Julian Hill MPFederal Member for Bruce

Speech to National Employment Services Association CEO Forum

Sydney - 4 October, 2022

Thank you for the invitation to be with you today and speak to you as Chair of the House Select Committee on Workforce Australia Employment Services.

When your sector is performing at its best – in the way that taxpayers, those who designed the system and those you serve would wish – then you don’t just get people a job. You change lives for the better – including in my community in south-east Melbourne. My seat of Bruce covers a large part of Melbourne’s most disadvantaged Council area, and the most multicultural part of Australia, with an unemployment rate generally about double the metropolitan average.

This is really, really important work that the organisations you are charged with leading do. It’s been a bit of an eye-opener, over the last couple of months, as I’ve immersed myself in reading, listening and thinking, to understand just how complex your work is.

One paragraph on me as this is a first date. I have a broad background in public policy from former lives as a Mayor, then a senior Victorian public servant. I claim no great expertise in your world, although as a small part of one role, I ran the remnants of Victoria’s employment programs; the couple of remaining little programs the Liberals had for some reason not got around to cutting. But it did give me an appreciation of the importance of evidence-based policy and rigorous evaluation in this area. And the dangers of unquestioned truisms or ideology.

And one warning at the outset. I usually don’t speak for long and prefer to talk from dot points. However I’ve broken my rule today and given Sally’s guidance have taken time to provide a longer speech setting out our task, early thoughts and challenges, and outlining the process. One advantage of this approach of course is that if you fall asleep you can read it later if you wish.

This speech has a few animals scattered to help frame my remarks – mainly elephants and sacred cows, plus a dead cat, a surprise fish and a unicorn.
Let’s start with a very big elephant in the room.

I’m conscious, as no doubt you are, of the slight weirdness of the task we’ve been given: to review a system that is only 3 months old, born after 4 years of review and trials. That does seem a bit strange on the face of it. But there are good reasons.

As a government, we have inherited a system that was contracted just before the election caretaker period commenced. It is the Commonwealth’s largest single contract outside Defence - $7.1 billion.

As the Minister has said to the sector, this system we have inherited was not designed by a Labor Government. And it was not designed for this moment; it was designed for a very different labour market and very different caseload.

Surely the most striking illustration of the failure of the previous system – or frankly systems – is the current labour market. Employers are screaming for workers; the ratio of jobseekers to job vacancies is as good as it’s been for a bazillion years. Yet there remain hundreds of thousands of Australians stuck in the long-term unemployment queue.

Now I’m not naïve – yes, some people are ill-suited for a myriad of complex reasons for the skilled work on offer, and the current caseload is the hardest that it’s been. Some people are going to be really, really hard to help due to physical incapacity, psycho-social or substance abuse disorders, attitude or other barriers. But for far too many people, the system has failed for years to prepare, invest in, train and skill them so they can seize the opportunities of this moment.
Or worse, it’s demeaned them and made them less employable over the months and years rather than helping them.
I will pay a compliment though to the previous review. Within the parameters that were given, the I Want to Work Report was a genuine and thoughtful attempt to identify real problems and make things better.

Workforce Australia appears to respond to that agenda, though imperfectly so, and the dedicated public servants deserve respect for professionally discharging their duties in advising on its design and in its implementation.

However significant aspects of the system design were simply not allowed to be questioned in previous reviews – the sacred cows which I’ll come to.

And so for a new Labor Government, we are not simply going to ‘set and forget’ the employment services system. The task our Committee has been given by the House of Representatives is a first principles review. So the Minister can get a deep sense of things, form a view as to what the future should look like, and identify what things we can do now and over the next few years – assuming the current contracts run as written – that bring us closer to that first principles potential destination.

A brief aside on the contracts and tendering, just to get this out the way, as many have mentioned this to me – in widely varying tones. I am also Chair of the Public Accounts and Audit Committee. So I have talked very meaningfully with myself. And We have formed the view that it will not be productive for the Workforce Australia Committee to become a complaints-shop for the last procurement round. There’s little to be gained in us doing that. The Auditor-General is doing a major audit of that procurement and is due to table his report around June next year, in time to draw on in our final report if necessary.

