrative costs when complying with the government’s demands. There has been a recurring tension between quantitative and qualitative measures of success, and there have been periodic complaints about unethical practices and unfair competition. Recently, concerns have also been raised about inadequate payments, and some Job Network members appear to be struggling to make ends meet.

All things considered, however, the purchaser-provider model has worked remarkably well. Last year the Job Network placed 186,400 long-term unemployed people in jobs lasting at least three months, and it did this more cheaply than under the system it replaced.

Some of the people who got jobs would have found employment anyway, but in 2005, the Department of Employment & Workplace Relations completed a “net impact study” which took account of this. It found that programs like job search training, Work for the Dole and customised assistance were contributing directly to many people getting jobs, and that success rate of these programs was at least as good as that of the highest-performing programs internationally. So the Job Network is out-performing other countries and doing better than the system it replaced.

Australia was the first country in the world to contract out employment services in this way. It has become a world leader, and the results have been so impressive that other countries are now copying what we have done.

How depressing, then, that just at the point where the system has been bedded down, and other nations are seeking to emulate it, voices are being raised here demanding that it be radically changed. The calls for change are coming from the welfare sector, and the new Workforce Participation Minister, Brendon O’Connor, seems sympathetic to much of what he is hearing.

The problem the critics are pointing to is a problem born of success. The Job Network was set up when unemployment in Australia was running at greater than 8 per cent. Unemployment has almost halved since then, leaving fewer cases for Job Network agencies to manage.

The cases that remain are tougher to clear. Catholic Social Services, which runs the Job Network agency Centacare, reports that the proportion of its clients with less than a year 10 education has increased from 19 per cent to 25 per cent since 2003. The CEO of Jobs Australia, another Job Network agency, suggests that “A significant number of the people left in the queue have very complex needs, typically mental health issues, housing issues, family relationship issues, all sorts of things that may make it difficult for them to comply [with work requirements].” And ACOSS claims that 35 per cent of those on the Newstart unemployment payment for more than two years have a mental health problem which could make it difficult for them to work.

These increasingly difficult caseloads are being cited as evidence that the emphasis on job-placement outcomes is no longer appropriate and should be scrapped. The Brotherhood of St Laurence, for example, claims that a system geared to finding jobs for job-ready unemployed people is not well-suited to handling the more difficult clients who remain, and it is critical of the continuing emphasis on “rapid movement into any job without ongoing support for career advancement or skill development”.

The Welfare Rights Network similarly argues that “people are work willing but they are not work ready”, and that welfare recipients are being pushed into short-term jobs rather than training for sustained careers.

The CEO of Job Futures, an alliance of welfare groups, joins this chorus by complaining that, “Employment outcomes seem at times to be the sole driver of the system … many of those who have been referred to these programs in the past require a great deal of support in dealing with personal issues before they are ready to join an employment program.” And the National Employment Services Association says there should be more emphasis on “proper” skills training rather than rapid placement into jobs.

If this sounds like an orchestrated campaign, that’s because it is. Influential sections of the welfare lobby have for years been trying to weaken or undermine the primary emphasis on work requirements which drives the Job Network model and the “mutual obligation” policy which it embodies, and they are seizing on the change of government in Canberra as their opportunity to push their case.

Up until now, their main target has been the financial “breaching penalties” imposed on claimants who persistently fail to meet their activity requirements. Many welfare groups think these penalties are too harsh. They say no penalty should last more than eight weeks, no payment should be reduced by more than 25 per cent, and there should be no penalty at all in cases where financial sanctions might cause “hardship”. Never mind that if they were ever implemented, these proposals would fatally undermine the whole system of “mutual obligation” (for claimants who were willing to settle for a lower payment could completely disregard their activity responsibilities, and nothing more could be done to force them to comply).

Many welfare groups would be quite happy to live with this, for they have never embraced the principle that welfare payments should be conditional on the performance of certain tasks. For them, welfare is a right, and it should be paid unconditionally to people who are in need of it.

The trouble is, many of these same welfare organisations are fully signed-up members of the Job Network, which means they are committed to implementing a conditional welfare system. They are contractually obliged to find work for the unemployed people who are sent to them, and they are required to inform Centrelink of any cases where claimants fail to discharge their obligations. This means they are part of a system which they do not believe in, and for years, they have been wriggling to get off this hook.

