I am away today with a full day of commitments from an early flight to the late evening. So I called up Victor and to see if he would write another blog which I know are of great interest. Today he is writing about some of the early manifestations of the neo-liberal onslaught on sound government services – in this case our former public employment service which was abolished and the services privatised. This is one of the examples in which the neo-liberals have not only converted unemployment from being a target of policy (to keep it low) into a tool of policy (to discipline inflation) but it also is one aspect of what I call the “unemployment industry” which sprung up to deal with entrenched joblessness that deficient approach to macroeconomic policy generated. It was amazing how the outsourcing and privatising of government services created a bevy of private profit-seekers who sought the booty on offer. In 2001 the OECD held out our privatised labour services as the exemplar of its Jobs Study agenda. What they were extolling was a corrupt, inefficient and ineffective system of shuffling the unemployed between various (mostly) meaningless training programs and work-for-the-dole compliance placements. But then the OECD has hardly had high standards so we shouldn’t have been surprised about that. Anyway, enough from me – the plane is ready … over to Victor.
Australia’s ‘marketised’ public employment service, Job Services Australia (formerly the Job Network), is undergoing yet another review in the lead up to issuing a new range of service provider contracts. After several makeovers, this method of delivering a public employment service has not delivered the quality services Howard government advocates claimed it would at the time it was launched in 1998. It has not provided a better deal for job seekers, particularly disadvantaged job seekers, nor has it provided a decent service to employers.
Regular ‘reforms’ to improve the quality of service provision have failed, because they have not addressed its fundamental design problems, which in one way or another stem from the flawed policy of combining labour market brokerage with welfare policing, which has driven employment services standards backwards since it became the central objective of policy makers around 1987.
The outsourcing of employment services was largely adopted as a final solution to Commonwealth Employment Service (CES) staff resistance to the intensification of coercive management of the unemployed, after years of managerialist cultural re-engineering to achieve this objective had progressively impaired its function.
As a close observer of the evolution of these practices, first as an unemployed youth in 1976, and subsequently as an employment officer, employment counsellor, Commonwealth Employment Service (CES) branch OIC, SkillShare Manager, Job Network Manager, during the 1980s and 1990s, and through a range of experiences including secondments to Canberra, and opportunities to interview former Ministers and other policy makers, it surprises me how little is publicly acknowledged as to what has driven this agenda.
Even fundamental shifts such as the ‘marketisation’ of the public employment service in 1998 are poorly understood, with commentators spuriously attributing the origins of the Job Network to the Coalition parties, with very few perceiving its primary objective: to overcome long-term resistance by CES staff to the use of coercive techniques in the management of the unemployed.
I thought I’d take this opportunity to outline some of the history of these developments and suggest why the maintenance of a pool of unemployment has led to the poor standards of labour market brokerage we experience today.
Managing the unemployed
The creation of a pool of unemployed people as a method of permanently disempowering workers in the labour market is not the end of the story, because it soon becomes apparent that this pool has to be strategically managed in order to engender the sort of desperate competition for jobs that the policy elites hope will thereafter drive productivity.
Long term unemployment soon arises among certain demographic groups in the unemployment pool, as employers avoid those they (rightly or wrongly) consider less productive, forcing them to the back of the jobs queue. At the same time the average duration of unemployment lengthens, as the unemployed population becomes de-skilled in the absence of regular employment.
Thousands of studies have shown a steady falling away of job-seeking activity as knock-backs accrue and durations of unemployment extend. People become socially isolated, their fitness declines along with their concentration and time management, their confidence erodes, their belief in being able to get work fades. Employers generally view absences from employment as indicative of an underlying problem, and the longer term unemployed find the task of explaining their situation increasingly difficult.
People become fed-up with the job search process where many employers treat them as if their time is valueless, particularly when employers fail to inform them of the outcome of their applications, which is very common. The emotional and financial costs associated with making unsuccessful applications for jobs seem increasingly like imprudent investments, and so unemployed people increasingly channel their energies into adapting to their unemployment. They stop competing for jobs.
For this reason, Australian governments take a stick to the unemployed to discourage their acclimatising to the unemployment to which they are subjected as a deliberate act of policy. They threaten to stop meagre unemployment benefits (Australian unemployment benefits are a non-contributory system with a low rate of replacement vis-a-vis the minimum wage), to compel constant competition for work and enforce participation in activities designed ‘to make non-work less attractive than work’ as Tony Abbott once explained to a visiting UK parliamentary delegation.
