Foreword

I am not a shirker, a scrounger, a beggar, nor a thief. I'm not a … blip on a screen. I paid my dues, never a penny short, and proud to do so. I don't tug the forelock but look my neighbour in the eye and help him if I can. I don't accept or seek charity. My name is DanielBlake. I am a man, not a dog. As such, I demand my rights. I demand you treat me with respect. I, Daniel Blake, am a citizen, nothing more and nothing less.

This is a quote from the movie I, Daniel Blake; an account of one income support recipient’s engagement with the welfare system in the United Kingdom. If you haven’t seen it, you should.

While the events of I, Daniel Blake are fictional, the film’s sobering critique of an employment services system with rigid rules that treats people as mere pieces of data rather than human beings would be all too familiar to so many people who have engaged with Australia’s employment services system since privatisation 25 years ago. Workforce Australia is just the latest iteration of the system, promising respectful, connected, simple and supported services. Yet the overwhelming weight of evidence is that this promise has not been fulfilled and that fundamental change is needed which cannot wait; both to better support the most disadvantaged in society and reduce long‑term unemployment and to get better value for money. Over $9.5billion will be spent over the next four years. Employment services are the Commonwealth’s largest single procurement outside Defence.

This inquiry has been the only ‘first‑principles’ review of the employment services system in several decades—it is far more than just a review of the latest iteration Workforce Australia (which was itself designed for a very different labour market). It’s not a fairy floss review. There were no ‘sacred cows’ and all aspects of the system have been interrogated in an open minded and non-partisan manner led by the evidence, not ideology, outside interests or direction. This report makes 75 recommendations, informed by over 300 submissions, more than 60 hours of witness testimony, over 50 meetings and site visits including with jobseekers, employers, employment service providers, academics, social enterprises, local and state governments, social welfare groups, training providers and other human services in every state and territory, plus direct engagement with OECD experts and over 10 other nations.

It’s harsh but true to say that Australia no longer has an effective coherent national employment services system; we have an inefficient outsourced fragmented social security compliance management system that sometimes gets someone a job against all odds. The system does not effectively serve jobseekers or engage service partners, and it is overly focussed on supply (jobseekers) rather than demand (employers). Government must be far more actively involved with a public sector core to a rebuilt system. Mutual obligations need to move away from a one-size-fits all approach that ties the system up in red tape, drives employers away, and makes people less employable, and must be broadened and tailored to the individual.

Critique and analysis – why change is needed

Australia’s system has long been designed in a deficit paradigm, underpinned by two flawed theories. Firstly, that unemployment is always an individual failing (ignoring structural and major barriers like ageism, racism, a lack of suitable work and thin labour markets, health, and disability). This drives the belief that if you only beat disadvantaged people hard enough to do the same things over and over they’ll somehow magically get a job, and if they don’t they’re lazy—the pernicious myth of the ‘dole-bludger’. Secondly, that more choice and competition in human services in every place, as well as harsh performance management, will inevitably result in better services and employment outcomes—especially for vulnerable and long-term unemployed people. Both theories have been proven to be rubbish, yet we have persisted in designing the entire system around them. The system designed for the few who cheat–around the worst people in society and the worst providers.

Consistent with the findings of previous reviews, it is clear that the overwhelming majority of unemployed people want to work. But the current rigid approach to mutual obligations is killing unemployed people’s intrinsic motivations and efforts to seek work, by drowning them and those paid to help them in a mountain of red tape, compliance requirements and pointless mandatory activities. People are made to do silly things that don’t help them get a job—such as pointless training courses or applying for jobs they won’t get—and are then harshly and repeatedly sanctioned for trivial or inadvertent breaches of prescriptive rules. It is ridiculous that over 70per cent of people with providers have been subject to payment suspensions despite zero evidence that 70per cent of people are cheating the system. The Robodebt Royal Commission’s finding that fraud in the welfare system is minuscule is apt. The nature and extent of mutual obligations is like using a nuclear bomb to kill a mosquito.

