Australia’s employment services caseload continues to feature a high proportion of job seekers with low educational attainment, low levels of literacy (digital and language)/numeracy and no post-secondary qualification. Economic and social observers alike predict the technological revolution will increase in momentum. As such, those already displaced, face greater barriers to securing work; with less skilled workers likely to experience the most significant displacement and risk of long-term unemployment as technology continues to change the nature of work.
Australia has a strong and dynamic labour market which provides the backdrop for this inquiry into jobactive. Despite the recent growth in employment, challenges remain: wage growth has been stagnant and the rise of non-standard employment means more Australians are likely to move in and out of the employment services system.
This chapter is structured according to the following topics:
Australia's labour market
Nature and causes of joblessness in Australia
Methods by which Australians gain employment
Employment services in Australia: an outsourced model
Consultation with unemployed workers
The committee's recommendations are set out throughout the chapter.
Australia's labour market
While the Australian economy has experienced a record-breaking period of growth, it is also fundamentally changing, with some industries and occupations expanding while others shrink. In the current labour market, more Australians are likely to change jobs and careers more often. As noted in a recent Senate inquiry into the future of work, one of the clearest trends impacting the workforce is the ageing population. Another major change to the labour market is the rise of non-standard employment arrangements, including the gig-economy. In addition, structural changes to the labour market over past decades have resulted in the loss of employment opportunities for many low-skilled workers:
…the share of the low-skilled jobs which many unemployed people seek is gradually shrinking, and those jobs are increasingly offered on a part-time or casual basis...
Despite these changes, most Australians are able to participate in the labour market without government assistance. The proportion of working age Australians in employment today is higher than at almost any other time in the nation's history. At the time of writing, 670 900 people are unemployed in Australia. The unemployment rate in Australia is five per cent, the lowest since early 2012.
However, some submitters pointed out that the definition of 'employed' used by the Australian Bureau of Statistics (ABS) captures persons who worked for as little as one hour in the reference week. One submitter noted that 'unemployment figures may be quite unrelated to the reality of living for many people'. The Australian Unemployed Workers' Union (AUWU) suggested that:
Counting people as employed when they work as little as one hour per week is so inadequate a measure that huge reductions in the aggregate number of hours people are working can appear as an increase in jobs and employment, particularly when permanent full-time work fragments into casual and part-time jobs.
In addition to the official unemployment figures, there is some spare capacity in Australia's labour market. As at December 2018, there were an estimated 1.1 million underemployed workers (persons who are not fully employed and want, and are available for, more hours of work). The National Employment Services Association (NESA) pointed out that the proportion of underemployed workers is growing:
Of all working Australians, 8.8% (approximately 1.1 million workers) are underemployed, growing from an estimated 6.6% a decade ago.
Individuals who are considered by the ABS as not in the labour force are not counted for the purposes of determining the rate of unemployment. NESA described these people as the 'hidden jobless':
…it is incumbent on policy makers to look beyond headline data to ensure its policy responses recognise the full extent and circumstances of jobless Australians, who want work but cannot find it.
However, it should be noted that not all people categorised as not in the labour force want to work and some are unable to, for example, due to full-time study or caring responsibilities.
Australia's long-term unemployment rate sits at 1.2 per cent—which amounts to about 24 per cent of all unemployed people. This rate is below Organisation for Economic Co-operation and Development (OECD) averages. However, according to NESA, long-term unemployment is a 'significant and growing problem, particularly given the exclusion of the hidden jobless in these figures'. Similarly, Social Ventures Australia suggested that Australia's low unemployment rate obscures the problem of long‑term unemployment.
Further information on demographic and employment trends in Australia and the impact of technology on work is available in a recent report by the Senate Select Committee on the Future of Work and Workers. The following section considers the causes of joblessness in Australia.
Nature and causes of joblessness in Australia
Joblessness is a broad term, capturing unemployed persons and persons not in the labour force. There is a large amount of commentary and analysis on the causes of unemployment and underemployment in Australia and the issues that contribute to joblessness. Explanations for joblessness usually take two forms: the first form concentrates on economic drivers of unemployment, whilst the second explanation considers why particular groups are more vulnerable to unemployment than others. This chapter provides a brief overview of the factors contributing to joblessness in Australia.
Economic drivers of unemployment
The Reserve Bank categorises unemployment according to three main types: cyclical, structural and frictional unemployment. In practice these types of unemployment can overlap. Cyclical unemployment refers to trends in the business cycle that generally occur over the medium term:
During an economic downturn, a shortfall of demand for goods and services results in a lack of jobs being available for those who want to work. Businesses experiencing weaker demand might reduce the amount of people they employ by laying off existing workers, or hiring fewer new workers. As a result, people looking for work will also find it harder to become employed.
In contrast, structural unemployment relates to a mismatch in skills and can be longer lasting:
Structural unemployment occurs when there is a mismatch between the jobs that are available and the people looking for work. This mismatch could be because jobseekers don’t have the skills required to do the available jobs, or because the available jobs are a long way from the jobseekers.
Frictional unemployment is generally shorter and occurs when people move between jobs or when people move in and out of the work force:
…people may not find jobs immediately and need to invest time and effort in searching for the right job. Businesses also spend time searching for suitable candidates to fill job vacancies. As a result, people looking for jobs are not matched immediately with vacancies and may experience a period of temporary unemployment.