According to the managerialist logic driving this morally bankrupt agenda, the investment in staff and facilities to do all this is justified by savings on welfare outlays. These practices became so severe by 1999-2000 that a poverty epidemic was reported by emergency relief agencies to have arisen in Australia because tens of thousands of people had their benefits stopped or reduced for failing to comply with the myriad coercive demands by Centrelink and revenue hungry job network operators.
Governments have endeavoured to suppress how poor the service is since its inception. At the same time that the poverty epidemic was happening the mantra coming from the unemployed was that the Job Network did nothing to help them. When Minister Tony Abbott released a Jobseeker Satisfaction Survey that said a poll of 15,000 job seekers reported a high level of satisfaction, many of us thought it was rigged.
The Productivity Commission later reported (2002) that the poll was actually of 22,000 people, but a screening question ‘has the Job Network done anything to help you’ resulted in around 7000 responses in the negative being removed from further consideration.
Some mitigation of the breaching has reportedly taken place, yet compliance activity still distorts and undermines the quality of performance of the employment services.
The Norgard era
If we go back to the period immediately following the abandonment of full employment, we can see how the issue subsequently unfolded.
It is one of the ironies of the story of the evolution of Australia’s employment services, that following the abandonment of full employment it was actually initiatives by the Fraser government (December 1975 – March 1983) that produced the best period of employment service capacity-building to deal with mass unemployment.
Fraser had the problem of reconciling a population that had experienced full employment for thirty years to a return to the old practice of preserving a pool of unemployment.
His tactic was to do everything to appear to be addressing unemployment, apart from actually reducing it, using a wide range of agenda management tactics (tokenism, blame shifting, changing statistical methods, etc), well described by Ann Harding in a 1985 journal article ‘Unemployment Policy: A Case Study in Agenda Management’ (Referenced at the end).
His backbenchers, and the media barons through their infamous ‘dole bludger’ campaign, pushed the line that unemployment was due to lax administration of unemployment benefit and the work test (that obliged people to seek work and accept offers of employment or lose benefit entitlement). Their calls for an overhaul of the CES prompted Fraser to commission two important reports.
The “Review of the Commonwealth Employment Service” headed by J.D. Norgard (former BHP operations manager) was established in October 1976 to consider the appropriateness of CES structures and performance, while the “Inquiry into Unemployment Benefit Policy and Administration” headed by Dr David Myers, (former La Trobe Vice Chancellor) was commissioned in March 1977.
Norgard reported in June 1977 that the CES needed more staff and resources, should modernise its facilities (many were still using Bakelite telephones, few offices had photocopiers), should concentrate on being a labour market intermediary and take no part in the administration of the work-test. He was particularly critical of the extent to which CES staff were tied up with administering benefit entitlement.
Myers reported in the following month that (contrary to the government’s view) current UB rates were not a disincentive to work, that job creation was urgently required and that the work-test should be abandoned in times of high unemployment.
While their opinions on work-test administration were largely ignored, Norgard’s recommendations for increased CES staff training and development, the introduction of a display board system where job seekers could make their own job selections, and use of computers to circulate job vacancies between offices were adopted.
Perhaps sensing public disquiet with the emerging iniquitous distribution of unemployment among disadvantaged social groups, Fraser took Norgard seriously, invested in upgrading the skills of CES staff, developing specialist roles and providing a raft of labour market programs such as wage subsidies, fares and relocation assistance, apprentice rebates, etc, to better meet the needs of an increasingly complex and longer term unemployed population.
Given the importance of re-institutionalising a pool of unemployment, it was critical not to elicit a political backlash by allowing the government to look indifferent to those disadvantaged groups that comprised the bulk of the long term unemployed – people with disabilities, migrants, youth, etc.
While CES industrial disputes arose during the Fraser years over the application of the work-test (considered counter-productive by staff in times of job shortages), by the time of the advent of the Hawke Labor Government in 1983, Norgard’s reforms were well established and the general attitude within the organisation was to discourage over-zealous work testing in line with his advice.
A contributing factor to this period of enlightened organisational development arose from Fraser’s depiction of unemployment as an industrial relations issue, caused by greedy trade unions etc, which gave rise to the Department of Employment and Industrial Relations (DEIR).
