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Labour Market Programs in 1995: Overview and Assessment
Steve O'Neill
Economics, Commerce and Industrial Relations Group
Introduction
Description of programs in 1995
Budget costs and placements
Working Nation Evaluation of the Employment,
Education and Training Elements (DEETYA, July 1996)
Assessments of effectiveness of labour market
programs
Endnotes
This Current Issues Brief provides information on labour market programs
(LMP) operating in 1995. The key programs are described under the headings
of employment programs, or training and assistance programs.
Issues addressed in this Brief include the titles and descriptions of
the program, the numbers using the program, budget costs including administration
costs and the net 'unit' costs of placing an applicant under each of the
programs. Also a summary of the main findings of Working Nation: Evaluation
of the Employment, Education and Training Elements (DEETYA 1996) is
provided in this Brief. A commentary on the effectiveness of labour market
program spending concludes the Brief.
The first section provides descriptions of programs available in 1995.
The next section provides data and statistics on placements and Budget
costs. Then the main findings of the DEETYA review are summarised and
the last section evaluates the effectiveness of LMP.
The labour market programs (LMP) reviewed in this paper are those which
are identified in Program 4 of the (now) Department of Employment,
Education and Training and Youth Affairs (DEETYA).
Employment programs
These programs pay an allowance to the jobseeker, or a subsidy to an
employer. When a jobseeker is placed under an employment program, the
allowance/subsidy replaces the individual's benefit received from the
Department of Social Security (DSS)(1). Thus DEETYA bears the cost of
employment program placements.
JobStart is the principal wage subsidy program paid to employers,
allowing them to employ a jobseeker under a subsidy (commencing at $100
pw for an adult) and generally available for 13 weeks.
NTW, National Training Wage, is also a subsidy scheme
available to employers, but the employer and jobseeker need to sign a
training agreement to be eligible for this subsidy.
NWO, New Work Opportunities, is the twin of JobStart. It allows
public funding of projects in situations/regions where it is unlikely
that a private employer would be able to offer a placement (under a wage
subsidy).
LEAP, Landcare and Environment Action Plan, provides training
and experience to people, aged 15 to 20 years, in environmental projects.
JobSkills Provides adults with training and work experience through
community organisations, whom DEETYA terms brokers. Brokers submit a costed
project (including the numbers of trainees to be employed) to DEETYA for
funding.
NEIS, New Enterprise Incentive Scheme is a program which provides
financial assistance for an unemployed person to start a small business.
Training and Assistance Programs
In most cases, these programs allow the jobseeker to retain payment
of an unemployment benefit paid by DSS while the individual undertakes
training under a DEETYA program.
JOBTRAIN allows jobseekers to receive a benefit (the Formal Training
Allowance) while participating in training courses, usually of 8 to 10
weeks duration.
Special Intervention provides for professional assessment of
individual jobseekers.
ATY, Accredited Training for Youth, provides young jobseekers
with special access to training places in courses such as TAFE courses.
Job Clubs are support and personal development programs allowing
jobseekers to access skills and facilities (fax, telephones) in order
to approach employers.
SkillShare allows community organisations to receive funding
to run training programs, but they must secure 15% of costs from the local
community. Services include personal referral and enterprise activities.
There were 402 SkillShare projects in 1995.
MAS, Mobility Assistance Scheme, provides relocation assistance
to jobseekers.
CAP, Community Activity Program, allows jobseekers and spouses
to undertake voluntary work. DEETYA advises that CAP is to be replaced
by the NWO program.
TAPS, Training for Aboriginal and Torres Straits Islanders Program,
is designed to provide broad ranging employment assistance to indigenous
peoples, both employed through career development and to the unemployed
through public and private employment providers. TAPS is not the same
program as the CDEP, Community Development Employment Program, which also
provides employment placements. It was decided in 1992 that the Aboriginal
and Torres Straits Islander Commission would administer the CDEP program.
OLMA, Office of Labour Market Adjustment, allows retrenched workers
and those threatened with retrenchment access to information on alternative
employment opportunities as well as financial assistance to seek new work.
Table 1: Labour Market Programs: Data for 1995, except for Unit Costs
NOTES TO TABLE
Commencements and Program Costs: House of Representatives
Hansard 29 August 1995: p.760. The table cites 'other programs'
as Contracted Placement, Post Placement Support, Post Placement Support
for People with Disabilities and Work Experience for People with Disabilities.