Submissions to this inquiry emphasised competition for jobs as a major cause of joblessness. According to the Australian Council of Social Service (ACOSS), there is only one job available for every eight applicants who are unemployed or underemployed. As at February 2018, 89 per cent of unemployed Australians reported having difficulty finding work. The main reason given as a barrier to finding work was 'too many applicants for available jobs'. Other prominent reasons included: 'insufficient work experience', 'own ill health or disability', 'lacked necessary skills or education' and 'no vacancies in line of work'.
NESA submitted that a central cause of involuntary joblessness is the balance of supply and demand for labour. In September 2018, ACOSS reported that growth in jobs was 'almost stagnant' from the Global Financial Crisis in 2008 to 2017, with many new jobs being part-time. More recently there has been a slight increase in trend employment of 2.3 per cent over 2018 (above the average year-on-year growth of two per cent over the past 20 years).
ACOSS pointed out that the relatively low rate of unemployment does not mean it is easy for job seekers to find work:
In May 2018 there were 723,700 people unemployed (5.4% of the labour force)… this does not mean it is easy for unemployed people to secure paid work. For instance, another 1,102,700 (8.3% of the labour force) were under-employed (employed part-time and seeking more paid hours).
Altogether, in May 2018, there were eight unemployed or under-employed people for every job vacancy, down from ten a year earlier. When employed people changing jobs are added in, the number applying for each vacancy almost doubles (for example, to 16 in 2016).
Additionally, ACOSS suggested that casualisation and the gradual reduction in low-skilled work means 'more people are cycling between unemployment payments and jobs'.
Barriers to employment for certain groups
During the inquiry, a number of stakeholders emphasised the specific barriers to employment experienced by particular groups. Certain groups are more vulnerable to unemployment and underemployment, based on factors such as education, skills, health, disability, place of residence, access to transport, and employer discrimination.
The varying rate of employment across different regions is well documented. In this regard, Jesuit Social Services observed that 'complex and entrenched disadvantage continues to be experienced by a small but persistent number of locations in each state and territory across Australia'. For example, the area of Brimbank in Melbourne's west has an unemployment rate of 10.3 per cent, which is well above Victorian and national averages. The unemployment rate in outback Queensland is even higher, at 13.6 per cent.
According to ACOSS and Jobs Australia, the groups most at risk of long-term unemployment include:
principal carers of children;
people of Aboriginal and Torres Strait Islander background;
people residing outside metropolitan areas; and
people of culturally and linguistically diverse backgrounds.
ACOSS and Jobs Australia reported that there are three main reasons for the entrenched unemployment of the above cohorts:
First, the profile of recipients of these payments [Newstart and Youth Allowance] has become more disadvantaged. One reason for this is as unemployment falls (it is much lower than it was after the recession in 1991), those who are less disadvantaged in the labour market find jobs more quickly, leaving behind the more disadvantaged groups.
Another reason…is the growing share of unemployment payment recipients who would previously have received pension payments: people with disabilities and sole parents with school age children. The welfare ‘reforms’ of the mid 2000s and 2010s were designed to boost workforce participation, but in many cases they simply shifted people from higher to lower social security payments…
Second…Australia under-invests in employment services for people who struggle to secure paid employment.
Third, the labour market has changed so that jobs that were previously available to people with similar characteristics to today’s recipients of unemployment payment (especially those with lower qualifications and skills) are either harder to get, or harder to keep.
UnitingCare Australia submitted that in addition to the factors identified by ACOSS and Jobs Australia, further barriers to employment include:
lack of technical and professional skills and education;
lack of prior work experience;
feelings of discouragement, poor confidence and motivation; and
the inappropriate or unsuitable nature of work opportunities available, with regard to flexibility of working arrangements, hours offered, and lacking flexibility to balance work with family commitments.
UnitingCare categorised these barriers to employment as follows:
Human capital barriers such as inadequate skills, education, experience and training. This also includes lack of work experience, poor work history, inadequate education, inadequate qualifications and skills, and not finding work that is suited to individuals’ skills and experiences;
Personal barriers such as poor confidence, discouragement and not knowing how to go about finding work, and
Unsuitability and lack of work available.
A 2017 OECD report into joblessness in Australia found that long-term unemployed individuals were potentially constrained from full participation in the labour market by one or more barriers:
Australia has a substantial group of out-of-work individuals that could benefit from targeted labour market activation policy interventions. These persistently unemployed or inactive individuals, as well as workers with very low work intensity, are potentially constrained from (fully) participating in the labour market by one or multiple employment barriers.
Many of the individuals with no, or weak, labour-market attachment have low levels of employability because of lack of work experience or because of existing care responsibilities or health limitations, while others might lack motivation because of high levels of non-labour income or replacement benefits. Understanding the combination of employment barriers that individuals are facing is crucial for targeting and tailoring successful activation policies.
The OECD report categorised barriers to employment in terms of motivation, employability and opportunities:
Lack of motivation: Benefits may reduce the financial incentive to look for a job, e.g. because of low potential pay, relatively generous out-of-work benefits (and potentially missing mutual obligations), or access to high levels of income independent of their own work effort.
Employability barriers: Even motivated jobseekers may struggle to find work due to a lack of skills, limited work experience, care responsibilities and health-related limitations.
Scarce job opportunities: Bringing more people into employment requires addressing demand-side barriers like a shortage of vacancies in the relevant labour market segment, frictions in the labour market due to information asymmetries, or discrimination in the workplace.
