Parliamentary report slams mutual obligation, calling for total overhaul of employment services

A parliamentary inquiry has delivered a scathing indictment of Australia’s employment services, finding it does not serve the interests of job seekers or employers and urging the privatised system be partially wound back.

A rigid approach to mutual obligation is killing unemployed people’s motivation, employers are flooded with inappropriate applications, and people are not adequately assessed upfront, the inquiry has found.

“We have an inefficient, outsourced, fragmented social security compliance management system that sometimes gets someone a job against all odds,” the committee chair, Victorian Labor MP Julian Hill, writes in his foreword to the report into Workforce Australia Employment Services.

The inquiry, done by a House of Representatives committee, finds the system can’t be fixed by “tweaks”.

It recommends a comprehensive rebuilding of the system with a much stronger role for government, including the establishment of a new entity within the public service to drive the system and be a “hybrid provider”.

Employment services were privatised 25 years ago and form the federal government’s biggest single procurement outside defence.

The inquiry found jobseekers are subject to “excessive – often very punitive – compliance and enforcement arrangements, which have little or no positive impact on their capacity for social and economic participation”.

The present approach “is tying the system up in red-tape and pointlessly harming productivity in providers, driving large and small businesses away from the system, and actually making many people less employable.”

The inquiry urges a more tailored approach.

This would include counselling clients several times before moving to compliance, an adjusted sanctions regime, and having “human decisions-makers” deal with key compliance functions, removing “Robo-Cancel” automation in suspending and cancelling payments.

The report, titled Rebuilding Employment Services, says stakeholders painted a picture of a scheme based on fear, excessive competition and compliance.

Participants fear doing something wrong and losing income. Providers fear the department giving them a black mark and losing their contracts. Excessive competition is to the detriment of employers and vulnerable job seekers.

The report says the public service, sitting on top of the system, “is detached and seemingly disinterested in or unaware of what actually happens at the frontline or in brokering place-based solutions, sharing best practice or encouraging innovation”.

Instead, it is focused on procurement, contract management and key performance indicators.

The employment services system is underpinned by two “flawed theories”.

“The first is that unemployment is an individual failing […] and that clients will make efforts to secure employment if only they are beaten hard enough.

"The second is that choice and competition in human services will inevitably result in better services and improved employment outcomes, especially for vulnerable and long-term unemployed people,” the report says.

“The system is also driven by the pernicious myth of the ‘dole bluder’, reflected in a patently ridiculous level of compliance and reporting activities.

"Employers have made it clear that the system adds little value to their business, and that it repeatedly tries to force unsuitable jobseekers into vacancies without providing adequate incentives or support.”

The report says “a hunger games-style contracting model and regulatory culture drives very high turnover in providers during contracting and licensing rounds”. This leads to disruption and devastates trust. In the last round, some 22% of regions saw all providers removed.

The inquiry urges government be an “active steward” proving enabling services as well as some direct service delivery in “thin markets” and to rebuild capability.

“Consistent with the world’s best employment systems and other human services (think TAFE, education, health or aged care) a public sector core to the employment services system must be rebuilt,” Hill writes in his foreword.

“Australia must change our culture and mindset from the current paradigm where politicians obsessively contract employment services out and deny responsibility, to a system where service partners are contracted to work with government and employers in local communities.”

The new entity proposed, Employment Services Australia, would be within the department of employment and workplace relations. It would be a large “digital-hybrid provider for jobseekers”.

It would establish regional hubs, where possible co-located with existing services, which would undertake jobseeker assessment and referrals to services, as well as engaging with industry and employers.

The inquiry’s blueprint for reform recommends dialling back excessive competition in local areas, focusing on more employer engagement, and considering integrating digital employment marketplaces, such as SEEK, LinkedIn and competitors into the system.

The committee’s 75 recommendations include the government creating a permanent administrative traineeship position for disadvantaged jobseekers in the electorate office of each MP. This is to lead by example and expose all parliamentarians to the lived experiences of disadvantaged people. Each placement would last between nine and 18 months.

The report says Australia spends materially less than the OECD average on employment services overall. Taking out administrative costs and the like, Australia spends slightly more than the OECD average on case management, job placements and benefit administration. But it invests significantly less in direct job creation, start up initiatives and training.

In a dissenting report, Liberal MP Aaron Violi criticised some of the central recommendations.

“The Coalition has concerns about some of the key recommendations […] that evidently seek to water down mutual obligation requirements, pass on key employment service functions from the private to the public sector, which end up increasing the size of the bureaucracy, inflating the cost to the taxpayer and simply risk creating more red tape.”

Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.