Fortuitously, the requirement for senior IR staff to be near the Arbitration Courts in Melbourne led to CES senior management also being located there, amidst a large metropolitan labour market where the social consequences of abandoning full employment were highly visible, rather than in the artificially buoyant Canberra community.
The Central Office was largely staffed by people who had risen through the ranks of the CES, who had experienced labour market brokerage under full employment, who by virtue of their location remained in close contact with former colleagues still working in the CES network.
This proximity to the coal face made them aware of how complex labour market brokerage in the new mass-unemployment environment had become, and engendered an appreciation of the importance of training CES staff in the functional aspects of their work, respecting their judgement as to how to assist their clients, and supporting them with highly developed specialist assistance.
The result of this period of reform and development following the Norgard report was that by 1986, the CES was handling a record 41 per cent of advertised vacancies in Australia. By 1992, after a series of reforms introduced from 1987 onward to improve the effectiveness and efficiency of the service, this collapsed to 18 per cent. What happened?
DEET and the Active Society
Prime Minister Hawke announced a reorganisation of the public service in July 1987, creating the Department of Employment, Education and Training (DEET) under John Dawkins. The CES central office was relocated to Canberra, and many managers with CES backgrounds refused to make the move, taking early retirement or transferring back to the CES network instead. Their positions in Canberra were filled by people without any experience of labour market brokerage, émigrés from Finance, Veterans Affairs, Health, etc.
What they lacked in tacit knowledge of the labour market, of the dynamics of intermediation between job seekers and employers, they made up with adherence to neo-liberal managerialist dogma. According to Michael Pusey, other changes in public administration at this time gave the Central departments of Treasury, finance and Prime Minister and Cabinet, greater control over the operations of other departments, setting the scene for a major shift in direction.
This found expression in their embrace of a new range of ‘activation’ measures, championed by the OECD, occasioning a new culture to be instilled in the CES: the Active Employment Strategy. This included changing benefit entitlements to oblige recipients to undertake ‘activities’ to which they were directed by employment services staff. This was publicly promoted in 1988 by Minister Brian Howe and consultant Bettina Cass, who argued for the introduction of ‘activity testing’ in their Social Security Review.
While understating the OECD’s advocacy for doing so as a productivity driver, Cass argued (spuriously) that it would mitigate labour market exclusion.
It soon became clear in practice that the Department particularly favoured those ‘activities’ which were especially disliked by the unemployed, such as ‘job search training programs’, as these occasioned the highest numbers of ‘breaches’ of the activity test. The resources to introduce these changes were, after all, justified in budget discussions on the basis of the savings that ‘breaching’ (as the practice of cutting people off benefits became known) would generate.
The CES staff who had the benefit of training and specialist development via the Norgard reforms, who understood how unemployment impacts on individuals, of the structural changes underway in the labour market, of the need to empower unemployed people to motivate them, and so forth, were appalled at the ignorance of employment officer trade-craft embodied in these initiatives. This was acknowledged in a report of a conference of Employment Office Managers in 1988:
‘There was a major attitudinal problem on the part of the staff:
“A large number of CES Officers see themselves as being there to assist the client. They believe work [activity]-testing does not assist clients and therefore it should not be done, as it will create hardship for clients when they lose their benefit. It appears they have failed to accept or understand the change of philosophy that DEET is taking”
DEETs new initiatives failed to generate the breaches and hence the promised expenditure savings. In 1991 the Australian National Audit Office looked for the reasons and presented parliament with a report entitled The Administration of the Work Test for Unemployment Benefit, Report No. 10., which drew attention to DEET’s view that there were significant divergences of opinion between senior management and the operational staff.
The belief of incompatibility between work testing and the job placement role of the CES was acknowledged as prevalent within the CES network, but was not a belief shared by senior management. However, CES attitudes to activity testing were recognized as being a possible impediment to the successful implementation of the Newstart strategy, and were addressed in the first phase of Newstart training as part of the package titled ‘Thinking AES” [Active Employment Strategy] (ANAO, 1991, para 1.7.5.)
