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Education and Employment References Committee
01/02/2019
Appropriateness and effectiveness of the objectives, design, implementation and evaluation of jobactive

McLEOD, Dr Travers, Chief Executive Officer, Centre for Policy Development

[09:24]

ACTING CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. If you'd like to, make a short opening statement and then we will ask you some questions.

Dr McLeod : Thank you. Thanks to the members of the committee for inviting the Centre for Policy Development to contribute to this public hearing and to the inquiry. I thought it might be helpful to give an update of our work on these issues since our submission. Members will probably be aware of CPD's longstanding interest in employment and settlement services. We started working on employment services in 2015 through our report Grand alibis and followed that up two years later with a report called Settling better, which had the support of the Boston Consulting Group and was focused on refugee employment pathways.

Since then we've established a multiyear Cities and Settlement Initiative, which involves government departments from federal, state and local governments, employment settlement service providers and experts from Australia and abroad, focused on how to help refugees find jobs more effectively or start businesses more effectively in the places they're most commonly settling. The chair of the Employment Services Expert Advisory Panel, Sandra McPhee, participated in the most recent meeting in Fairfield of that initiative, which was in September 2018.

Since we made the submission to the future of employment services inquiry, we've also met with the Shergold panel, which, as you know, is reviewing humanitarian outcomes, including employment outcomes, for refugees and the humanitarian entrants. We met with that panel earlier this month and have made a subsequent submission to that panel which expands on many of the issues that are detailed in the submission that you have. That submission goes into more detail on the place based model that we advocate as being important to the future of employment services. We presented that model to the Settlement Services Advisory Council in November last year. We have also been working with a number of local government areas, including the city of Wyndham, on their proposals for the regional employment trials, which are intended to model some of those features.

CPD has been up-front for several years now about the failings of jobactive and its predecessors. We said in 2015, in Grand alibis, that it was failing Australia's most disadvantaged jobseekers. I'm sure you've heard that a number of times through your hearings; I don't intend to be a broken record on that. We think what's really promising is that there seems to be a growing consensus that the system isn't fit for purpose. As the McPhee report said in December, it can do much better. Four per cent penetration of employers, 1-to-148 ratios for some jobactive providers, waitlists of two to five years for the most disadvantaged streams—these are big issues that the new system will have to grapple with. There are a number of interlocking systems at state, local and federal level, not least language services, that interact with jobactive in sometimes constructive and sometimes counterproductive ways.

We're conscious of the challenge that this inquiry has and that the panel that Sandra McPhee chaired had. It was in their spirit of public consultation that they really engaged with the work that CPD has done and our Cities and Settlement Initiative. What we have said, though, is that jobactive has been particularly disappointing for a number of cohorts: for culturally and linguistically diverse communities, for young people, for women and for Indigenous communities. There's been a focus on compliance instead of ensuring that the workforce is equipped for the future and prioritising pathways to sustainable employment.

Several principles have informed CPD's work on employment services. They're contained in our submission, so I won't go into repeating them, but I just want to highlight a couple. First of all, the goal of sustainable economic participation for all Australians young and old needs to be an objective of the system. All jobseekers have the capability to contribute. One size does not fit all, which is why we have been advocating, as have many others, the importance of local approaches built around backbone or anchor institutions at the local level. The centrality both in Australia and around the world suggests that the best practice for employment services is one-to-one intensive support over a career or life cycle for jobseekers and, in some cases, their families that prioritise not just employment but pathways to sustainable economic participation or business creation.

