‘Unemployment shock’: will workers hardest hit by the pandemic be left to languish?

A new online system will offer some the chance to seek work without using a job agency, but may leave others without support

queue of people standing under a centrelink sign




During the pandemic an estimated $360m will flow to providers over six months through ‘administration fees’, according to Simone Casey, a policy analyst at Per Capita.
Photograph: Quinn Rooney/Getty Images

A year before the pandemic hit, the federal government announced the biggest overhaul of the welfare-to-work system in decades.

The controversial requirement that jobseekers complete 20 applications a month would be scrapped for a more flexible “points-based system” and the most job-ready would be moved on to a government-run digital platform. Job agencies could then focus their efforts on those who most needed help with training, upskilling or just finding jobs.

But the new system wasn’t scheduled to be rolled out until 2022. In the meantime, the government would run a trial in Adelaide and on the NSW north coast.

It’s hard to imagine the Coalition would have made the call to delay the new system if it knew what was coming.

Fast forward 18 months and the nation’s welfare-to-work system is facing its biggest challenge since it was privatised under John Howard in the 1990s, with 1.6 million people on unemployment benefits.

The government has taken three key decisions in response to the pandemic-induced recession.

Mutual obligations – the job-search requirements that people must meet to receive their benefits – were temporarily suspended. At the same time, the government boosted sign-up fees for the private companies and non-profits that run the $1.4bn-a-year jobactive program to shore up the sector.

It means during the pandemic an estimated $360m will flow to providers over six months through these “administration fees”, according to Simone Casey, a policy analyst at Per Capita.

Conversely, and in a move that has angered the industry, the government expanded the digital trial by diverting about 400,000 new jobseekers from across the country to the new online service.

These people will not be connected with a job agency, depriving the sector of an even larger windfall of sign-up fees and bonuses for getting people into work.

The decision is a tentative step closer to the 2022 model, allowing many people to go about their job search themselves.

“The jobactive system was designed for low unemployment,” Casey says. “It was not designed for the unemployment shock we’ve got.”

Before the pandemic, the average consultant to jobseeker ratio was 148, according to one report, up from 94 about a decade ago.

With nearly 1 million more now on benefits, the fear is that providers will ramp up what research has already accused them of doing: “creaming” and “parking”.

This sees consultants focus on those who are easy to place into employment, triggering a fee, while those with more bleak prospects are left to languish.

“The advantage of the new model is that jobseekers who can self-service online will be left alone by jobactive agencies,” Casey says.

“Only the people who need specific support or who have more complex needs will go to an agency.”

The reason why some jobseekers might want to be “left alone”, as Casey puts it, is that welfare campaigners have long argued the jobactive system is punitive.

While some report positive experiences, others say they have been ignored, bullied, or pushed into “demeaning” or “condescending” personal development courses – sometimes run by the same company – or positions that don’t align with their goals.

Some who have found a job themselves have been hassled to provide payslips so the consultant can claim a fee anyway.

Kristin O’Connell, of the Australian Unemployed Workers Union (AUWU), agrees there are positives to shifting some people away from job agencies.

But she has concerns about a “one-size fits all” digital model that replaces meetings with a jobactive consultant for online tools and a contact centre.

“We don’t think there should be no support for jobseekers,” O’Connell says. “We think jobseekers should be able to access the support they want.

“Give people a choice about whether they need something. And when they decide they do, make sure that support is available.”

For the first time since the Keating government introduced “mutual obligations”, the system during Covid has at least been designed to give jobseekers some choice.

Swelling ranks of jobseekers have filled out a questionnaire that either places them in the online employment services system or with a jobactive provider. Those who want the extra help can “opt out” of the digital program.

With welfare penalties suspended, the government has guaranteed the 1.6 million people on the jobseeker payment – up from 700,000 pre-pandemic – that their Covid-boosted benefits will drop into their bank accounts every fortnight regardless of whether they finish enough job applications or attend meetings with a provider.

Because providers are unable to suspend payments during the pandemic, in some cases, it has created more of a voluntary relationship between jobseekers and their consultants.

Still, in other cases, O’Connell says consultants have threatened to cut off the benefits of new jobseekers unless they agree to attend a meeting. These sign-up meetings trigger a payment for the provider.

Tellingly, there were still 1,301 complaints about jobactive providers between 20 March and 31 July despite the relaxed rules.

While the AUWU has called for a “mutual obligations strike” and wants them abolished, the government is likely to revive the penalties when the pandemic eases.

And it has confirmed the more flexible “points-based” mutual obligations system still won’t be rolled out until 2022.

Ideologically, the government’s view is that mutual obligations incentivise people to get back into work, though international research has disputed this and current data suggests employers are already being flooded with applications.

In the same vein, it plans to reduce welfare benefits that were lifted during the pandemic, with the first $300-a-fortnight reduction due on 25 September.

The Greens senator Rachel Siewert, a vocal critic of the welfare penalties regime, is disappointed the government is not signalling its plans for mutual obligations.

That is because the system temporarily stopped welfare payments more than 2m times in 2018-19, incorrectly on many occasions. This hasn’t happened at all during the crisis.

“It depends where you are in the country, but you’re going to have a group of people that have potentially significant mental health issues [due to the pandemic],” Siewert says.

“If you look at what works … you provide wraparound, targeted support. The people that are supporting you are not also the compliance person.”

The employment services sector argues Australia spends less than the OECD average on labour market programs. Even critics agree more funding would be welcome if better directed, though they note Australia is one of the few countries where the funding goes to private companies.

contracts

Analysis of government tenders since 2012 suggests Max Solutions, the largest jobactive provider, has reaped an estimated $1.6bn in contracts across multiple welfare-to-work programs.

Another, APM, has raked in about $980m, while Sarina Russo has won more than $600m in contracts.

The figures demonstrate revenue, not profit, and there is no suggestion the payments are anything other than legitimate.

But there is money to be made. Maximus Inc, Max Solution’s publicly listed international parent company, posted a $240m profit in 2019. Separately, it has previously told shareholders 10% of its revenue came from the Australian government.

In a June financial update, Maximus told investors an “improved outlook in our Australia operations” was among the reasons for “better than expected” earnings.

That was before the government’s decision last month to refer many jobseekers on to the digital platform rather than jobactive.

Although Casey would like the government to move faster on its funding reforms, there is at least a sense that the gravy train could be slowing down.

Sally Sinclair, chief executive of the National Employment Services Association, disputes that providers want more jobseekers on their books to bolster their bottom lines.

“Our concerns are that half the newly unemployed are in an online employment service which was being trialled,” she says when asked about the decision to no longer refer some jobseekers to the agencies.

“We don’t know what will happen to the people in that service, how they are getting the necessary support they might need.”

Sinclair says talk of a windfall through sign-up fees is overstated, arguing the funding payments only “barely cover what providers have to deliver”.

Most of the sector’s funding “outcome fees” paid for getting people into work or training, she says. “This is not about administration fees. It’s about making sure people are supported and assisted.”

For the jobseekers the AUWU represents, it’s about more than that. “People would like flexibility,” O’Connell says. “And support that is available to them when they want it, but not forced upon them.”