Employers have fled the system, dodging floods of inappropriate job applications. Providers are forced by the payment and performance frameworks to repeatedly try to place jobseekers into unsuitable vacancies to chase outcomes payments so they can pay their staff and make a profit, yet there are inadequate incentives or support for business to take on disadvantaged jobseekers. The system is unbalanced, focussed on supply rather than matching demand, and employers’ disengagement from the system also means that people are missing out on more effective in-workplace training.

So many job agency staff are compassionate, caring people who deliver great outcomes and small miracles in difficult circumstances. Generally, providers want to help people. Yet overall, the employment services system is not delivering optimal outcomes or value for money. Almost without exception staff told us that they were consistently having to fight against the system to help their clients. There is little time or ability to tailor services, and the workforce is in crisis with over 40per cent turnover of frontline staff. Low paid, de-professionalised and de‑unionised, many staff do not possess the skills or qualifications to support an increasingly vulnerable and heterogenous client caseload. Only around 12,000 of the 20,000 provider staff deliver frontline services (the rest are in management, administration, or service support). Moreover, the system is so choked with red tape, compliance and inefficient ITsystems that staff now spend 50per cent or more of their time on administration rather than working with clients and employers.

It should not be controversial to conclude that that full marketisation has failed. The failures of the current outsourced quasi-market system, driven by neoliberal New Public Management theories that have exhausted their utility, have been identified repeatedly by experts and analysts. The costs of the system are not properly acknowledged. Indeed, even the previous government, which lived and loved to privatise and outsource whatever bits of the public service they could, implicitly admitted that privatisation had failed by bringing a large share of the caseload back to the public sector in Workforce Australia. Yet the problems are more fundamental.

The level and nature of competition is excessive and counterproductive, resulting in high levels of service saturation, fragmentation, and duplication yet without specialisation or localisation. In numerous regional towns and disadvantaged suburban centres, it seems there is a service provider operating on every street block, providing largely the same service with little innovation or variation in offerings or performance. Coupled with the myriad of Disability Employment Services (DES) providers it is a ridiculous situation. Five ice cream shops all selling the same vanilla ice-cream, lined up side by side, while the Department of Employment and Workplace Relations (DEWR) studiously manages market share so everyone gets a lick.

The same problems arising from excessive competition have plagued every iteration of the quasi-market system for decades, yet governments have only ever made tweaks to the system and experimented with band-aid and sticky-tape workarounds. The promised benefits of choice and contestability have never been realised, despite this issue being raised in multiple previous reviews. Every country that has experimented with extensive outsourcing has eventually realised that it does not work without a public sector core as some companies will profiteer—hence governments respond by heavily regulating a quasi-market.

Australia’s system does not adequately assess people upfront or support them to make informed choices about the supports that would best suit them. The fact that so many clients in online services self-assess as not digitally competent is a sign of a flawed intake process. People are forced to choose a provider with little information while under extreme stress. The Committee was unable to find the secret Harry Potter style ‘Sorting Hat’ which allocates other people to services, but we are sure it exists and would do away with it.

Employment services should act as a gateway to the broader human services system, especially for more than 150,000 people who have been in the system for over five years. Australia has a red-hot labour market, yet too many people have not been skilled and prepared for this moment and the available jobs, as the Employment White Paper made clear.

Effective services need to leverage local social capital, relationships with employers, and other human services. Yet the system places little value on connections in local communities and labour markets. A Hunger Games style contracting model and regulatory culture drives very high turnover in providers during contract and licensing rounds—bafflingly 22 per cent of regions saw all providers removed in the last round—leading to service disruption and devastating impacts on relationships of trust which have been built up between jobseekers and providers, and with employers. There is no other human services system where this level of provider (or staff) turnover would be considered desirable or acceptable.