Another small elephant in passing, on the contracts. The Minister has been very direct that of course he is bound by the contracts and does not break contracts. Equally, of course we all understand that there’s a level of flexibility in the contracts to make changes if required and desired. So the Government intends this to be a cooperative process, without – to quote the Minster – “descending into anything silly”. Sounds sensible.

Now for a dead cat.
If we strip away the marketing spin and rhetoric, I agree with ACOSS’ conclusion, that really there have been 2 overarching objectives of successive governments over the last 20 years, since the Liberals under John Howard fully privatised Australia’s employment services system.

Firstly, to drive down, at pretty much any cost, the number of people claiming welfare benefits at any and every point in time. Every dollar saved at a single point in time has been claimed as success. It matters not if someone is made less employable because of what we do to them, condemned to poverty or consigned for life to insecure work.

Secondly, to constantly drive down the cost of running the employment services system. To the point we now invest less than half the OECD average, which is also seen as success - regardless of quality or impact.

Really, let’s not be coy – those have been the 2 main objectives of governments for 20 years. The impact on disadvantaged people, communities, employers and the labour market of the policies used to achieve these two objectives are secondary considerations. Under the previous mob, just a bonus.

To their credit, the Rudd and Gillard governments made genuine attempts to rebalance things, and significant investments especially to deal with disadvantage and long-term unemployment. But these were not a fundamental reconsideration of the system’s core tenets.

One thing that is absent entirely is any objective of supporting people into good, secure, appropriately paid jobs. Sustainable work. It’s pretty strange that we don’t seem to measure any outcomes beyond 6 months. No longitudinal analysis. All points our Committee will no doubt reflect on.

Now I’m conscious from my visits and discussions so far of the depth of expertise and thought about these issues. NESA CEO Sally Sinclair is exceptionally experienced and has a deep understanding of programs, efforts and reforms since the Hawke – Keating years, as well as international perspectives.

So to name another elephant. Many of you have heard all this before and are – I expect – sceptical of the value of yet another review. Fair enough.

Because in many senses, there is little that is truly new in this policy space, and certainly no black and white answers.

Evelyn Brodkin’s foreword to the provocatively named book about the current Australian system – Buying and Selling the Poor by O’Sullivan, McGann & Considine which I read last month – beautifully frames and locates our debates and dilemmas in first principles and history.

She starts by reminding us that “Welfare and labour market policies are boundary-setters; straddling the line between two, large structuring institutions: state and market…. Policies that shift the balance between welfare and work … may assume outsized political significance.”

The same questions we grapple with today, and that our Committee will weigh up, have been the subject of intense policy and political debate for centuries. Swinging the pendulum from the provision of goods, cash and support to “help enable individuals to make it in a market economy”, to deploying regulatory strategies to “discipline the labour force” by “withholding aid or making it conditional”.

‘Work for the Dole’ and recent ‘Workfare’ policies are not new ideas. Brodkin quotes a 1927 study of 600 years of the British Poor Law experience, examining “the continuously shifting and perpetually developing legal relations between the rich and the poor, between the ‘haves’ and the ‘Have-nots’ … [Yet] the story ends as it begins with the (as yet unsolved) problem presented by the Unemployed, whom our grandfathers called the Able-bodied” [Webb and Webb]. She goes on to recall the notorious British workhouses from the 16th century where gruelling work was required in return for meagre rations – a rough prototype she observes for workfare strategies.

It could be worse though – and apparently it was; the workhouse was a reform in fact: “a reaction against the severity of [earlier] Poor Laws which provided for the enslavement and harsh physical punishment of unemployed ‘vagrants’.”
She also recounts a change in the mid-1800s to how the Poor Law Boards reported to Parliament, ending the provision of colourful narrative and replacing them with reports heavy with dreary detail, “statistical records…unspeakably dull”. “The power to conceal [what’s actually happening to citizens in a system] under the guise of administrative statistics and business-like efficiency resonates to this day”. If you haven’t seen the 2016 British movie ‘I, Daniel Blake’ you should.

The point of all this is not to depress us. It’s simply to better locate our debates and continuing efforts to improve and do better for those we serve. As Brodkin persuasively argues, even as Australia “has advanced its commercialised policy model, [we have carried with us] the legacy of the British Poor Laws, along with their complicated contradictions and dilemmas”.