Using data from the Household, Income and Labour Dynamics in Australia Survey, the OECD report found that the most common barriers for people that are long-term unemployed or weakly attached to the labour market are low relative work experience, low skills, and health limitations. Other barriers included care responsibilities and high levels of non-labour income.
A number of submitters also emphasised that many disadvantaged individuals experience multiple barriers to employment, which can compound employment issues. For example, Mr Kevin Piggot, a member of the AUWU from Perth, gave evidence about the barriers faced by his wife. His wife has a hearing disability, sciatica in the left leg and severe anxiety. Mr Piggot said that his wife’s experience of trying to find work had taught him ‘just how much harder life is for people with disabilities’.
The OECD's analysis of joblessness in Australia found that that 'individuals often face more than one barrier to employment'. The OECD report identified seven distinct clusters of individuals with no or weak labour market attachment:
low education women with limited work experience and health limitations;
experienced early retirees with health limitations;
mothers with care responsibilities and few other employment obstacles;
underemployed workers with weak work incentives;
long term unemployed with limited work experience and low education;
women with limited work experience living in higher-income households; and
mothers with multiple employment obstacles.
Some of the main barriers to employment for particular groups are discussed below in more detail. These are only a sample of the many barriers people face.
Youth in Australia have higher unemployment rates compared to adults and are more likely to bear the brunt of economic downturns. Young people are overrepresented in relation to unemployment and also underemployment rates. Young people are also more likely to experience long-term unemployment. The rate of youth unemployment in Australia is 11.3 per cent, more than twice that of the general population. The rate of youth underemployment is 17.4 per cent. Currently, about 629 900 young Australians are unemployed or underemployed, which is approximately 19.5 per cent of the youth population.
In the last two years there has been some improvement in the youth labour market: the trend unemployment rate for youth aged 15–24 years has fallen from 13 per cent in September 2016 to 11.3 per cent in December 2018. However, youth unemployment rates are higher in certain areas, such as the Southern highlands and Shoalhaven in New South Wales.
A 2017 report by the Brotherhood of St Laurence found that youth underemployment was at its highest level in 40 years. When the report was released in 2017, the rate of youth underemployment for 15–24 year olds was 18 per cent.
Young people are overrepresented in jobactive. People aged 15–24 make up about 12.9 per cent of the general population. However, there are approximately 114 800 young people (aged 15–24) on the jobactive caseload, representing around 18 per cent of the total caseload.
Youth Action emphasised the disproportionate impact of several dominant economic developments on young Australians:
Young people today are navigating new and different challenges to past generations. The employment context for young people today is challenging. Increasing rates of underemployment, the rise of casual and insecure work, as well as automation and globalisation have impacted young people significantly. This is coupled with a reduction in the number of entry-level positions and apprenticeships, with less than 1% of jobs advertised with no experience necessary.
Importantly, youth unemployment trends are not explained by rising participation in education and training.
Mature age workers
Barriers to employment for mature age job seekers vary substantially depending on the circumstances of the individual. The reduced workforce participation of mature age Australians can be explained by factors such as weaker financial incentives to work, reduced job opportunities due to age discrimination and less access to training and development opportunities. Some mature age workers may face employment barriers due to lower levels of education or outdated skills. For many mature age workers, disabilities and health issues can also limit employment options. For example, Mr Rod Shehan who is 54 years of age, said that his age made it increasingly difficult to find work. Mr Shehan was diagnosed with cancer in 1995 and said that his age and disability means that he has 'little hope of a good [employment] outcome in the near future'.
As noted by Dr Kay Patterson, the Age Discrimination Commissioner, many older Australians would like to work but are unable to do so. The 2016 Willing to Work report by the Australian Human Rights Commission found that negative stereotypes about older people were prevalent in Australian society, and that this has an impact on the willingness of businesses to hire older workers. Dr Patterson reported that a survey in 2018 found that up to 30 per cent of employers are still reluctant to hire workers over a certain age, and for more than two thirds of this group, that age was over 50.
Dr Kay Patterson highlighted that it can be harder for older people who become unemployed to find a new job, compared to younger people:
…it takes significantly longer for an older person to get a job if they are out of employment.
According to the ABS, older job seekers have a higher median duration of job search in comparison to the average duration for all age groups. On average, people aged 55–64 years spend 36 weeks looking for work, compared to 14 weeks for all age groups.
Older Australians also make up a significant proportion of 'discouraged job seekers', which refers to people who are willing and able to work but not actively looking for work as they believe they will not find a job. As at February 2018, approximately half of all discouraged job seekers were aged 55 and over.
The committee received a number of submissions from older Australians who struggled to find work. The following extract illustrates this struggle:
I am in my 50s and have aged out of the job market. Fifty is the average age where job applicants have their application binned. Worse, I have a research PhD in science. I am long-term unemployed, more than four years now; I live in poverty and my life is unending grey.
I apply for jobs but rarely hear back, when I do the reply is usually an anodyne form letter. If I get to an interview, I sense that my age is a factor; I have dyed my hair to hide the grey, but that is a shallow mask. I always seek feedback and the most usual reply is that I am ‘overqualified’ or that with my qualifications the employer thinks I would not find the job satisfying or fulfilling.
First Nations People
First Nations people have significantly higher rates of unemployment compared to the general population and face multiple barriers to employment. In 2016, the unemployment rate for Indigenous people of working age was 18.4 per cent—2.7 times the non-Indigenous unemployment rate (which was 6.8 in 2016). The 2018 Closing the Gap report found that the government's target to halve the gap in employment outcomes between Indigenous and non-Indigenous Australians is not on track.
