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Jobs network: making it work, reforming Job Network.

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Jobs Network


Making it Work : Reforming Job Newtwork.


While the CES provided employment services on the basis that freely accessible assistance should be available to those unable to find work due to economic restructuring. Job Network does not work on an altruistic principle, but rather uses a profit motive alone as incentive for organisations to help unemployed people.




  State of the Australian labour market


According to Australian Bureau of Statistics (ABS) Labour Force statistics for July, Australia's unemployment rate is currently 8.3 percent, representing 766,700 people, and the youth unemployment rate is 29.9 percent, the highest level since 1992.


There are 251,100 long-term unemployed people, an increase of approximately 20 percent since March 1996.


ABS figures released on March 10 this year revealed that the effective number of unemployed people is 2 million - almost 19 percent and more than double the official unemployment rate, which has hovered above 8 percent this year. 




  Executive Sum mary


The Australian labour market has undergone substantial changes over the past decade. Globalisation and the post-recession era have seen drastic job cuts across all sectors and industries. Downsizing has become the management catch-cry, a means of maintaining high dividends to shareholders. This has led to a sharp decrease in job security for those Australians still in work and the threat of a permanent underclass of people who will never find work.


There is a clear moral obligation incumbent upon Governments to address the issue of unemployment, to canvas new means of creating jobs and providing opportunities for the unemployed. This was recognised by the then Leader of the Opposition, John Howard, when he stated in 1996 that unemployment was 'the single most important issue facing Australians'.


Australian's consistently rate unemployment as one of the top three issues of concern, and the issue vies with taxation for dominance in the 1998 election campaign. Australians want answers to unemployment, or at least a strategy which has sufficient resources and long-term planning to function.


Job Network was presented as a bold experiment by the Government, but it has proved to be a risky gamble, the dividends of which have been confusion and chaos, and no reduction in unemployment.


The system is flawed in conception, design and implementation, and since it was first announced, the Australian Democrats have called for review and reform.


The very ideology which underpins it is wholly inappropriate. There is something bizarre in the application of market forces to the provision of services for unemployed persons, when these people find themselves without work because of the operation of those forces.


The blind application of this ideology has seen a fundamentally flawed tendering process produce an equally flawed outcome.


Instead of rewarding commitment and proven records of expertise, the Government rewarded size and low-cost tenders.


The closure of long-established, dedicated community organisations represents an incalculable loss to the community as a whole. The links with local communities and the specialised skill and knowledge this engendered cannot be replicated by organisations new to the area, or to the industry altogether.


This paper highlights the areas most in need of change, if Job Network is to fulfil the goals of providing hope, assistance and job opportunities to Australia's hundreds of thousands of jobseekers.


The Government's August 25 1998 changes were overdue, and insufficient. The injection of $55 million into the system to widen eligibility criteria is a stop-gap measure which will not stave off the collapse of the system. In many cases, this measure will actually increase the strain on agencies. Further reform must be undertaken as a matter of urgency.


The Australian Democrats support a comprehensive review of Job Network, which would analyse all aspects of design and operation of the system. This would take place as soon as possible, present its recommendations in time for inclusion in the 1999 Budget, with changes to be implemented at the end of the first contractual term in November 1999.




Areas of Concern and Recommendations


1 Competitive model


"Well, obviously we support the competitive model" Shadow Minister for Employment, Martin Ferguson, Lateline, 26/8/98.


The success of a competitive model of employment service delivery relies on there being an even spread of jobs across regions. The Australian labour market does not fulfil this criterion. Rather, the operation of Job Network will favour areas with low unemployment, and disadvantage those already suffering from high unemployment.


It is for this reason that, unlike the ALP, the Australian Democrats do not support the retention of the competitive model in its current form.


Unemployed people become a means of turning a profit, rather than individuals requiring help. Helping people with barriers is not an exercise which should be undertaken on a for-profit basis. While best practice in terms of economic efficiency should be encouraged, this should never be at the expense of the commitment to providing high-quality, universally-available employment assistance and services.