Positive Outcome: DEET's Annual Report 1995 p.175. The
success of placing a jobseeker in subsidised employment is assessed
if the jobseeker retains employment (or moves into further education),
3 months after the support finished. Information was not available for
each program.
Unit Costs: This data is based on 1993-94 costs. Net
unit cost is derived from the total costs of the placement and its
duration under the relevant DEETYA program less savings accruing to
the Department of Social Security as income support measures (JobSearch
and Newstart allowances) need not be paid while the individual derives
a benefit from the DEETYA program. The former Minister in the Hansard
cited on 29 August 1995, p.757-758, referred to a complex formula for
making this calculation. Again, information was not available for each
program.
Programs/services not included in Table 1 because they are not strictly
comparable with the mainstream programs include, eg apprenticeship subsidies
which are designed to apply over the four year life of the apprenticeship,
whereas other mainstream subsidy and training programs are of approximately
three to six month duration. Yet other schemes are a much more short term,
immediate assistance variety (which may last for a month or less). Schemes
not included in the table are: Jobs, Education and Training (directed
towards sole parents), the Disability Reform Package, Migrant
Service Improvement Strategy, External Disability Assessment,
Interpreter Services, Advanced English for Migrants Program,
Disability Access Support Units, Mature Workers Centres,
Group Employment Program, Support for Apprentices, Support
for Traineeships, and Employment Assistance Australia (which
provides case management services).
The DEET Annual Report (1995 p.159) notes that the program costs for
its Program 4 was $1.621 billion, up marginally from its 1993-94 budget
outcome of $1.501 million. The difference between $1.621 billion and the
total of $1.458 billion shown in Table 1 can largely be accounted for
by the subsidies for apprenticeships and traineeships of sub-program 4.3.2
under the Apprentice Training Incentive and similar schemes. These
are not included in the table. The cost of the apprenticeship programs
in 1995 was around $115 million.
Administration costs (running costs) for the Program were $514.5 million
in 1994-95 compared to $536 million for the previous year. Thus total
costs (program costs plus running costs) were $2.036 billion in 1993-94
and $2.135.3 billion in 1994-95 ($1.71 billion 1992-93).
The costs of the operation of the Commonwealth Employment Service (CES)
and some other services are included in the running costs (indeed CES
operations make up almost half the department's running costs budget),
but not reflected in Table 1, ie the costs of individual programs.
A review of LMP was commissioned by the then Minister in late 1994.
The Report of the Commonwealth Employment Service Advisory Group (CESAC)
recommended streamlining the programs into four categories to make access
to the programs simpler for employers and jobseekers(2).
This report notes that when Working Nation was established the
former government 'required an interim evaluation for consideration in
the 1996-97 Budget'(3). This report satisfies that requirement.
Summary of main findings:
- the level of unemployment has decreased significantly since late 1993.
The decrease commenced prior to Working Nation. The fall was
based on strong employment growth and slower than expected increase
in the labour force (p.vi).
- the reduction in long term unemployment exceeded what could have been
expected on the basis of 1980s experience (p.vii).
- early evidence indicates that many of the long term unemployed (LTU)
are unemployed after completing program placements. For Job Compact
placements (ie those unemployed for 18 months or more), unsubsidised
outcomes three months after the subsidy finished range from 22% for
NWO, 33% for JOBTRAIN, 37% for Job Clubs to 52% for JobStart. (p.vii
and p.110).
- there is evidence that employment programs (as well as other programs)
increase the employment prospects of participants compared to those
not assisted, however, these improvements vary between programs (p.vii).
- Working Nation only led to a small increase in placements,
but there was a significant change in the mix of programs with a decrease
of those placed under wage subsidy programs and increase in those placed
under brokered schemes such as NWO and JobSkills (p.vii).
- those unemployed for three years or more increased their share of
program assistance while the 12 to 18 months unemployed category lost
their share. Those in the category of 12 months or less unemployed initially
lost share then increased it (p.vii).
- there was a problem of administrators not recognising poor work skills
(education, literacy and numeracy) of a proportion of the 'at risk of
LTU' (ie those whose unemployment duration might exceed 12 months) (p.viii).
Case Management
- case management provided more personalised assistance to disadvantaged
jobseekers and is supported by clients and CES staff. However, the report
finds case management of limited success due to pressures to seek short
term targets and does not find that case management is significant in
leading to unsubsidised employment outcomes.