It was that commitment to new funding and service models underpinned by localism that was at the heart of our submission both to the McPhee expert panel and to Peter Shergold's inquiry into humanitarian outcomes. We have found in our research, aided by the Cities and Settlement Initiative and volunteers from the Boston Consulting Group that place based models are achieving better results. This requires funding for recognised pathways to employment, not a tender based approach, which is driven by price and not results. We can talk more about that in the questions if you like,

The other point to mention is that CPD has done a number of rounds of attitudes research on Australian attitudes to democracy and to services. What we've found in that research is an increasing scepticism about the reliance on outsourcing. What we suggested in the 2015 report was the pendulum had swung too far and crowded out public and non-government collaboration in the hardest-to-reach places and the hardest-to-reach cohorts. But there is a strong appetite in the attitudes research we have done—something over 80 per cent—for government to retain the skills and capability to deliver services directly. So we think there's an appetite for a more active role of government in the delivery, not just the design, of employment services. Remaining beyond the contract gate has the consequence of depriving the Commonwealth, state and local governments of experience based policy design and delivery. I will leave it there and look forward to questions.

ACTING CHAIR: Great. Thank you. I link back to your research and experience in the employment of recent arrivals—refugees—coming to this country. We heard from a witness a few days ago in Perth. Their name escapes me, unfortunately, but one of the interesting things they raised in their submission was that they saw one of the barriers of the current system as that it put a disincentive to people setting up their own businesses. There was also a problem with recognition of previous qualifications, so there was a licencing barrier that related both to employment opportunities but also to people creating their own business opportunities and gaining self-employment. Look back at, say, the refugees who came from Vietnam in the seventies and early eighties; you had a very high level of self-started business and entrepreneurship. We haven't really heard about that issue from other submitters. Have you come across that issue? Do you have any particularly comments on it?

Dr McLeod : Certainly. You're right. As part of the Cities and Settlement Initiative we identified through a number of consultations the pain points for refugees in trying to find jobs and start businesses. This came up quite a bit—not just the skills recognition and utilisation but the ability to access microfinance and entrepreneurship support. One of the people we have involved in the Cities and Settlement Initiative is a gentleman called Phil Legrain, who used to advise the European Commission. He is working with us on a big report on refugee entrepreneurship and what we're calling seven steps to success to allow that entrepreneurship spirit to be enabled more effectively in Australia. We'll be releasing that at our next meeting in April. But it's something we've stressed both to the McPhee panel and the Shergold panel. The present design of employment services doesn't seem to put as much weight on creating businesses as the way it does on finding a job.

The interesting thing is that refugees are not just Australia's most resilient migrant but also the most entrepreneurial. Of all the migrant categories in the ABS, they create more jobs than any other. So it's a very important point that we think not just the future employment services but particularly those that relate to refugees need to be conscious of.

ACTING CHAIR: Have you got any particular focused policy proposals in that area?

Dr McLeod : We do, actually. We're releasing the report in a couple of months, but it was a specific focus of the meeting we heard in Fairfield. We've got an entrepreneurship working group, which is one of the five working groups in our Cities and Settlement Initiative that and representatives from government departments; an academic from UTS, Jock Collins, who is doing a multicountry study on entrepreneurship; and Phil Legrain writing the report with assistance from CPD. So we're happy to take that on notice.

ACTING CHAIR: We don't expect you to pre-empt the release of your report; we completely understand that it's important that your process follows through. But, if there's any heads-up information you can give us on the directions you may be going in that report, I'm sure the committee would be very interested in hearing those.

Dr McLeod : Sure. On the cohort of refugees and humanitarian entrants: that's why CPD has been saying that there's actually a huge opportunity here, which is why we've been focusing on the emerging consensus that we need to rethink and reimagine the funding, delivery and governance of these systems—not just employment but language. Both of those systems, of course, start afresh 1 July 2020, and the second-biggest predictor of employment outcomes for humanitarian entrants is language. The first is gender, which is why we say that it's imperative the new system have a gender lens. Maybe we can talk a bit more about that.

But the prize is enormous. In Settling better we talked about what would happen if you reduced the gap between the average Australian jobseeker and a single cohort of refugees, and we've updated that analysis for the Shergold review. If there is a 25 per cent reduction in the gap in unemployment, participation and income between a single intake of refugees and the average Australian jobseeker over the next decade, I think it generates something like $480 million for those refugees and their families. The resulting savings to the federal government are about $180 million—not to mention the enormous benefits to community integration, cohesion and support that comes from people being employed and having sustainable economic opportunity. We've been approaching these issues from the perspective that we can do a lot better and there's a big prize on offer for everyone if we can do that.