The effect of paying organisations only upon successful outcomes is that those operating in areas of high unemployment will find it difficult to survive as they will not be generating the cash to remain viable. When these organisations go bust, who will take over their contracts?


Of particular concern is the effect of a competitive model on rural areas. The commercialisation f the market favours the urbanisation of service provision, where there are more jobs for providers to fill.




The review of Job Network advocated by the Australian Democrats would critically examine the competitive model, examine possible means, if any, by which it may be made fairer, but would comparatively assess its operation relative to that of the CES-based model. 



2 Fees


The competitive model encourages practices such as charging employers fees for services which they received free under the CES.





The Australian Democrats would prevent the charging of employers of fees for services which they used to receive free of charge.




3 Cashing out of training


The staggering of payments for Flex Three operates as a disincentive to spend money on training, or find a job seeker meaningful employment. The sooner the job seeker is placed in a job, any job, the sooner the remaining payment can be claimed and less money spent on training.


Furthermore, when the overall level of funding is considered, once the commencement payments are made, there is only 13% of funding left to pay the remaining 70% of the payments. This raises serious questions about whether the Government expects outcomes to be so poor that the payments will not need to be made or that, in the absence of further funding being made available (not likely under this Government), access to Flex Three will be further restricted.


The implementation of a competitive market also acts as a disincentive to innovation. Under-resourced agencies can hardly afford to develop and implement new programs or take risks.






Appropriate guidelines on how training is to be provided to be developed, including minimum standards, to be enforced by the monitoring body and regular reports to be published. 



Spread of services


The International Labour Organisation Convention ratified by Australia in 1949 provides:


Article 1.


Each member of the International Labour Organisation for which this convention is in force shall maintain or ensure the provision of a free public employment service.


Article 3:


The system shall comprise a network of local, and where appropriate, regional offices, sufficient in number to serve each geographical area of the country and conveniently located for employers and workers.



Before the tendering out of employment assistance, there were 869 sites where the long-term unemployed could get intensive training to prepare them for work, according to the Employment Services Regulation Authority (ESRA) - a Federal Government body.


Due to the concentration of intensive assistance contracts among the four largest providers, many small agencies have closed, resulting in a drop in the number of points of access to 715, a fall of 18%.


The number of providers of employment services for the disadvantaged has fallen by 61% to 125.1 Of this, the top 20 received 80% of the market, and the top 5 received 66%.


Many of the smaller organisations had developed strong links with their local comm unities over many years of service provision. This infrastructure has been lost. In many areas, job seekers no longer have recourse to an equitable, just service, committed to helping people, not making a profit out of unemployment.


Dr Kemp claimed that Job Network would provide unemployed people with more points of access, stating that there would be 1404 sites, compared with over 300 CES offices, but he neglected to mention the additional 600 points of access, where 320 case managers operated.


The accusation has repeatedly been made, and appears born out by the spread of services that the primary criterion for the award of tenders was price. The Government predicted in the 1996 Budget a cut of $1.8 billion in employment assistance, and it surpassed this, with a further saving of $147 million announced in the 1998 Budget.


Many organisations tendered in the expectation that they would be able to cross-subsidise the cost-intensive Flex One job matching with the more lucrative Flex Three. As a consequence, many quoted below-cost prices for Flex One and Two, and were left with unviable contracts when they didn't get contracts for Flex Three.


This meant that many organisations had insufficient start-up capital (as only Flex Three has upfront payments) and were even more reliant on a large number of Centrelink referrals as soon as the system was to come into operation.




Case study 1


South Australia has the second highest unemployment rate in the country, at 10.3% in July. In May 1996, the CES operated a network of 31 offices and had 700 staff. Under Job Network, Employment National has less than 100 staff in 17 locations and a number of these are merely shop front operations.




Case study 2


St Mary's, an area with one of Sydney's highest unemployment rates saw its two local organisations servicing 600 long-term unemployed people replaced by just one company, which was awarded a contract to serve just 110 people.