There is a strong correlation between education attainment and employment for First Nations people. High incarceration rates for First Nations men also have a large impact on their employment prospects. Additionally, there is a strong relationship between major chronic diseases, health status, carer responsibilities, disability status and labour force participation. Employment rates are also significantly lower in remote areas. There is also evidence to indicate that First Nations job seekers have lower rates of job retention. First Nations people also experience high rates of discrimination in the workforce. This may 'mean that some Indigenous Australians decrease their labour supply in order to avoid potentially adverse (discriminatory) situations'.
Around two thirds of all First Nations job seekers receiving Commonwealth employment assistance participate in the jobactive program. First Nations people make up around 2.8 per cent of Australia’s population, but make up 11.3 per cent of the jobactive caseload.
People with disability
There are a number of barriers to employment for people with disability, although these barriers vary depending on the nature of the person's disability and other factors. For example, people with disability often have increased costs associated with education and employment participation, in addition to everyday expenses.
The loss of many low-skill employment opportunities over past decades has had a disproportionate impact on people with disability who on average have lower education levels, compared to the general population. People with disability also often experience discrimination in the workforce. Employers can also be ignorant of disability issues, which can operate as a barrier to workforce participation.
In 2015, only 53.4 per cent of people with disability were working or actively looking for work. In comparison, 83.2 per cent of people with no reported disability were working or actively looking for work.
Aspergers Victoria highlighted the specific barriers that people with Aspergers experience, despite their 'higher-than-average IQ, specialised knowledge and often extraordinary creative talent and productivity'. These barriers include challenges with communication and social skills and also difficulty adapting to change.
Migrants and refugees
The Settlement Council of Australia submitted that 'new Australians from a migrant and/or refugee background represent some (though clearly not all) of the most vulnerable job seekers'. As a result, they 'encounter significant difficulty in entering the Australian labour market'. The Settlement Council described the barriers to employment experienced by this group:
It is accepted that overall, it takes time for newly arrived migrants to achieve the same levels of labour market engagement as persons born in Australia. Similarly, within the broader class of migrants, different groups, such as migrants from a refugee background, report lower levels of economic participation than others. This is a result of a number of different factors that impact a migrant’s employability and economic independence on their arrival in Australia, including lack of Australian work experience, difficulties in obtaining skills assessments and challenges faced as they develop their English language skills.
Research clearly demonstrates that migrants, including those from a refugee background, possess a strong desire to work and a resourcefulness and resilience which is fundamental to long term job outcomes. However, the settlement process is complex and highly variable, meaning that not every new Australian is ready to start job-hunting immediately upon their arrival in Australia.
According to the Refugee Council of Australia, longstanding barriers to employment for refugees include de-skilling, a lack of opportunities to attain relevant Australian work experience, and difficulties in the recognition of prior qualifications and experiences.
Mental health issues
People with mental health issues experience multiple and significant barriers to participation in employment. According to Beyondblue, these barriers include:
…issues specific to the nature of mental illness; stigma and discrimination; the perceptions, attitudes and understanding of employers; and structural issues associated with poorly coordinated services and financial disincentives to participate in work.
The committee heard from submitters with mental health issues. For example, Mr Thomas Studans, who is 27 years of age, noted that his major depressive, anxiety and panic disorders limit his ability to participate in the labour market. Mr Studans also noted that mistreatment in employment caused further harm to his mental state.
The barriers to employment for women vary considerably according to their circumstances. Barriers to employment are amplified for women 'who have increased experiences of discrimination and reduced agency'. This includes women with disabilities, women who are ethnically, culturally, or linguistically diverse, and First Nations women.
Single mothers face particular difficulties participating in the workforce, especially if they have minimal or no assistance with unpaid work duties. Good Shepherd Australia New Zealand (GSANZ) interviewed 26 single mothers about their experience of the employment services system. GSANZ reported that the women they interviewed 'expressed the difficulty of being both the sole provider for their household and sole parent to their children'. In this regard, GSANZ submitted that:
For single mothers, the lack of supportive policies to ensure a safe and effective method for collecting child support is a critical barrier to their economic security.
Women disproportionately experience all forms of intimate partner violence, which includes physical, sexual and psychological attacks and economic coercion. In addition to having a detrimental impact on the physical and mental health of women, intimate partner violence can operate as a barrier to employment:
Experiences of intimate partner violence therefore leads to reductions in women’s ability to engage in employment through a range of negative outcomes, which can include ongoing reductions in physical and mental health and experiences of trauma; the need to relocate; increased days off or workplace-situated harassment from perpetrators; reduced job-ready history (including reduced access to education and/or career-track positions); and increased overall financial insecurity which leads to housing stress, lack of ready transportation, inability to pay for child care, reduced access to internet, and other deficits which make finding and engaging in paid employment challenging.
ACOSS and Jobs Australia submitted that another barrier to employment for women relates to their economic security:
Workplace discrepancies persistently undermine women’s economic security, through the gender pay gap (currently averaging 14.6 per cent); the under-representation of women in senior and leadership roles; the high levels of women who are in precarious (casual, seasonal, insecure, and affording little or no organisational voice or decision-making) or part-time employment; and low levels of superannuation balances compared to their male counterparts.