ACTING CHAIR: Can you talk to the gender issue and the drivers a little more? Do we know how much of that is cultural expectations from the countries they're coming from versus actual barriers to employment in Australia? Do you know what I'm getting at?

Dr McLeod : I think I do. Maybe if I answer—

ACTING CHAIR: I would imagine that would be very hard to tease out.

Dr McLeod : It is. I think the easiest way to answer that question is to tell a very brief anecdote. As part of helping local government areas, including the City of Wyndham, to design a place based approach for economic and social inclusion, we did a big workshop of different providers and government officials in the city of Wyndham late last year. As part of that, half the group took a jobseeker and half the group took an employer perspective, and we deliberately chose a jobseeker that would be a young woman who had arrived and wanted to find work. Halfway through that user-centred design workshop, which we're still conducting, it became obvious that the services were not set up for that jobseeker. They were set up primarily for a jobseeker interacting with the system—often a male jobseeker—and, whether it was childcare support, transport support or all of the things that have to work together to allow for particular jobseekers to interact with those services, it was much more difficult for women. And that's why we have decided in our Cities and Settlement Initiative to apply a gender approach to all of the work that we do. We found that the system is particularly disappointing in its results for women.

One example is the Building a New Life in Australia data set, which is the best longitudinal data set for humanitarian entrants in 2013 and 2014. I can get the number, but I think it's 25 per cent or maybe 50 per cent of people who drop out of language support who have cited work or family as the reason for that. It's often because childcare might be at a very different place to where language support is, which is central to employment. Often, language training is for a couple of hours. It's not as flexible, whereas the cost of childcare, if it's a mainstream service, might be an entire day. Often, it's just the sheer difficulties of building a new life and interacting with all of the different services that enable you to get to language classes or employment support that make it particularly difficult for women, who have borne more of the family caring and raising responsibilities.

The other point is that what we have heard is that often by the time they are in a position to interact with the system they've either ceased to be eligible or the services are not ready for their engagement at that point in time. That is another point we've made to the Shergold inquiry.

Senator DAVID SMITH: Thanks for your submission. I'd be interested in whether you might be able to be expand on some of the ideas around incentivising tripartite partnerships. I think there were some really interesting ideas around the benefits of collaboration.

Dr McLeod : One thing we did when we were looking at our work and employment services was look at how certain state governments were approaching the issues. What we were finding was that you often had three or four buckets of money being directed to the same cohorts—some through jobactive, JVEN in Victoria, non-government activities, Brotherhood of St Laurence, other charitable providers and some local governments. One strength we have found, particularly with Jobs Victoria, is that the way that those contracts and the model have been set up requires that collaboration. It requires, in many cases, a tripartite partnership at the local level between public and non-government providers. We've often found that at the national level the opposite occurs, where you have a number of different funding arrangements and often not the same incentive for collaboration.

The reason why we've been big supporters of place based approaches—and you'd probably be familiar with the Logan model or, in WA, the Challis model. Wyndham and Hume are attempting to build their own models. Often their success relies on having an anchor or backbone institution at the local level that can coordinate those partnerships, whether it's the industry or employer—interaction, the provider relationship, common assessment and referral. We've found that it's in those partnerships at the local level that you often have better engagement with employers and a better understanding of local networks and the local needs of specific cohorts.

Senator DAVID SMITH: And, I guess, an understanding of how it might connect across to local education providers and the challenges. In an earlier hearing we heard about the level of youth unemployment on the Central Coast and, at the same time, the drop-off in apprenticeships and opportunities. I'd be interested—and I guess it relates to a couple of things you've touched on a little bit—in a bit more about the role of local government, potentially, in coordinating some of that activity. You might want to expand on how a couple of those trials are going.