  Case study 3


A Gold Coast company was awarded two contracts in Botany and Chatswood, replacing local organisations, even though it has never operated in Sydney. 



Case study 4


Employment National, the Government-owned service provider, was granted the largest share of the lucrative intensive assistance contracts - 42% of the overall market. In certain areas, such as Lismore, it's market share for Flex Three is 100%.




Case study 5


The National Skillshare Association provided case management services for over 1 million unemployed Australians in the period since 1989. There were 300 Skillshare organisations, of which only 50 were offered case management contracts.




Case study 6


The Offenders Aid and Rehabilitation Services of SA Inc received a contract for Flex One and Two, but not Flex Three, which is its specialty. 



Case Study 7


East Melbourne is Victoria's largest region in terms of population. Under Job Network, funding has been allocated for the provision of Flex One, or Job matching services to 71,100 job seekers to 30 November 1999. However, Government figures reveal that there were actually 102,000 unemployed people in this region when tenders were called, resulting in a serious deficiency of places.


For Flex Three, the Government allocated funding for 21,100 people at any one time, with a maximum of 49,000 to November 1999. Yet on the day the tenders were announced, Government figures showed 58,778 long-term unemployed people eligible for this assistance.


The situation in rural areas is even more dire. In Gippsland, funding for only 3,600 Flex Three places at any one time was made available, despite there being over 10,000 eligible job seekers in the region.2




Job Seeker Classification Instrument (JSCI)


This is the mechanism by which a job seeker's eligibility for Intensive (Flex 3) assistance is determined. However, in the context of the rationing of services, it also becomes the means by which the Government can further regulate access to assistance.


Welfare and industry groups have strongly criticised the JSCI, claiming it is too harsh, disqualifying many job seekers who would have been automatically eligible for assistance under the old system.


The JSCI can also deny assistance to those who are con sidered to be so disadvantaged that Intensive Assistance would be of no benefit to them, such as those suffering from severe disability.




The Government consulted widely with welfare and representative bodies, but the JSCI bears little evidence of many of the recommendations made by these bodies having been incorporated into its design.


The JSCI needs to be made fairer, and service rationing should bear no relation to determining the eligibility of job seekers for intensive assistance.




Accountability and Transparency


A probity audit of the tender process was conducted by Blake Dawson Waldron, yet the Government has refused to release this probity report for scrutiny.


The system contains no in-built transparent monitoring and review system, and figures on the performance of individual agencies were not released for over three months.


This raises serious concerns about the accountability of the Government and DEETYA for the performance of Job Network. DEETYA is both purchaser and regulato r of the services. There is no avenue of appeal for those with a complaint, and DEETYA is an insufficiently independent arbiter.


The Government has made little attempt to inform unemployed people of their rights under Job Network. Unemployed people are among the least able to enforce their rights. There should be appropriate and readily accessible avenues for appeal and rights to review. 



ESRA model of regulation


This was abolished by the Government, and was not replaced.


ESRA received its funding from outside the department, meaning there was no conflict. It comprised consultative committees and a national board with a balance of parties - providers, interested parties (such as welfare organisations) and consumers of services. It produced a regular newsletter showing outcomes of organisations.


For a market to operate properly, there must be transparency and a free flow of information, so that consumers within the market can make informed choices. This is lacking from Job Network.


There is no means of open scrutiny or transparency, and no mechanism for ongoing reform to address problems as they arise.




A qualitative monitoring process must be incorporated into the system, to monitor levels of clients service delivered by service providers and to ensure that DEETYA maintains accounting of clients and outcomes and regularly publicises the results. This process would also monitor the tender process, report on deficiencies in the system and make recommendations on reforms needing to be made.


Appropriate regulations to ensure social equity, consumer protection and regional protection should be incorporated into a widely-publicised charter of conduct. The system should also contain guarantees that a diversity of providers would be maintained.




Privacy issues


Under Job Network, the obligation to protect private information is contractual, based on the contract between the provider and DEETYA. The actual job seeker is a third party to this contract and therefore cannot enforce its provisions.