ACOSS and Jobs Australia also highlighted that the burden of unpaid work also continues to fall disproportionately on women. Women work more hours than men; however the majority of those hours are unpaid:
The Workplace Gender Equality Agency reports that women work a total of 56.4 hours per week—of which 64.4 per cent is unpaid work, with only 35.6 per cent of those hours paid; this compares poorly to men, who work only 55.5 hours per week—of which 36.1 per cent is unpaid, with 63.9 per cent of those hours paid.
Long-term unemployment can itself be considered a barrier to employment. People who have been unemployed for a long time generally experience greater difficulty finding subsequent work. Additionally, the longer people are unemployed, the more their paid work prospects diminish. Reasons for this include skill depreciation, loss of motivation, screening out by employers and marginalisation from the labour market:
Long-term unemployment (defined as longer than one year unemployed) itself puts people at a disadvantage as they lack recent work experience and references, and employers often use this to screen them out of job interviews.
Causes of long-term unemployment are diverse. Long-term unemployed people are 'more likely to belong to groups who struggle to secure paid work'.
The committee acknowledges that while the majority of Australians enjoy fulfilling and productive employment arrangements, headline unemployment statistics can obscure the difficulties faced by many unemployed and underemployed Australians to find and sustain work. Further, the committee notes that securing work is particularly difficult for various categories of disadvantaged Australians who face a highly competitive labour market and often experience multiple barriers to employment. The services and support available to participants in jobactive are discussed in Chapter 5.
Methods by which Australians gain employment
Most recruitment activity in Australia occurs without the involvement of the government. According to the ABS, the most common methods used by unemployed Australians to find work, as at February 2018 were:
Looked at advertisements for jobs on the Internet, in a newspaper or on notice boards (89.2 per cent).
Wrote, phoned or applied in person to an employer for work (86.2 per cent).
Answered an advertisement for a job on the Internet, in a newspaper or on notice boards (75.6 per cent).
Contacted friends or relatives (51.6 per cent).
Had an interview with an employer (42.6 per cent).
The ABS found that similar methods were commonly used by underemployed Australians to find work, but at lower percentages:
Looked at advertisements for jobs on the Internet, in a newspaper or on notice boards (40.4 per cent).
Wrote, phoned or applied in person to an employer for work (34 per cent).
Asked current employer for more work (32 per cent).
Answered an advertisement for a job on the Internet, in a newspaper or on notice boards (31.2 per cent).
Contacted friends or relatives (22.6 per cent).
Online recruitment is increasingly used by Australians as a method to gain employment. Approximately 60 per cent of job vacancies are advertised online. In some industries, employers are 'increasingly using social media or mobile apps as a way of connecting with potential workers'. The Department of Jobs and Small Business noted that:
Recruitment is increasingly being done online, with more and more job seekers and employers using a range of platforms such as SEEK and Indeed to fill jobs.
My Pathway, a jobactive provider, observed that the increasing use of online recruitment can further disadvantage people that lack digital skills. NESA supported this view, highlighting research that:
…indicates that disadvantaged job seekers (e.g. unemployed job seekers who are low income and live in low-SES areas) are being ‘left behind’ and will continue to be ‘left behind’, as the Internet takes on a more significant role in the employment process.
Despite the popularity of online recruitment, for some individuals, other methods of finding work may be more effective. A facilitator for the Career Transition Program (a pilot program), submitted that the jobactive participants they interacted with could have improved their chances of securing employment by engaging with community networks:
Given the requirement to meet jobactive obligations, this cohort applied for jobs using Seeks online system so they could manage job application records and report to their Job Search Provider accordingly, which is contrary to the way the majority of jobs are gained. During the program we looked at data showing the number of jobs that come through personal networks. It became clear to the majority of participants that they needed to make efforts to connect with networks more effectively. We explored ways to do this via volunteer work and other work in community organisations to build relationships, rapport and trust so they are in the minds of employers when job opportunities become available.
In a similar vein, My Pathway commented that across the Tasmanian regions in which they operate 'many positions are filled through word-of-mouth, existing networks or door stopping. Most of all, employers are drawn to job seekers who demonstrate proactivity'.
Employment services in Australia: an outsourced model
Australia is unique in its approach to public employment services. It was one of the first countries to contract out employment services and it is the 'only OECD country to outsource the entire delivery of its publicly funded employment services'. In 1998 the Howard government created the Job Network, 'a fully subcontracted employment placement market', which evolved over the following decade. In 2009, the Job Network was replaced by Job Services Australia.
On 1 July 2015, Job Services Australia was itself replaced by jobactive. The Department of Jobs and Small Business advised that 'the balance between service and outcome fees was changed to place greater emphasis on employment outcomes and provide a stronger incentive for jobactive providers to achieve them'.
Jobactive is the government’s generalist employment service. There are also a number of complementary programs for specific groups and particular objectives. For example the government funds several related employment services including Disability Employment Services and the Community Development Programme. Another example is the Transition to Work service which provides 'pre-employment assistance to young people who have disengaged from work and study and are at risk of long-term welfare dependency'. The Department of Jobs and Small Business has acknowledged that ‘there is a risk that disadvantaged job seekers could fall between the cracks if they are not part of the cohorts targeted by the complementary programs.
The government also runs an employment services program, ParentsNext, for unemployed parents of children under 6 years of age who receive the Parenting Payment. The ParentsNext program is currently subject to an inquiry by the Senate Community Affairs References Committee.