Dr McLeod : I'll give it another data point, I suppose. We've looked at the humanitarian entrants over the last decade, according to the census data, with assistance from the Cities and Settlement Initiative and the Boston Consulting Group. Seventy per cent of humanitarian entrants in the decade to 2016-17 are in 25 local government areas. If you focus on those pivotal places—we'd have to exclude Brisbane from that, because Brisbane is one of them, although it's not a particularly high amount. It's not just CPD who has been saying this. There's the grow Australia movement, and Minister Fletcher had some announcements on these in Brisbane in December. Larry Summers, the former Treasury secretary, has just put out a big paper through the Brookings Institution that says that the future of policy around services is place, not person. That's why in our research—and it depends on the jurisdiction—we've seen that you need a backbone or anchor institution at the local level. It won't always be local government, but in many cases it can be. It might be a TAFE or it might be a child and maternal health service that interacts with those families. It could be a university, it could be a hospital or it could be a community service provider or an employment service provider.

The Wyndham example is a good one. I think the City of Wyndham is on track to overtake Geelong by 2040. There are something like 160 or 170 different backgrounds in that area. It's the second-biggest employer in the region. They have the ability, and they're trying to set up a trial that would enable them to assist the services in that area to do things like common assessment and industry interaction—to lead by example through procurement and their own employment practices as a way of helping to turn around the economic participation story for disadvantaged cohorts in those areas.

Not all local governments will be in a position to do that, but it may be other public agencies or entities at the state and federal level. I mentioned the Brookings Institution research on place as pivotal to better employment outcomes. The Productivity Commission, in its Shifting the dial report—I think 18 months ago—talked about the importance of special projects, or state, federal or local governments working together in pivotal places around big problems. One thing we encouraged the employment services review panel to do was to look at particular places around Australia, because, if you segment the cohorts and where the most disadvantaged jobseekers and those that are struggling to find jobs and start businesses are, you can very quickly divide and conquer with local backbone or anchor institutions that really want to drive a new approach for that area. That's why we've said that one of the most important things about the new system, be it employment, language or a combination of those, is the willingness to let go to those local government areas that are prepared to experiment; to innovate; and to really work with their employer networks, jobseekers and communities to help build more sustainable employment outcomes.

It won't always work, but we've seen through the McPhee report that the cost of the federal system is substantial. When you overlay that with the various state employment service providers that have sprung up to deal with some of the inadequacies of jobactive and all of the effort at the community level—if you achieve greater coordination and pooled funding between those amounts with real incentives to partner and collaborate, but you empower those communities to go after those objectives, that's where the examples around the world seem to be suggesting that you get better results.

Senator DAVID SMITH: Thanks, Dr McLeod.

Senator SIEWERT: I want to start off with your comment that you made earlier—obviously it's contained in your submission—around the issue of public provision of services. You talk about the public's attitude to provision of services by the Public Service. In your recommendations, you talk about changing the service and funding model and going to activity based funding, ABF. I want to come back to that, but first I want to explore a bit more on how you see that operating. Obviously, we used to have the CES—I've used CES—and we've moved to the system that we have now. How do you see that working through your recommendations for changing the model and activity based funding? I still haven't quite got it straight in my head about how you see the system working and taking it back more into the public service.

Dr McLeod : I think what we've said in the submission—and our chair, Terry Moran, has talked about this—is that the way in which the outsourced model has evolved over the past 20 years has resulted in the crowding out of public involvement, either at the agency level or the department level. As we all know, it's an entirely outsourced system. What that means is that you don't have experience based policy design and delivery. I think in Grand alibis we mentioned New Zealand and the UK as examples of jurisdictions that had followed a similar approach but had kept a fair amount of public involvement, as a comparator.

Senator SIEWERT: New Zealand has a lot more public involvement.

Dr McLeod : That's right. What we said is that the tender based approach had resulted in a focus on price and not on results. It had developed in a way where it didn't cost or value the sorts of benefits that public delivery can bring. Not in all cases, but there are the public service values and the ability to have a continuity of provision in what we call anchor or backbone institutions. I don't think we're the only organisation that's been saying this; many have, including those that were big proponents of the way in which the system evolved. The consensus seems to be that the pendulum has swung too far. Often in the hardest-to-reach places, like the big local government areas where there's a lot of disadvantage, it's really helpful to have that government and non-government collaboration around not just the design of those services but the delivery. In terms of the activity based funding question, or the case mix question, the example we give in the submission is around health and hospitals.