A key part of the problem is that the Australian Government today has no view as to what is a good service model or what or why something works. Individual public servants are good, intelligent people yet the department is largely detached from regional labour markets and local communities, and from the day-to-day reality of supporting unemployed people back into work. They’re like puppet masters sitting way up in the rafters, jerkily pulling the strings, trying to control things way below on the stage. They need to be closer to the action. Responding to this concern doesn’t mean (re)creating a giant new bureaucracy that does everything, as our recommendations make clear. But government cannot remain so passive, commissioning and contract managing from afar, if better outcomes and value for money are to be achieved.

The significant and numerous issues identified in this inquiry simply cannot be addressed by mere tweaks to policies and programs. They demand wholesale, large-scale reform in the coming months and years to fundamentally rebuild the Australian system.

A rebuilt Commonwealth Employment Services System

The Committee proposes that a rebuilt system aspire for more than just kicking people off welfare at every moment. Of course, moving people from income support into work must remain a primary goal. However, new, modern objectives should also explicitly value economic security, sustainable employment, productivity, skills, and workforce participation and respond to industry transitions and the workforce needs of employers, while preventing and addressing long-term unemployment and intergenerational disadvantage. A guiding vision should be to enable all people in Australia to enjoy decent employment and to participate in economic and social life regardless of who they are or where they live. This means broader service eligibility.

Government must have a much stronger role, both as an active steward of the system providing enabling services in each region and a direct provider of services. 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. 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 in to work with government and employers in local communities. Specific recommendations include:

Establishing a new entity—Employment Services Australia (ESA)—within DEWR as a large digital-hybrid provider for jobseekers with fewer barriers to work, to actively managing the caseload; to provide core enabling functions in every region; and to provide case management services in some places and for people who are furthest from the labour market or persistently non-compliant with their obligations.

Enabling services provided by ESA’s network of regional hubs would include local system coordination and mapping (available to clients and service partners); client assessment and referrals; industry and employer engagement; administration of support for social enterprises and local projects; and delivery of industry transition and place-based projects for Commonwealth and State and Territory Governments. Direct case management would occur in thin markets and a few other places to rebuild public sector capability and understanding of the efficient cost of a quality service.
All driven by Jobs and Skills Australia’s regional labour market data and guided by Regional Advisory Boards of local governments, employers, and service leaders.
This will necessitate a redesign of existing functions and funding splits between DEWR, Services Australia, DSS and providers.

Establishing a regulator—Employment Services Quality Commission—responsible for workforce standards and professional development; research, continuous learning and improvement activities; quality frameworks, advising on pricing and funding mechanisms for quality services; data collection, analysis, and release; and complaints management.
Significantly enhancing social procurement, including via the creation of a national social procurement framework to leverage federal spending on major projects and services to assist more disadvantaged people back into employment.
Entry level job opportunities. Reinvigorating entry-level jobs and paid internships and traineeships in Commonwealth, State, Territory, and local government agencies for long-term unemployed people. This should not be overdone but can make a greater contribution.
Formalised governance arrangements, with ongoing engagement with academic and policy experts, service partners and other stakeholders as part of a culture of collaboration, learning and improvement, including establishing Client Council(s) of service users.

A rebuilt Commonwealth Employment Services System requires an enhanced and—at least in some respects—radically different service model, with support differentiated according to a client’s distance from the labour market. Core elements proposed include.

Revamped comprehensive assessment and referral, including video or face‑to-face appointments at ESA’s regional hubs following the initial digital assessment. This aims to put the human back in human service, to fully understand clients’ aspirations, goals, and personal circumstances, and to maximise choice and control over referrals to appropriate services and supports—in the same way as a GP helps people navigate the health system.
A ‘digital-hybrid’ service mixing self-management online with extra supports. For Australians who need less help to get a job, an enhanced digital-based service would be complemented by support to improve digital literacy. The hybrid service would be delivered by ESA, absorbing the Digital Services Contract Centre’s functions, properly resourced to build an effective and efficient public service for this cohort.
Case management—‘Job Coach’—services, differentiated by clients’ needs for people who need more and face-to-face assistance, with:

‘Low intensity’ support focused on preparing for and finding work and addressing minor vocational barriers to employment, delivered by servicepartners.
‘Medium intensity’ support focused on setting goals and overcoming vocational and non-vocational barriers, delivered by service partners.
‘High intensity’ support for clients who are furthest from the labour market, including in-depth and wrap-around support, case managed by a public sector-led program.