Several other related government programs, such as Newstart, the Youth Jobs PaTH internships program and wage subsidies are outlined below.
Overview of Jobactive
Jobactive is the largest program through which employment services are delivered and is administered by the Department of Jobs and Small Business. The Department oversees the delivery of contracted services including through compliance and performance monitoring. According to the Department, jobactive has achieved over 1 million job placements since July 2015 and has more than 650 000 people engaged at any time.
There are 42 jobactive providers operating over approximately 1 700 sites in Australia. The jobactive program is delivered in 51 employment regions across Australia. Job seekers who are eligible for employment services, but reside outside the employment regions, are serviced by the Community Development Programme.
Over $6 billion in funding has been allocated for jobactive employment services over the forward estimates period (2018-19 to 2021-22). The adequacy of current spending on employment services is discussed in Chapter 5 under 'Spending on employment services'.
The stated objectives of jobactive are:
helping job seekers find and keep a job;
helping job seekers move from welfare to work;
helping job seekers meet their mutual obligations; and
jobactive organisations delivering quality services.
Participation in jobactive is compulsory for people who receive income support, such as the Newstart Allowance or the Disability Support Pension, and who have been assessed as being able to actively look for work.
People not receiving an income-support payment, or those in receipt of income support that do not have compulsory requirements, are able to voluntarily access one period of jobactive services for up to six months. Volunteer participants comprise approximately 1.4 per cent of total participants.
Assessing the needs of participants
The Job Seeker Classification Instrument (JSCI) is a statistical tool used to measure the capacity and needs of job seekers. The tool allocates points based on answers to questions and ‘determines a job seeker’s relative level of disadvantage and their likelihood of remaining unemployed’. The assessment process is used to place a participant in one of three streams of service:
Stream A—these participants are the most job ready and require minimal support from their provider;
Stream B—for these participants, jobactive providers play a greater role in helping participants become job ready; and
Stream C – these participants require the most support to secure employment, often due to multiple barriers.
If the JSCI identifies that a job seeker has multiple or complex barriers to employment, they may need to complete an Employment Services Assessment (ESAt). The ESAt is used to refer job seekers to jobactive Stream C or Disability Employment Services.
Chapter 4 of this report considers the effectiveness of the assessment process in more detail.
Jobactive's new compliance framework, the Targeted Compliance Framework, gives employment services consultants responsibility for imposing demerit points. The compliance framework applies when a participant does not meet their mutual obligations (such as applying for jobs and attending appointments with their provider). The new framework was criticised by many stakeholders for being unnecessarily punitive and unfair (see discussion in Chapter 8).
The Targeted Compliance Framework was introduced in the 2017-18 Budget. The new framework increases penalties for persistent and deliberate non‑compliance. The framework includes a ‘warning zone’ for participants that are not meeting requirements, and a ‘penalty zone’ for repeated non‑compliance.
Jobactive uses wage subsidies, which operate as ‘a financial incentive to help overcome employers’ reluctance to hire certain groups by compensating employers for real or perceived lower levels of productivity’.
The Department of Jobs and Small Business has reported that:
Over 100,000 wage subsidy job placements have occurred under jobactive, which offers employers that hire an eligible job seeker up to $10,000 over six months. Wage subsidies have experienced significant growth in uptake since changes were introduced in January 2017 to make them easier for businesses to access and manage.
However, wage subsidies can introduce deadweight costs, for example, paying a wage subsidy for a person who would have been hired anyway.
The effectiveness of wage subsidies for employment outcomes is considered in Chapter 5.
Employment services providers
Jobactive participants either choose or are allocated an employment services provider. The government engages employment services providers through periodic open tender rounds.
Under jobactive, the performance of providers is largely assessed by a relative comparison of provider performance. Performance is measured by a star rating system comparing actual outcomes achieved and other performance indicators to expected performance based on regression analysis that factors in caseload and local labour market conditions.
The lowest performers face a potential loss of market share. The Department of Jobs and Small Business is responsible for monitoring the conduct of providers and determining penalties for non-compliance. The Department conducts regular performance reviews and action may be taken under the deed if a provider is not meeting their obligations or if their performance is poor.
The performance of providers is published via Star Ratings on the Department's website and the jobactive.gov.au website. Star Ratings are calculated at both Employment Region level and site level. The Star Ratings are designed to help improve employer and participant choice of provider and assist the Department in relation to business review and reallocation processes.
The Newstart Allowance (Newstart) provides basic financial support to unemployed people while they look for work. Approximately 727 500 people receive Newstart. Additionally, about 94 000 people receive youth allowance. The single rate of Newstart is currently $275 per week. The rate has not substantially increased in real terms since 1996. Newstart is designed to 'supplement other savings which would help unemployed Australians and their families through periods of unemployment'. However being on Newstart is not temporary for many recipients. Around 67 per cent of Newstart recipients have been on the payment for 12 months or more, and approximately 70 per cent have been unemployed for 12 months or more.
A number of organisations and individuals submitted that the low rate of Newstart operates as a barrier to employment and advocated for an increase in the rate. For example, GSANZ submitted that the low rate of Newstart 'creates additional barriers for single mothers to enter employment'. Ms Emma King, the Chief Executive Officer of the Victorian Council of Social Service advocated for a $75 dollar increase in the Newstart rate:
…we need to raise the woefully low Newstart allowance. It is so low that it stops people from finding work. People can't afford to pay rent and feed themselves, let alone pay for transport to attend a job interview.