- those assessed as unable to benefit from case management (the 'hard-core'
unemployed) should not be referred in the first place. The role of case
managers in localities which have extremely poor employment opportunities
needs to be reviewed (p.ix).
- there was confusion about the role of 'competition' in the supply
of case management between contracted case manager organisations (CCMOs),
the CES and the public sector case management supplier Employment Assistance
Australia (EAA). The outcome measure is also important to the fee structure
for CCMOs. In a competitive environment, rewards need to be restructured
so that the focus of those providing assistance is on getting clients
into employment, rather than into an employment program (p.ix).
The Job Compact
- the Job Compact targeted those unemployed for 18 months or more and
aimed to give these clients a job offer or training placement - the
refusal of which would lead to cancellation of allowances (p.x).
- Working Nation forecast a decline in the Job Compact group
by 47% over the period June 1994 to December 1995. The group declined
by less than 20% over the period. The lower than expected fall in the
size of the group has made it very difficult to honour the Job Compact,
ie placing all in the group in a job by July 1998.
- the lower than expected fall in the size of the group was in part
due to a higher than expected inflow into the targeted group and related
also to the fall in the level of assistance going to the 12 month to
18 month unemployed group (p.x).
- under Job Compact arrangements, JobStart (the wage subsidy to employers)
was enhanced to make a placement more attractive to employers. However
employers value jobseeker quality more highly than other considerations,
including the opportunity to give an unemployed person a go and the
level and duration of subsidies offered (p.x).
- other factors which mitigated against the success of the Job Compact
were the unfair dismissal laws, the decision of DEET to holdback JobStart
in preference to the National Training Wage (which is also a subsidy
to employers) nine month placements which employers considered too long
and the introduction of brokered programs in the private sector. Thus,
most Job Compact placements occurred under NWO which DEET considered
too expensive compared to subsidies (p.xi).
- the report recommends that a guarantee of employment not be made to
all LTU clients. Given the higher cost and lower effectiveness of brokered
programs, access to the brokered schemes should be reserved for the
most hard to place clients. Assistance should be redirected to short
term unemployed (p.xi).
Youth Training Initiative
- the aim of YTI was to prevent young people (<18 years) becoming
long term unemployed. Those on an allowance for 13 weeks were provided
with intensive case management so that they would either return to school,
pursue vocational training or find employment (p.xi).
- educational objectives rather than employment targets were the aim
of YTI and this was consistent with the Finn Report (1991) to
raise the proportion of school leavers completing high school to 95%
of school leavers.
- YTI has not succeeded in returning clients to school due to a combination
of their attitudes to formal schooling, the absence of educational alternatives
to formal schooling and reliance on LMP rather than on developing strategies
specifically for early school leavers.
- YTI has been successful in steering these young people into case management,
but more emphasis needs to be given to educational outcomes (p.xi).
Entry Level Training
- ELT sought to create a flexible, nationally consistent training system
through traineeships. The evaluation found that these were received
well by employers, and they were introduced to new industries (p.xii).
- some weaknesses of the scheme include a perception that while the
trainee wage is seen as acceptable by those under it, the training received
may not have been at a quality level. If the training is perceived as
deficient, trainees will leave. Monitoring needs to ensure that the
quality of training was at a sufficient standard.
- ELT was slow to start but has generally met its target, although many
employers are still unaware of the ELT program (p.xii).
Employer Servicing
- Working Nation sought to expand the CES industry coverage and
vacancy share and to encourage employers to take on more LTU and improve
the links between the CES and local employers. It appears to have been
generally successful in achieving these goals although it is not known
if there has been an increase in the share of vacancies going to the
CES (p.xii).
- employers were generally satisfied with those referred (about 46%),
although a significant minority of employers were dissatisfied (41%).
- employers who hade never used the CES wanted more information on its
services and programs.
- for job ready jobseekers, the CES could offer employers a choice of
self referrals or screened referrals. Self referrals resulted in a quicker
filling of a vacancy. Screened referrals usually resulted in a better
match of qualities desired by the employer to those possessed by the
applicant, but the process was slower, although a quick match did not
appear to be a high priority of most employers (p.xiii).
The report concluded that many of those who participated in an employment
program returned to unemployment after leaving assistance and were likely
to have their ABS unemployment duration shortened. Greater use of the
brokered programs would have 'increased the extent of reclassification
of job-seekers from long-term unemployed to short-term unemployed'(4).