Senator SIEWERT: You do. I see where you're coming from with the health and hospitals approach, but I don't necessarily see that as being the same comparison. So I wanted to tease that out a bit. I want to come back to public service in a minute. I understand the rationale of what you're saying. You were here when we were talking to our previous witness about the need for specialised services and focused services. We talked with previous witnesses about complex issues and how it's not just about finding a person a job; it's actually about providing support, coaching, dealing with their crises and other training needs and personal needs as well. That's activity based funding, but I'm struggling to see how you then go, 'We've provided this service because we referred them'—for example—'to headspace.' I'm struggling there. I get what's needed and supported, and I've seen examples of where that's been working, like Brotherhood of St Laurence and a couple of other organisations I could name.

Dr McLeod : I'm not sure I understand the question. When we were working on the employment services submission for the McPhee panel, we compared jobactive contracts with contracts under the New South Wales RESP system and JVEN. We found that there were very different approaches to payments of what you would describe as pathways to employment—that sort of complex care and integrated service arrangement that may generate more sustainable employment opportunities or business creation opportunities. Even though jobactive has the employment fund, I think the evidence has suggested that that has been underutilised for those sorts of things that might assist stream B or stream C categories. We think the activity based model is a better way of incentivising that bundle of activities.

One of the issues, of course, as you would know, is that a lot of those integrated services are funded by different departments or have different assessment tools or different compliance arrangements. We've done these workshops in areas. The sheer difficulty of getting them to marry up well becomes too hard, in which case the easiest option in many cases is to try to find a job at all costs. One approach—the McPhee panel suggest this—is to move away from a tender approach to a licensed model where you may have an independent agency that licenses providers. We sort of hypothesise about this our submission. They may be public, they may be non-government, they may be private or community. They would monitor the most effective—

Senator SIEWERT: ACOSS also touched on it last week.

Dr McLeod : Yes. They would model what effective wraparound employment services with one-to-one intensive support cost when delivered effectively and what results they generate, and they could adjust the reward or the remuneration for those services at regular junctures. But what we've said is that one consequence of the tender approach is that it's resulted in an obsession with price and overall cost, and that's meant a disincentive away from that bundle of activities that may lead to a more sustainable employment opportunity.

Senator SIEWERT: Yes. I understand the tendering for pathways process and the wraparound supports. I suppose I struggle when I look at activity based funding. For me, I suppose that means I go to counting the widgets. I don't want providers to be constrained by counting the widgets; I want them to focus on providing those wraparound services to support somebody.

Dr McLeod : Neither do we. In fact, that's why we say in the submission to the Shergold review—and it's said in a more convoluted way in the previous submission—that the new system will only have impact if it's prepared to let go and devolve funding and responsibility. That means empowering providers, whether they be government or non-government, to devote funds to those wraparound services in order to yield better results. So we don't think that case mix or activity based funding—however you describe it—means that you have 150 different payment points and different widgets that you need to report on and comply against. What we mean is greater devolution of that money to providers, who can then chase the clear objectives that the new system sets.

Senator SIEWERT: Thank you. That makes it clearer. That's more in line with what I thought you were getting at. I was having trouble making the leap between what you were saying and what I have seen people doing that's effective. Thank you.

I then go back to the issue around public involvement. Going back to what you've just said about the agency that, in a sense, does the overviewing and the quality assurance, is that what you mean by public engagement in provision of services, or are you talking about also going back to public provision of some of these services—not just funding it but provision of the services? Sorry, these are multiple choice answers! Are you talking about the example that you've just spoken about, with local government doing it?