This point was also been made by ACOSS:
…unemployment payments of $38 a day do not provide people with the minimum income they need to cover the most basic living expenses and undertake job search, which adds to the stress and anxiety faced by people who are unemployed.
A report by Deloitte Economics in September 2018 found that increasing the rate of Newstart and Youth Allowance payments by $75 per week would 'boost wellbeing in regional communities doing it the toughest, lifting the incomes of people most in need, as well as delivering 12 000 new jobs'.
The committee is persuaded by evidence that the low rate of Newstart can act as a barrier to recipients securing employment. The committee considers that the adequacy of the rate of Newstart must be reviewed.
The committee recommends that the government undertake a review of the adequacy of the rate of Newstart, with respect to keeping people out of poverty and getting people back into work as soon as possible.
Youth Jobs PaTH is an employment program for young people aged 15–24. PaTH provides employability skills training for participants (this includes training in work skills, career development and job preparation). Employability skills training is available for young people who are on income support, are registered with jobactive and have mutual obligation requirements.
The PaTH internship program is for young people aged 17–24. The internships run for four to 12 weeks and include 30 to 50 hours of unpaid work. Instead of receiving a wage, the participant receives an extra $200 per fortnight in addition to their normal income support payment. To be eligible, participants must be on income support with mutual obligation requirements and have been registered with jobactive, Transition to Work or Disability Employment Services for at least six months. Employers receive a payment of $1000 for hosting an intern.
According to Youth Action, PaTH in its current form is 'inadequate to support young people who experience additional barriers to employment'. The committee also heard that under the PaTH program there is a risk of exploitation and for genuine positions to be replaced by short-term subsidised placements. Additionally, participants in PaTH receive low pay for the internship.
Ms Anne Maxwell, a jobactive participant who gave evidence to the committee, described PaTH as an opportunity to showcase her skills, however, the placement did not lead to further employment:
I signed up and did a PaTH internship for three months—admin reception. I had a great opportunity to offer up extra skills in Photoshop, only to be kicked out by the end of the internship.
According to Ms Sally James, Head of Youth Programs at the Brotherhood of St Laurence, the design of PaTH is flawed:
…PaTH had good intentions but flawed models from the beginning. It had good intentions. Yes, paid work experience is a good way to go, particularly for young people who are disadvantaged and don't have the networks to get into work experience. It needs to be managed and regulated. Having a training bit and a work experience bit and being fragmented and not together is a big issue, and that's why it's not working.
However some stakeholders considered that PaTH, whilst having issues, was an improvement compared to jobactive.
The committee notes concerns raised by submitters around the design of PaTH. The committee is not convinced that the PaTH program has proved its worth for young job seekers. The program has failed to live up to expectations that it would help young people get a foot in the door. Instead, it has put young people at risk of exploitation, without sufficient protections if something goes wrong. The committee is of the view that the government must consider options to better protect and support young participants.
The committee recommends that the government review the Youth PaTH program and ensure that any future program provides adequate worker protection and payment.
New Enterprise Incentive Scheme
The New Enterprise Incentive Scheme is an initiative aimed at assisting eligible job seekers to create and run their own business. It is delivered as part of jobactive. Under the scheme, the government provides assistance to individuals not currently in employment, education or training who are interested in starting a business. The assistance includes:
…accredited small business training, helping to develop a business plan, business support and if eligible, income support (NEIS allowance) to encourage entrepreneurship.
Access to the scheme is restricted, with only 8 600 places available per annum.
The government's review of employment services
The government is currently reviewing employment services, with the current jobactive deed due to expire in 2020. As part of the review, the government established an Expert Advisory Panel to inform the design of future employment services.
In a June 2018 discussion paper, the government acknowledged that more needed to be done to assist the most disadvantaged job seekers (Stream C) to find work and move off income support. Research commissioned by the Department of Jobs and Small Business in 2017 found that:
some employers are averse to employing jobactive candidates due to a perceived lack of reliability
employment services consultants felt it was difficult to provide quality service to more vulnerable job seekers within the time constraints they work
employment services consultants felt they spent more time on administration (and compliance) than on securing job seeker outcomes.
In December 2018 the government released the report of the Expert Advisory Panel. The report made 11 recommendations for the future of employment services. The government is currently considering the report and recommendations. The Panel's recommendations are discussed throughout this report.
Additionally, the government is undertaking a number of trials to inform future policy decisions. The government's Online Employment Services Trial began in July 2018 and runs for two years.
The government is also undertaking a Regional Employment Trials program, which commenced on 1 October 2018:
In selected regions, employment facilitators will work with Regional Development Australia committees to develop local employment projects. A grant program will provide $1 million to each of the ten regions to develop local employment projects. For eligible job seekers, the trial will also examine how earlier access to relocation assistance to take up a job can assist with securing employment.
The committee notes the Expert Panel's review into the future of employment services. The committee considers that the recommendations in this report should be considered by government, as part of the government's response to the review.
The committee recommends that the government consider the recommendations of this report in its response to the review of employment services.
Consultation with unemployed workers
The following section considers the extent of consultation with unemployed people in the design and implementation of jobactive and in the government's review into the future of employment services.