Measures taken by DEET to overcome these “impediments” involved changes to recruitment practices (to favour recruits with the “right” attitudes), training sessions (to foster attitudinal change), and glossy staff magazines promoting the preferred organisational values through the use of such strategies as essay writing competitions for staff with ‘reciprocal obligation’ being the moral of the story. Staff were brow-beaten with the proposition that if the government undertakes to provide support for the unemployed, they were obliged to co-operate with what they were told to do.
While this may seem reasonable (providing we ignore it was government policy to keep a pool of people unemployed in the first place), what people were asked to do was often deeply frustrating and demoralising – experienced mature workers being lectured to by 20 year olds on how to conduct themselves in a workplace, people who had operated their own retail businesses being drilled in the correct way to answer a telephone, alongside 17 year olds, and so forth.
With the tabling of the ANAO report in parliament, Opposition spokesperson Senator Richard Alston was livid with the CES staff for dragging the chain, and critical of the Hawke government’s inability to impose its will.
There has been an inordinate amount of lead-up time and every opportunity to re-educate the troops, yet … we have virtually a strike on our hands. That should not be tolerated, yet this Government seems quite relaxed about the fact. …This makes it clear that the CES has no claim to stay in the game. It is no longer relevant to an active employment strategy… the CES by its actions has forfeited any claim to ongoing relevance. … [The DSS is] being frustrated constantly by the CES. This simply underlines the need for a fundamental overhaul and a rationalisation of activities. An independent CES in these circumstances is a luxury that we cannot afford (Senate Hansard, 5/11/91, p2400
The enforcement of managerial prerogative became the central focus of the department, entailing a new, highly prescriptive manual, authored by people who had not ever worked in a CES, and an extraordinary explosion in the number of forms staff had to complete and counter sign in administering any process. Computerisation of job seeker records then gave the Central Office the capacity to monitor every keystroke, and automatically generate threatening letters to clients, turning CES offices into breach processing factories during the 1991-2 recession.
Staff were progressively de-skilled as training resources were wholly given over to learn the constantly redesigned computer system codes, forms, and other paraphernalia for managing the administration of the compliance regime.
Specialist roles were abandoned, interviewing and other training was reduced to a bare minimum, occupational and industrial knowledge formation was neglected, with the consequent fall in the competence of the service reflected in its share of advertised vacancies plummeting to 18 percent. The problem was that you cannot train staff to a high level of insight as to the realities of the labour market, in how to assess work readiness and motivate demoralised unemployed people, without them gaining insight into the counter productive and unfair nature of punishing the unemployed for behaving as unemployment is known to make people behave.
Nor will the unemployed have sufficient confidence in staff who routinely threaten to stop their benefits, to disclose anything that might indicate they are not seriously applying for jobs, and hence their real barriers to employment are seldom revealed. Between the lack of functional (as opposed to administrative) training and the barriers to communication with their clients, the CES was rendered very ineffectual in its final years.
The Twomey Report
To manage public disquiet over the ‘recession we had to have’ the Keating Government released a green paper on Restoring Full Employment in late 1993 that after several months of public debate was followed by the White Paper: Working Nation. Wearing and Smyth note in a 1998 paper that a curious rupture occurred between these two documents, in that the first is talking about the possibility of community sector agencies collaborating with the CES to provide a wider range of supports to the long term unemployed, a suggestion without any particular prominence in the submissions, whereas the White Paper set out a policy of head-to-head market competition between the CES (via a corporatised wing) and contracted providers.
In the interim another (to this day unpublished) report had emerged as “one of the informant documents for the White Paper process” (CALC 1994, 197), a report entitled From Client to Customer: An Approach to Re-Engineering the Delivery of Employment Services, prepared by Paul Twomey while on leave of absence from McKinsey and Company where he had mostly specialised in downsizing financial institutions.
This was around the time that his McKinsey colleague Fred Hilmer brought down his report on National Competition policy. Twomey’s report was commissioned at the behest of the then Minister for Social Security, Peter Baldwin, for $147,000, plus a further $56,200 for a Roy Morgan Research Poll that was used by Twomey for his analysis. It was presented to cabinet but not publicly released, probably because it is so inept.
Twomey argues in the report that the CES should be shut down because it failed to meet its client’s needs, because it hadn’t placed them all in employment, without mentioning that the period he was reviewing entailed a government induced recession (we had to have) that had driven unemployment to an official post war high (well over 10 per cent). Twomey chose instead to argue that the problem was that the CES was putting its resources into the wrong type of referral activity and that such poor use of its resources meant it should be scrapped and replaced.