Job seekers need to be given the legal right to enforce obligations on the provider as there is enormously sensitive information available between the provider and DEETYA, which must be protected.






Centrelink services 8 million Australians.


Approximately 4000 CES workers lost their jobs as result of the introduction of Job Network. According to forward estimates, the Government plans to cut a further 3800 Centrelink staff over the next two years.


Despite making a commitment to improve the standard of service delivery, the Government's under-resourcing and mismanagement of Centrelink have resulted in chaos for the provider and Job Network.


Problems in Job Network have resulted in greater pressures as confused and concerned job seekers have beseiged Centrelink. Calls have grown exponentially, from 197,000 calls per day in January to 718,000 calls in June and over 1 million on some days in July, despite funding only being available for 70,000 calls per day.


As well as coping with the introduction of Job Network, Centrelink has also had to contend with a faulty new computer system, the Newstart Common Platform which delayed payments, causing increased confusion among unemployed people.


The Government also in troduced the Common Youth Allowance and Work for the Dole within two months of the start of Job Network, mismanagement which further compounded the strain on Centrelink.


This has resulted in unprecendented strain on Centrelink staff, with many having been threatened.




Clearly, the resourcing of Centrelink needs urgent review. Job Network shows no signs of settling down and there needs to be an increase in the funding of Centrelink to ensure it has sufficient levels of adequately trained staff to cope with demand and provide appropriate service and support to clients.






In 1997, representatives from Manpower Services International, a transnational employment services company, met with the then Minister for Employment, Senator Amanda Vanstone. Manpower was interested in buying the then CES, but apparently sought a long-term contract form the Government and a guaranteed strong market share.


It is a common fear within the industry that the Government has considered privatising Employment National and Centrelink in late 1999, at the end of the 18 month start-up period of Job Network, when both these organisations will be granted 3-year Government contracts for the provision of employment services.




The provision of social security and employment services should not be privatised. The most disadvantaged members of the community should feel secure that their needs will be met and not viewed as a commercial venture.


The Democrats would oppose the privatisation of Employment National and Centrelink.






Job Network


Job Network came into operation in May 1 1998. It is the Government's new system for labour exchange services, which used to be delivered by the CES, and for intensive employment assistance, which was delivered by private and community organisations.




Design and operation of the system


The new scheme centres on the provision of 'Flex' services. Organisations were offered the opportunity to tender for these services and compete against the Government-owned Employment National for payments upon successful outcomes. 



Flex One:



Basic job matching. Organisations attract jobs from employers and match work ready job seekers registered with them.



Flex Two:



A three-week intensive group course for job seekers. Participants receive training in aspect of job seeking, including letter-writing, resume preparation, interview techniques and industry information.



Flex Three:


The centrepiece of the tender. $1.1 billion of the total $1.7 billion allocat ed to employment services goes to this component. It is case management, where long-term unemployed people are given one-on-one assistance to help them find and retain employment.



Tendering Process


Organisations were invited to tender for employment services in defined regions, and bid to provide services to defined groups (such as young people and the disabled).


They were required to answer specifications and display evidence of their ability to provide these services and display financial viability.


All organisations had to tender for Flex One services.




Operation of the system


Job seekers approach Centrelink where they are registered and given a card, which they present at up to six agencies to register for Job Matching services. Job seekers with specific barriers to employment are assessed under the Job Seeker Classification Instrument (JSCI) to determine their eligibility for Intensive Assistance.


Agencies are only paid for Flex One services when the job seeker is placed in a job. There is no up front payment. For Flex Three, 30 percent of the payment is paid upon commencement, when Centrelink refers the job seeker to a provider who then negotiates an activity agreement (which sets out the nature of training and assistance to be provided). Forty percent is paid after the job seeker has been in a job for 13 weeks and the remaining 30 percent is paid after the former job seeker has been in the job for 26 weeks.





1 Community organisations unite.......


2 Paul Pickering "Altruism and Capitalism: through the new Job Network?" Brotherhood of St Laurence Social tracts for our times, No.1, May 1998.


© 1998 Australian Democrats