Contracted local service partners would continue to support most people but with a very different approach to commissioning and delivery.

A specialist youth employment service in each place, open to all people under the age of 25 years, with varying intensity depending on a person’s circumstances. The existing and highly regarded Transition to Work (TtW) program would be rolled into this.
Cohort-specific specialist case management services, for priority cohorts, including Aboriginal Community Controlled Organisations (ACCOs) For First Nations jobseekers and specialists for jobseekers who are culturally and linguistically diverse or with disability.
A completely revamped service for people in or exiting the criminal justice system, commissioned with all State and Territory Employment and Corrections Ministers aligning pre-release, on-release, and post-release support.
Referral and access to other human services and support, addressing substantial non-vocational barriers (such as family violence, mental health, homelessness, and substance abuse disorders) prior to connecting to an employment services partner; reinstating Sickness Allowance for people unable to work for medical reasons; and reviewing access to the DSP for extremely (more than 5years) long-term unemployed people.
Social and community participation options for people who are unlikely to benefit from employment assistance as employment is not a realistic short to medium term goal.

Employers should also be encouraged to become the lead partner in on-the-job training and real work experience which is proven to be more effective for long-term unemployed people.

Broadening and tailoring mutual obligations

Participation requirements should continue to be a part of Australia’s system. People will be expected to show commitment and make reasonable efforts to secure work or to increase their social or economic participation while receiving income support. But as outlined above the current approach is self-defeating, tying people up in red tape, driving employers away and actually making many people less employable. Recommended changes—which are not about going soft but about being more tailored, sensible, and effective—include:

An individual Participation and Jobs Plan that is a realistic and tailored pathway to employment based on a person’s needs, capabilities, strengths, and goals, and includes a commitment by the relevant service partner to providing support.
Broadened and tailored mutual obligation requirements, not one-size-fits-all:

Clients in digital-hybrid services or intensive case management for non-compliance would continue to engage via a recalibrated Points Based Activation System.
Clients in case management services delivered by ESA or by service partners would be required to ‘meaningfully participate’, including attending scheduled appointments and doing what is in their Participation and Jobs Plan.

Activation requirements would be retained—serving as an ‘availability test’—and would include a greater variety and removal of default activities, and more flexibility in timing.
Replacing the Targeted Compliance Framework with a new Shared Accountability Framework, including discretion for frontline staff to counsel clients a few times a year before moving into compliance, an adjusted sanctions regime and—critically—the return of key compliance functions to human decision-makers within government, removing ‘RoboCancel’ automation in payment suspensions and cancellations.
Urgent interim changes to reduce red tape and the volume of inappropriate suspensions.

To be effective, reforms to rebuild the Commonwealth Employment Services System will need to be supported by fundamentally different and fit-for-purpose commissioning, funding, and performance management arrangements. The most fundamental change is the development of a new regulatory culture and a more relational contracting model, focussed on partnerships and building quality services. This will challenge the ‘black box’, hyper‑competitive paradigms which have driven marketized employment services.

Complementing a more relational contracting model, other changes should include:

A substantial increase to the number of employment regions to reflect natural labour markets and communities of interest, rather than ease of Commonwealth procurement.
A reduction in competition in place and service fragmentation by:

Engaging only one ‘generalist’ case management service partner and one youth specialist partner per location (in line with the TtW model). This will usually mean more than one partner per region.
Complementing generalist case managers with specialists as outlined above, including some who work across multiple regions with flexible service models.