Had Twomey or the two bureaucrats assigned to assist him prepare this report had any experience of working in the CES, or even using one, they would not have so ludicrously misinterpreted the referral data they used to make their case.
Following the referral of someone to a job interview, CES staff would statistically record whether it occurred as the result of a self service interview, where a person found the job on a CES display board, or whether they had been called into the office about the vacancy by a staff member who had matched them to it, or whether the referral occurred when they were being interviewed for another purpose, either at an initial registration interview, or an interview to explain eligibility for a program.
‘Self service’, ‘ matching’ and ‘ interview’ referrals were otherwise identical, in that the person’s suitability for referral was determined by a face to face interview, the employer contacted and the job seeker’s attributes discussed, and if the employer agreed, a job interview appointment was arranged. Twomey mistakenly thought a self-service referral meant the job seeker contacted the employer directly themself, without the CES performing any screening process.
However the highest placement rate was achieved when the needs of the unemployed were matched to the needs of the employer. Most success in placing job seekers occurred when a client was referred after interview by the CES (39 per cent of interview referrals). Only 13 percent of Self Service referrals resulted in placement. Nearly one third of job matching efforts resulted in placements. The cost-effectiveness of one to one interviews is enhanced when consideration is given to the impact of the higher placement rate on income support outlays.
The reason why ‘interview’ referrals had a higher hit rate was because the bulk of those referred had only just registered as unemployed on that day, or had the shortest duration of unemployment that would entitle them to a significant wage subsidy. The number referred was largely a function of how many people registered. ‘Matching’ interviews had a higher placement rate than self-service because vacancy staff selected jobseekers from the register whose profiles were least subject to employer discrimination, but this was a slow referral method because it took time to contact people and for them to attended the office, by which time a self-service referral had usually filled the vacancy.
Yet, it was on this basis that Twomey argued for the adoption of case management, and for the work to be outsourced to contracted private providers!
It is astonishing that so inept an analysis could have held any sway in the federal cabinet, but evidently it did. Twomey went on to outline how a marketised public employment service could operate, sketching out a model similar to the initial Job Network/Centrelink system. He also explained that such a system would have to be phased in, to allow time for non-government providers (private and community) to establish their premises, staff, systems etc over several years before closing the public provider.
As it happened, that was the main thrust of Working Nation and subsequent implementation of contracted case management by the Keating Government under the 1994 Employment Services Act. Significantly, when the Howard Government legislation was cynically frustrated in the Senate by the Labor opposition, Howard introduced the new system in 1998 under Labor’s own 1994 legislation.
But surely, wasn’t so lame a justification for outsourcing the public employment service obvious to those running the CES?
I believe that those in power saw in Twomey’s proposal as a method for driving a tougher employment services regime by undermining the employment security of employment services staff. Contracting out the employment service gave them the power to make the economic security of employment services staff conditional on their propensity to breach.
The tender process for allocating Job Network contracts proved very effective for this purpose. Firstly, it knocked out the mass of non-profit community agencies that sprang up in the 1970s to provide support for the unemployed following the abandonment of full employment.
Run by volunteer committees, these had delivered the grant-driven Community Youth Support Scheme (CYSS) and then became SkillShare providers (of cheap vocational training) in 1988.
These institutions were largely hostile to the practice of breaching, so with the SkillShare program ceasing on the same day as the CES, in May 1998, many closed for good rather than participate in the Job Network, others had their applications rejected, and those that received contracts and showed insufficient commitment to breaching were weeded out in subsequent contract rounds.
Contracts were designed to encourage breaching, by capping referrals for fee-attracting services, so that agency incomes dried up as their books swelled with people employers didn’t wish to employ. Breaching people and driving them to seek an alternate provider would clear a space for a new referral and a new upfront fee.
People who failed to attend their assigned provider to commence ‘case management’ were breached in order to elicit a replacement referral and an upfront fee.
The real basis for awarding contracts was obscured in commercial confidentiality, so when Minister Kemp spoke of judging agencies ‘according to their capacity to reduce their client’ s dependence on welfare’, which could mean getting them work or breaching them, money hungry agencies breached the unemployed with missionary zeal. Welfare agencies reported high levels of poverty to be directly attributable to this policy.