Dr McLeod : I don't think we'd have a single rule. It would depend on the context. What we're certainly not saying is that the only role for government should be oversight, with an independent agency with a helicopter view that monitors progress through facilitators and reports against that. What we're saying is that the system has crowded out public delivery. We're not saying that the answer is to go back to completely publicly delivered services—the old system—but what we're saying is that there has been no public delivery, and in some cases that's been to the detriment of employment outcomes. That why we cite the New Zealand and UK examples. So, no, we don't mean that it's just an oversight function.

ACTING CHAIR: How do you back that up with evidence? What's the evidence for that statement?

Dr McLeod : In what sense?

ACTING CHAIR: That, under the new system, outcomes have not been delivered as well. If you're looking at things like unemployment rate, it's almost impossible to tease out one system versus another. I'm just wondering what the evidence base for that statement actually is.

Dr McLeod : I take your point. The evidence we would cite is contained in our Grand alibis report, but it's really the McPhee panel that says it. The current system costs $7 billion and has four per cent employer penetration, ratios of one to 148, and waiting lists of two to five years. It's an entirely outsourced service. There is something not working in that model. The counterfactual that we think has been underexamined, because it's been impossible to examine it, is the combination of government and non-government design and delivery of those services and a greater focus on the places where those cohorts are. In a lot of those places, the institutions with continuity, with presence on the ground, that are trusted, as our attitude research suggests, are public agencies, local governments or institutions like TAFEs and universities.

We're not saying that in all cases you will come up with the same provider. There are many non-government providers that are doing a wonderful job. The Brotherhood of St Laurence has been mentioned. The Given the Chance program has an exemplar of what one-to-one intensive support can deliver for a jobseeker. What we're saying is that the system as it has involved has crowded out public delivery of services. As Peter Shergold has said, one consequence of that is that you don't have experienced based policy design or delivery, because you have public servants who are designing a system and monitoring a system, without very much experience of that system in action on the ground.

Senator SIEWERT: I know we will run out of time so I want to ask the question about digital. You refer to digital in your submission. We've heard quite a lot of criticism around the move to digital delivery of services. I notice you comment on it as well in terms of it not being a panacea and make some recommendations on incentivising to encourage jobseeker service providers to top up their digital training accounts et cetera. While I don't necessarily object to that, I sort of see going to the provision of digital supportive systems is not necessarily being consistent with the comments that you're making about the one-on-one provision of services. There are some people in stream A who I think are fine for digital services but the evidence we've received to date is pretty negative for anybody in streams B and C. There's the trial going on at the moment with stream A but other people are required to report online. They're told to go online to put in their records et cetera, and that's causing a lot of problems for people. How do you marry those two things up?

Dr McLeod : Thank you. It is demoralising being out of work for a long period of time. Anyone who has seen family or relatives in that position—I'm a West Australian like some on the panel—it is a confidence-shattering experience. The research tells us that young people will have about 16 jobs and five careers. If I'm still young, I'm probably onto my third. What that means is that the new system, if it's going to be fit for the future, is going to see a lot more Australians who need to interact with it on a regular basis as they shift in and out of different careers, job opportunities, certain jobs are automated, new opportunities crop up, retraining and reskilling. Because it can be confidence-shattering and demoralising, we think the ability to interact digitally with the system but also have the option for those who particularly need the support of intensive one-to-one provision is really important. Those people from overseas that we've involved in our Cities and Settlement Initiative have been really shocked that the Australian system does so little digitally. They have given examples of free language services and online portals that are in other jurisdictions that are really effective for a number of different cohorts. We've said that, of course, the new system needs to do that. And there are plenty of stream A candidates who will probably find it much easier to interact digitally with digital training accounts. President Macron has just topped up the digital training accounts in France. We've also said that there are a number of jobseekers who don't have the digital literacy. We were told this directly by a number of settlement employment service providers. So there can't be an assumption that everyone who interacts with the system is going to be able to satisfy their needs, and particularly their complex needs, through digital smart phone access. I think the new system can walk and chew gum. We just shouldn't put all our eggs in that basket.

Senator SIEWERT: Okay. Thank you.

ACTING CHAIR: Thank you very much for your time this morning.

Proceedings suspended from 10:05 to 10 :22