So while naming the elephant of scepticism, I do ask you to not cross over into cynicism. The Committee is genuine in our efforts to shine light, understand, and make sure future employment services are best designed to meet the challenges of this labour market and our society in the future.

And now, the sacred cows that have been beyond challenge, let alone slaughter. Firstly, Extreme ‘Work-first’ ideology, ‘any job’s a good job’, and the nature of mutual obligation.

For years we have heard the chant of “work-first” and “any job’s a good job” from politicians playing to the crowd. It’s a pretty easy and safe political space to live in. As the system for over 20 years has been built on the stereotype of the ‘dole-bludger’ having a great time living it up on the dole, refusing to get work. The belief that ‘all unemployed people are just lazy’ and if only society beats them ever harder they’ll somehow, magically just go and get a job. Of course the caseload now is very different from 20 years ago, or even 4 years ago.

And I’m not ignorant of the power of these stereotypes in the community and the political danger in challenging these truisms. I chat to people in my community and this comes up regularly at street stalls, morning teas and all over the traps. But when you engage honestly Australians are fair-minded and reasonable.
The response I give is that “yeah, no doubt some people take the piss, and mutual obligation done properly is important. But most people want to work, and we need to be careful not to torture the 95% to find the 5% who are doing the wrong thing. Some people aren’t capable of work at a given point in time for legitimate reasons, and we should be supporting people, training them and requiring them do things that will help them get work and good secure jobs. Not making everyone run around like hamsters in a wheel and do things that make them anxious, depressed, stigmatised, ashamed and less employable.

I ask people “How would you like the system to treat you or your family if you fell on hard times? If you’ve lost a good, secure job through no fault of your own – e.g. the factory closed – and you get demeaned and forced to take casual, minimum wage labour hire work that can’t support your family with no help to retrain. Is that a good outcome? Is any job really a good job?”

And I am direct: “Some people no doubt need a push or a kick up the bum. But we’ve ended up in a pretty weird place where the Government contracts companies to be, far too often, glorified Centrelink compliance officers. Forced to make people do Work for the Dole stunts that don’t help them get a job, or suspend or cancel their payments if they’re confused and push them further into poverty.” Most Australians respond pretty well to that sort of blunt talk.

One thing the Committee will be doing is questioning these shibboleths and following the best evidence. The failure to effectively invest in people – in skills, training and strengths – has led to the current ridiculous situation where the labour market is red hot and employers are desperate for warm human bodies to work, yet hundreds of thousands of unemployed people are not skilled or work-ready.

Now the architects of Workforce Australia will contend that extreme ‘Work-first’ is dead and buried, though many remain sceptical. Some of the answer will only be seen in the rear-view mirror, as it depends on how you – the providers represented in this room – behave over the next 12 months.

• Will you respond to the greater flexibility in the system and upfront investment by investing in people?
• Or will we see more ‘creaming and parking’ as has plagued the privatised system for 20 years, underinvesting in those who need the most help?

Time will tell.

A comment as we finish this first little herd of sacred cows on mutual obligation. It certainly has an ongoing place. I know saying that doesn’t please everyone, but society and citizens justifiably expect that people will make reasonable efforts to secure work in return for social security support. OECD evidence regarding activation policies back this up. Some have thoughtfully suggested reframing it as ‘mutual accountability’ but it’s not worth a pointless political fight, so let’s just pick our battles and stick with mutual obligation.

My firm belief, however, is that mutual obligation must actually be mutual. Which means the State must also live up to its part of the bargain, providing meaningful support to people to skill and retrain where needed and to find work. Preferably good, secure jobs. And that the State should not make people do things that harm them or make them less employable on the way. Lots of stuff to explore in the inquiry. ‘Work for the Dole’ anyone?

The second groups of sacred cows I’ll name as “Poverty traps and perverse disincentives the broader system creates”.

Many unemployed or underemployed Australians are making actually quite rational choices to not work more hours, or to reject full-time jobs. I won’t dwell or expand on these today, so just name a few as examples:

• Taper rates and earning credits for people receiving some level of benefit
• The fear and risk of overpayments being raised if Centrelink makes mistakes or people misreport or there’s a lag in calculating…what?
• The impact of the Childcare Activity test
• The terror of “getting off Centrelink” – this is complex and due in part of the difficulty of ‘getting back on’ if a job doesn’t work out, due to waiting periods or perceived processing times, as well as the risk of probation periods or psychology of security that even a part-payment provides.
• The quick loss of a Health Care Card – this is a HUGE one, especially for single parents and people with dependants.
• Public housing policies in some States and Territories – people are fearful of losing their secure housing if they take more work.