Not-for-profit organisations make up more than half of the Job Network’s members. The two biggest members of the network are the Salvation Army (with a 15 per cent market share) and Mission Australia (8 per cent), but they are not the only non-profit organisations which have come to depend on government contracts. The Salvation Army, Centacare, Mission Australia, and Wesley Uniting Employment together rely on Job Network contracts for one third of all their income. Inevitably they feel compromised, for to varying degrees they are all accepting government payments to implement policies with which they are unsympathetic.

Not only has the autonomy of the “voluntary sector” been compromised by these contracts, but the government’s policies have to some extent been undermined by the existence of a Trojan Horse within the heart of its Mutual Obligation citadel. While they have continued to operate within the Job Network system, the welfare organisations have never felt comfortable implementing the “Work First” policy the Howard government demanded of them, and the result is that they have implemented it half-heartedly.

A 2002 Productivity Commission report found, for example, that non-profit Job Network members were underreporting breaches by 12 per cent as a result of their reluctance to report claimants who failed to fulfil their mutual obligation requirements.

More recently, after the government extended work requirements to single parents with children over six years of age, the welfare organisations agreed to operate a new Financial Case Management Scheme, designed to monitor families where breaching penalties had been imposed and to dispense special payments where there was evidence of hardship affecting children. But no sooner had they joined this scheme than they started publicly attacking it, and eventually 12 of them reneged on their agreement, arguing that any breach penalty imposed on single parents was “immoral” and they wanted nothing more to do with it.

It is against this context that we have to understand the latest round of complaints from welfare organisations involved in the Job Network. First, they attacked breaching penalties, then they criticised work requirements for single parents, and now they are claiming that people remaining on welfare are not “job ready” and should not be required to work. The common theme through all of this has been that work requirements should be weakened.

Why are these organisations so concerned to undermine the main plank of the last ten years of welfare policy? Basically, because their traditional instinct is to help people in need, not to penalise them. Ever since they got embroiled in the Job Network, however, they have been acting more as arms-length agencies of government than as autonomous charities. Their desire to help people has been subverted by their contractual duty to coerce them into work and other activities. They are now too dependent on government money just to walk away from these contracts, so they are hoping they can change the terms of their agreement with the government, to bring their tasks more into line with their traditional values and ethos.

If they can get the new Labor Government to accept that the “hard cases” that remain on their books should not be expected to work (or that they need long periods of “support” before they should be required to look for jobs), they will be able to keep the government money flowing while returning to their softer, more traditional welfare function. In this way, they hope they can have their cake and keep eating it.

There may well be a case for re-examining how payments are made to Job Network agencies. Before it lost office in the 2007 federal election, the Howard government signalled its intention to do this at the 2009 contract round, and the Rudd government has already indicated its support for adjusting interim fees to improve rewards for those dealing with the hardest cases. There may also be some scope for rewarding Job Network agencies that put additional time and resources into developing the “job readiness” of long-term unemployed people, although not everything the welfare charities do should necessarily be funded by Canberra.

But whatever reforms are introduced, it is vital that the core “work priority” principle that has come to underpin welfare policy in this country is not weakened or abandoned. When jobless people who are capable of working approach Centrelink and the Job Network for help, the first priority must remain finding them employment. Even if they only secure a short-term job, this is better than staying on welfare and undertaking job-readiness training, for the best preparation for work is work. The current campaign by sections of the welfare lobby to weaken or scrap altogether the emphasis on placing claimants into jobs aims to decouple welfare provision from the expectation of work requirements. This must not be allowed to happen.

Of course, the Job Network agencies are right when they tell us it’s not easy to get unskilled, long-term jobless people into work. They may also be right when they complain that their job has become harder as the unemployment figures have fallen. But the Job Network system has evolved and changed significantly over the last ten years, and it can change some more. It should be possible to amend the system of payments so that agencies that achieve successful job placements for hard-to-employ people get better rewarded in the future than they do now. But this does not justify moving away from the work first principle. We have made real progress in the last ten years. It would be a tragedy if we were to throw it all away now.