A simplified commissioning process, with greater weighting given to service partners who demonstrate strong community connections.
Utilisation of business transition mechanisms in contracts to reduce service disruption and cost to the taxpayer when a service partner in a place finishes a contract.
A new funding model allowing experimentation with different approaches. For example:

Blended funding for a bundle of services for service partners, with a reduced focus on payments for narrow employment outcomes as these drive extreme ‘work first’ behaviours which the previous government said were being removed but which are alive and kicking due to funding and performance management settings.
Bespoke and other flexible funding arrangements—including the reverse auction grants model used in Victoria—for social enterprise and community programs.

A revised performance management framework within a year of tabling this report.

Other key reforms proposed include:

Re-professionalising the sector, including a framework of minimum standards for staff skills, qualifications, and competencies (while continuing to value lived experience) and ensuring that pay and conditions are competitive with similar sectors.
Streamlining and simplifying assurance and accreditation and reducing red tape, including by pursuing opportunities to integrate Single Touch Payroll data into the system.
Making data publicly available for research and evaluation, supported by the establishment of a dedicated, co-operative research unit in the new Quality Commission.
Streamlining and simplifying the use of the Employment Fund, including establishing a default principle prohibiting providers from referring clients to services or training delivered in-house or by a related entity—subject to limited exceptions approved by DEWR.
Overhauling active labour market and complementary programs including:

Centralising administration of wage subsidies, internships, and paid work experience.
Trialling the establishment of a ‘Work in the Community’ program in a selection of regional areas and metropolitan regions with entrenched disadvantage.
Retaining Career Transition Assistance and foundation skills programs; and adding a stronger focus on digital skills.
In the medium-term, abolishing Employment Skills Training and the existing disparate facilitation programs for employers and rolling these funds into the new initiatives.

A Roadmap for transition to a rebuilt system

The Committee is not naïve and understands the complexity and ambition of what is proposed. This is not a science experiment, and rebuilding any human service system is a fiendishly difficult thing to do.

Reform will require sustained political leadership, a major change in culture led by the bureaucracy and ongoing engagement by all levels of government. Numerous experts have told us that the biggest obstacle to system reform is likely to be resistance by the public service given a decades long belief in full outsourcing, a lack of experience in delivery and the sheer convenience of being able to blame and punish contractors for systemic failures.

Successful reform will require genuine partnerships between government, employers, service partners and communities, informed by the lived experience of unemployed people and service users. That does not necessarily mean consensus and not everything can or should be co-designed. Government needs to lead and take bold decisions and set parameters and culture for reform within which co-design, experiments and trials can occur. To be clear, the Committee’s firm view is that rebuilding a public sector core to the system is a question of how, not if. Not everything should be subject to trials—major decisions need to be made with government leadership.

Significant funding can be repurposed, and efficiencies gained, achieving better value for money from current investment. However, government should not be scared to make targeted investments to get long-term unemployed people back into work. Australia spends more than the OECD average on the operating core of the system, but only half the OECD average overall as we underinvest in things like paid work experience, effective wage subsidies, active labour market programs and social enterprises.

Chapter 16 outlines an approach to transition including urgent and short-term actions, as well the preparation of a roadmap transition plan by the end of 2024. Demonstration partnerships should integrate the successful Jobs Victoria program and Tasmanian Job Hubs Network.

The Committee thanks the numerous organisations and individuals who contributed to this inquiry. Sharing personal experiences can be confronting, and the Committee especially thanks current and former employment services participants for sharing their stories in public and private.

The Committee also thanks the hardworking and dedicated staff who support jobseekers. Frontline staff are central to the delivery of employment services, and critique of the system must not be seen as a reflection on individuals working to support people into work.

The Committee thanks all of the impressive and dedicated public servants with whom we have engaged.

This is one of the most complex public policy reviews I’ve ever been engaged in. Grateful thanks to all Committee members for their engagement and collegiate approach and to the wonderful Committee Secretariat. You should be proud of your work, as we are.

Mr Julian Hill MPCommittee Chair