During the initial design phase of jobactive, stakeholders had opportunities to provide feedback. In late 2011 the Advisory Panel on Employment Services Administration and Accountability consulted with stakeholders, including employment services participants, on ‘opportunities for streamlining administration and industry-supported solutions to reduce unnecessary administration’. In 2013, following the release of an employment services issues paper, consultation sessions were held with stakeholder groups including employment services participants. In 2014, the then Department of Employment consulted on the exposure draft to the Request for Tender. The Department received submissions from community sector representatives. Finally, in mid-2015 the new jobactive arrangements were launched.
However, many submitters to this inquiry considered that there had not been adequate consultation with unemployed and underemployed workers in the design and implementation of jobactive. The AUWU expressed 'deep concern' regarding:
[the] government's ongoing refusal to meaningfully consult with and include unemployed workers and their representatives in the creation and implementation of unemployment policy in Australia.
The AUWU suggested that employment policies were 'out of touch with the reality of unemployment' because participants were 'not given a seat at the table'. Similarly, Aspergers Victoria was concerned about the lack of consultation in the design of jobactive:
Aspergers Victoria was not consulted nor are we aware that any of our members were consulted. Because of the specific requirements of Aspergers job seekers, it is imperative that AV and our members are consulted in the design and implementation of jobactive services.
In its submission, the Department of Jobs and Small Business referred to the audit of jobactive undertaken by the Australian National Audit Office (ANAO). Although the ANAO's overall conclusion was that stakeholders were adequately consulted on the design of jobactive, the ANAO audit did not specifically consider the adequacy of consultation with unemployed and underemployed workers. Additionally, NESA submitted that engagement with job seekers was low according to the ANAO report:
While job seekers and indeed other stakeholders had the opportunity to provide feedback, it is clear from the ANAO’s report that the level of engagement of job seekers was low and subsequently, their voice not heard proportional to other stakeholders.
Furthermore, NESA submitted that consultations on the design of jobactive did not provide sufficient detail:
To illustrate, the Employment Services 2015–2020 Exposure Draft paper while providing an overview of the proposed jobactive program did not provide sufficient detail to enable informed discussion about the adequacy of services. Stream A is a basic service that is suited to job seekers with a high level of independence in their job search and designed for the ‘job ready’. It would not have been transparent to stakeholders that the proposed model would today result in Stream A consisting of 40% long and 25% very-long term unemployed, and that it would be the service level afforded to job seekers facing issues such as homelessness, mental health, disability, substance dependency, recently released prisoners or recent humanitarian arrivals.
NESA submitted that the changes made to the jobactive model following consultation could be regarded as 'at the margins'. The committee also heard that stakeholders were not aware of any consultation with unemployed or underemployed people in the implementation phase of jobactive.
There were mixed views on the adequacy of consultation for the current review of employment services. The Settlement Council of Australia was broadly supportive of the consultation undertaken as part of the review and more broadly:
SCoA notes that Australians from migrant and/or refugee backgrounds have traditionally had negligible involvement in the design and implementation of jobactive. However, we acknowledge the positive effort taken by jobactive providers and their peak bodies to engage with this community, and welcome the positive steps taken by the Expert Panel to take a range of diverse voices into account as they consider the future of employment services in Australia. We would hope that such commitment continues into the future and that the opportunity for all jobseekers to be heard be entrenched in both the design and implementation of employment services.
As with consultation on the design of jobactive, NESA submitted that consultation for the future of employment services lacked sufficient detail:
The Next Generation of Employment Services Discussion paper regarding 2020 reform; contains similarly insufficient description of the cohort of job seekers likely to receive a digital only service in the next iteration of services proposed to replace jobactive... Additionally, these discussion papers reassuringly describe mechanisms for job seeker movement if their circumstance change, but fails to describe the complexity and restrictions imposed in the required processes.
The AUWU pointed to the lack of representation of unemployed workers on the government's Advisory Panel:
The government’s Employment Services Expert Advisory Panel was created by Minister Cash to provide the government with advice on policies affecting unemployed workers. However, not one member of the panel is an unemployed person, nor is likely to have been on Newstart Allowance in the last decade, nor represents the views of unemployed workers.
A jobactive participant submitted that they did not feel like they had a say:
It is completely unacceptable that there are no job seekers on the government's Department and expert Advisory Panel… This system should be tailored to our needs and wants. By excluding us from the design and implementation of the service like this, the government is sending a very clear message that it doesn't care about our perspectives and requirements at all.
The AUWU suggested that the government's failure to consult has led to most participants losing all trust in the system. The AUWU submitted that involving unemployed people in the design, implementation and evaluation of future employment services would 'ensure both a more effective employment services system and its ongoing integrity'. This was also the position of NESA:
The unique perspectives of the consumer, they being those most affected and those delivering the service, are essential to understanding how elements of the framework individually and/or through interaction, either enhance or hinder achievement of objectives and the service experience at the point of delivery.
Similarly, My Pathway, a jobactive provider, suggested that 'timely and clear consultation with job seekers, employers and providers will support the success of any program changes'. NESA also submitted that formalised ongoing consultation was necessary to ensure continuous improvement of employment services.
The committee notes that many jobactive participants and some providers do not feel that their voices have been heard during consultation on the design of jobactive. The committee also considers that consultation on the future of employment services did not include sufficient detail on the proposed reforms.
To restore trust in employment services, the government must consult in a meaningful way with jobactive participants (including participants from disadvantaged groups) and other unemployed and underemployed Australians in designing the future of employment services.
The committee recommends that the government consult in a meaningful way with jobactive participants (including participants from disadvantaged groups) and other unemployed and underemployed Australians, as well as employment services providers, in designing future employment services.