Thank you to the providers including many here today who have been blunt and direct, and helped us to identify these systemic issues. I hope that you all will contribute further thoughts on these during the inquiry, and invite you to do so.

I suspect just about everyone would agree these are real issues and want them explored. With the possible exception of the Treasurer and the Minister for Finance given the dreadful state of the Commonwealth Budget the government has inherited! As fixing them costs money. But the Committee will examine them even if they can’t all be fixed straight away.

Another area of interest and concern is the impact of payment cancellations. Let’s call this the surprise appearance of me as the fish: I have to say I was one stunned mullet, when I read and explored the Targeted Compliance Framework and the ‘Penalty Zone’. It felt like Boston Consulting meets Squid Game in a dystopian reality TV show that we make citizens play every day.

International evidence, including in Ireland and the UK, suggests payment cancellations simply fall on those with the most chaotic lives and push people – including those experiencing trauma, family violence and addiction – further into poverty. That’s not to say there is not a role for payment suspensions as a behavioural tool, if not automated and reasonably applied. But I’m sceptical about the utility of cancellations and it’s an area of interest for the Committee.

As is the way Governments have turned your staff into Centrelink compliance officers, too often getting in the way of building a positive relationship with the people you’re trying to help. A sort of weird Victim-Persecutor-Rescuer triangle game, where you’re forced to be both the Persecutor and the Rescuer.

Perhaps the largest in this herd of sacred cows, is the nature and extent of privatisation and marketisation.In saying the word ‘marketisation’, a brief nerdy point to note – employment services are not actually a true market. In economic theory terms they’re a quasi-market as Government entirely designs, commissions, funds and supervises the market.
Ultimately/ Government funds and is accountable for the system, for what you do and how you do it.

For decades now, the system has rested on unquestionable truths of Neoliberal ideology, derived from New Public Management theories. That more competition, contestability and choice will automatically – magically, even – deliver better outcomes for consumers, and lead to wonderful innovation and efficiencies. And that Government is inherently inefficient and must never provide services directly.

For a long while these truths have been something akin to religious doctrine for the Productivity Commission, Finance Department, consulting houses and other places where the high priests of marketisation reside.

Previous reviews have largely not or not at all been allowed to question the impact of privatisation. This was clearly telegraphed right from the start of the 2018 review when the very first Discussion Paper faithfully set out these beliefs and constraints. Though interestingly Workforce Australia ultimately brought in-house a large chunk of the system in the form of digital services. It’s early days in seeing how that will go, and I acknowledge the questions and concerns many providers have already raised about the system design.

• Is the Job Seeker Classification instrument sending too many people to digital services who really need face to face help?
• Is it too hard to exit digital services? A bit like unsubscribing from Amazon.
• Is 12 months too long to leave people in the digital system, knowing they will be less employable after 12 months searching for work?

We can and will consider these things in our work. One of the consequences of the shift to digital of course is that your caseload is far more disadvantaged, so questions about how best to help them come front and centre.

But on the core question I’m posing here: over two decades of evidence raises legitimate questions about the impact of marketisation, and there are a growing number of informed sceptics, deeply concerned that competition and choice has failed and will continue to fail the most vulnerable consumers.
The BSL has an interesting reframe on choice suggesting we need less focus on choice of provider and more on agency and choice of pathway to work.

Professor Mark Considine and many others have observed convergence between providers over the 20 years of privatisation. Instead of innovation and specialisation, we have seen not not-for-profit and for-profit providers increasingly doing largely the same things. The main difference being for-profit providers give their surplus to owners or shareholders, and not-for-profit outfits invest it in other mission-driven activities.

Much of this convergence seems to have been driven by red tape and the increasingly tightly prescriptive regulation by the Department of what you do. In significant part a response to previous contracting rounds where providers did exactly what you would expect them to do - maximised profit and chased outcomes at the expense of investing in those needing the most help. I’m genuinely not having a go though it may sound like it. In retrospect, everyone behaved largely as you’d have expected and Governments need to take ultimate responsibility for these outcomes.