- The 1995 CESAC review of LMP canvassed the potential confusion to
employers, brokers and clients of the array of programs, the fact that
each program has its own guidelines and that these are known only to
the most experienced officials. Another report of the pending changes
to LMP referred to the notion that 'a sophisticated range of labour
market programs should be provided to assist unemployed people finding
a job'(5). The CESAC review recommended that the programs be streamed
into four broad groupings although many of the functions and purposes
of the existing programs would continue. However the Government now
appears to favour retention of four of the nine core programs(6).
The OECD generally accepts the need for the range of LMP currently
operating in its member states. In its Employment Outlook, it
observed that LMP could be classified into the following standardised
categories:
1. Public employment services and administration
2. Labour Market Training
3. Youth measures
4. Subsidised employment
- Subsidies to regular employment in the private sector
- Support for unemployed persons starting enterprises
- Direct job creation (public or non-profit)
5. Measures for the disabled
- Vocational rehabilitation
- Work for the disabled
6. Unemployment compensation
7. Early retirement for labour market reasons(7).
Thus, while there were many individual labour market programs operated
by DEET in 1995, they would all fall into one or another of the OECD
standardised categories and sub-categories. In other words by OECD
standards, the variety of programs offered in 1995 was not unique.
LMP have particular macro economic effects by making the labour
market more efficient by helping to ensure that the market clears.
As well, LMP can have positive budgetary effects by (ultimately) reducing
social security payments and increasing tax receipts, a point made
by Ross Gittins(8) recently, but also by John Piggott(9) earlier.
The OECD claims of LMP that:
Active policies can improve macroeconomic performance while at the
same time meeting equity objectives. They can reduce structural unemployment
by facilitating the matching of workers to jobs and keeping the unemployed
in contact with the labour market while at the same time improving
their skills ... However, active policies are not without costs, and
they need to be effective in order to justify the large public spending
on them(10).
The DEETYA report Working Nation: Evaluation of the Employment,
Education and Training Elements has found that certain programs
have not realised the outcomes expected of them in 1994 and urged
that LMP targets and achievements be 'realistic'. However it might
be useful to recall an earlier report which pointed to the benefits
of LMP, in terms of budgetary, employability and employment outcomes.
The Committee which made the report Restoring Full Employment
(1993) the precursor to Working Nation argued:
A fairly crude estimate is that some 45 000 new jobs were directly
created by labour market programs of the Commonwealth Government during
1992-93. The current level of spending (then about $1.5 billion excluding
CES operations) would be hard to justify if it depended on this criterion
alone ... active programs have the advantage that they can be clearly
targeted to long-term unemployed people and reduce their dependence
on income support(11).
(But) for every dollar spent, the ... estimates suggest that the
Government gets back between 37 and 64 cents in savings, depending
on the program. This illustrates that the net additional cost of
making passive assistance, active for unemployed people, is considerably
less than the program budget alone suggests(12).
In addition, the bulk of evidence on the budgetary impacts of LMP
spending, both local and international, suggest a need to consider
LMP benefits beyond the individual program costs. The value of these
programs as perceived by labour market economists is that they are
able to provide opportunities to access employment for individuals
who would otherwise miss out. Even if a high proportion of such individuals
fall into unemployment again upon completion of programs, the work
experience gained under LMP is likely to enhance their potential to
be re-employed over the longer term.
- The DEET publication Programs 1995-96 (AGPS 1995) is recommended
for a more detailed explanation of these programs.
- Report of the Commonwealth Employment Service Advisory Committee
on Labour Market Programs (AGPS 1995).
- Working Nation: Evaluation of the Employment, Education and
Training Elements Department of Employment, Education, Training
and Youth Affairs (July 1996): v.
- Ibid: 110.
- 'Jobs-for-all may go with Budget cuts', The Australian Financial
Review 21 May 1996.
- 'Job schemes face $1.3 billion cut' The Australian 2 August
1996.
- Employment Outlook 1993 OECD: 71-72.
- 'How to screw the unemployed', Sydney Morning Herald 5
August 1996.
- Costing the Job Compact paper presented to the Conference
of Economists by Professor John Piggott in 1994. He concluded that
it would be possible for the Job Compact to make a return
to the Budget of over $300 million.
- Employment Outlook 1993, OECD 1993: 67.
- Restoring Full Employment A Discussion Paper, Committee
on Employment Opportunities (AGPS 1993): 107.
- Ibid: 102.
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