As for the staff, survival in this system requires conforming to their employer’s wishes, and many skilled and experienced employment service staff now avoid working in the public employment service. A 2001 study by Richard Goddard, Wendy Patton and Peter Creed, in the Journal of Employment Counselling (vol 38) of ‘psychological distress in Australian case managers working with the unemployed’ reported on two 1999 surveys that found:
More than one half (51%) of the case managers surveyed at T1 were identified as either suffering from, or to be at serious risk of developing, a psychological illness. This case rate had increased to 57% at T2. Although this increase was not statistically significant, the finding is confirmation of the stability of the study’s observations…
At T1, almost two thirds of case managers (65.1%) indicated they had not undertaken a formal skills training course pertinent to their case management duties, whereas one third said they had undertaken such training.
To my knowledge (and I would like to hear from anyone who knows otherwise) there have been no follow up surveys undertaken or published.
And so today we are left with the agencies that have survived this natural selection process, who invest little in the formation of their staff’s practical brokerage skills, as in counselling, assessment, industrial and occupational knowledge, because this would risk engendering a view as to the counter-productivity and moral bankruptcy of breaching unemployed people.
The market structure itself prevents the development of strong insights into the state of the labour market since commercial rivalry prevents open sharing of labour market intelligence, of brokerage techniques or other matters, while the contract incentive regime engenders the most superficial possible service being extended to the unemployed and the community in general.
The marketised system has never matched the universality of access or range of outreach and public education services once routinely provided by the CES.
But perhaps the largest impediment to the effectiveness of the modern employment services system is that the relationship between staff and clients has been so hopelessly distorted by the culture of breaching, that the unemployed do not trust employment or Centrelink staff with the sorts of disclosures about their problems of engagement with the labour market that are necessary for facilitating viable strategies for surmounting them.
People have to admit they have stopped looking for work before any meaningful discussion can take place about improving their prospects of finding work. The unemployed and the people supposedly there to help them, continue to go through the motions, while the proprietors of the system, such as the former Labor Prime Minister’s wife, make their millions out of the resultant misery. Surely, we can do better than this.
A large scale public sector job creation system, integrated with a high quality public employment service, is the crucial ingredient for any serious policy for eliminating unemployment. Among many other advantages, it would eliminate the need to continually threaten and punish the unemployed for behaving how unemployment inevitably makes them behave.
It would, as a consequence, reduce the fear and defensiveness with which job seekers engage with the system, opening up more insightful dialogue with employment services staff, in turn enabling them to provide a higher standard of service to employers. As it would also remove staff resistance to breaching as an issue, employment officers could once more be permitted to develop a sophisticated understanding of labour market brokerage, providing both job seekers and employers with more effective forms of counsel and practical support.
Community Affairs Legislation Committee, (CALC), (1994), Department Of Social Security: Program 3–Income Security For The Unemployed: Subprogram 3.1 — Jobsearch Allowance 2/12/94. Senate Estimates, Hansard, Parliament House, Canberra.
Committee on Employment Opportunities (1993), Restoring Full employment: A Discussion Paper, Canberra, Government Publishing Service.
Goddard, R. Patton, W, Creed, P.(2001) ‘Psychological distress in Australian case managers working with the unemployed’, Journal of Employment Counselling , June, Volume 38.
Harding, A. (1985) ‘Unemployment Policy: A Case Study in Agenda Management’, Australian Journal of Public Administration, Vol XLIV, No. 3, September, 224 – 246
Myers, D.M. (1977) Inquiry into unemployment benefit policy and administration / Report for the Minister for employment and Industrial Relations and the Minister for Social Security. AGPS, Canberra.
Norgard, J.D. (1977) Report for the Minister for Employment and Industrial Relations, AGPS., Canberra.
Pusey, M. (1991) Economic Rationalism in Canberra, Cambridge University Press, Cambridge
Wearing, M. and Smyth P. (1998) ‘Working Nation and Beyond as Market Bureaucracy: The Introduction of Competition Policy in Case Management’, in Cass, B, M. and Smyth, P (eds) Contesting the Australian Way: States, Markets and Civil Society, Cambridge, Melbourne.
Bill will be back with the Saturday Quiz sometime tomorrow – even harder than last week!
That is enough for today!