Workforce Australia is a genuine and the latest attempt to respond to these realities. Another go at trying to get the incentives right. After the previous go. And the numerous goes before that. Many including the respected labour market economist Jeff Borland have questioned if the amount of ‘up-front’ funding though will be sufficient for jobseekers with the highest barriers. And whether the heterogeneity of jobseekers is sufficiently recognised. There’s also a worrying question as to what happens in 2 years if providers fail to get enough people into work. Is the outcome payment enough to be bothered with? Numerous questions can be posed and played with in our work.

But putting aside the design detail for a moment, some of the fundamental issues remain in any such quasi-market – a sort of Maslow’s hierarchy of needs for any provider:

• Behave in a way to keep the Department happy so you keep the contract, even when performance measures are silly or don’t help someone get a decent job.
• Maximise profit.
• Minimise costs.
• Make rational decisions to chase outcomes when it makes sense to do so.
• Do what you can to help someone get a job.
• Invest in staff.

I’ve talked earlier about the serial problem of ‘creaming and parking’ and the underinvestment in those furthest from the labour market. Another big problem here has been the progressive de-professionalisation of staff in the sector. I’ve visited a number of services now. Most of the staff I’ve met are lovely, but whatever their age, there has been a de-skilling and lack of investment over many years. And I am left scratching my head how bright young 20-something year olds without any relevant study – if any study at all – are remotely qualified to deal effectively with highly disadvantaged and traumatised people suffering long term unemployment – amongst other disadvantages. I know your clients – I represent them, they visit my office and I engage with them in the community.

A legitimate question then arises. If the point of privatisation was to create innovation and efficiencies, if we now regulate and prescribe everything in detail, then why would we continue with the current form of privatised system? Please don’t presume we have an answer to that question: we do not yet know.

A by-product of course of the previous systems has been a profound disengagement between employers and publicly funded employment services. The astounding and shocking statistic is that by the end of JobActive just 4% of employers engaged with the system. I suspect most were on seek.com and LinkedIn. Fleeing the insanity of ‘20 job applications a month’; confused about the changing and competing parade of local agencies and staff; and limited support to onboard people with complex barriers to employment.

The previous contracting rounds do seem a bit like a regional Hunger Games. Which made it kind of hard to build deep, trusting relationships with local employers, especially SMEs.

I’m old fashioned by the way. I believe relationships matter. Social capital is a thing. Indeed, that’s one of the main lessons from the really effective programs that work to help long term unemployed people and address social disadvantage in communities. Localism is the key.

But don’t believe me. I’d point you to the excellent 2019 report by the Deputy Chair, Liberal MP Russell Broadbent entitled Living on the Edge by the Committee he chaired on Intergenerational Welfare Dependence. One of its most important conclusions was the importance of local, place-based, tailored solutions that help people at critical or key life stages and moments, with greater local collaboration.

Even those left-wing radicals(!) at the Productivity Commission admitted social capital is a thing in their work a few years ago on human services reforms. They were understandably a bit confused on how to measure or value it, but it’s a secret sauce, if you like, where local networks and relationships leverage jobs.

The Centre for Policy Development has observed that markets have been unable to achieve the right level of personalised integration at the local level.

• I wonder how we can unlock more of that local creativity including small not-for-profits and get them working with you?
• How can we generate more actual work opportunities, coupled with job specific training that leads to real jobs? To do this we need to work out the best ways to develop lasting partnerships with employers.
• Where do we need, and how do we get more local collaboration in the system, including with housing and allied health services?
• How do we incentivise, where we can, helping people into secure work?
• What role could government procurement play in all this?
• How also do we build in more ongoing evaluation and experimentation into the system? The regionalised system lends itself to good public policy experimentation provided we evaluate what works.

Boston Consulting, whom I cheekily invoked earlier, expressed some years ago their own fears on the degree of contracting out generally, the erosion of APS capability and  potential for perverse outcomes in a submission to a broader inquiry on outsourcing. These are indeed complex issues, but we must examine them.

Of course, given the complexity and intractability of some of the problems we are all grappling with, it’s easy to criticise but much harder to conclude what may be better alternatives. I’m not suggesting we bring back the big national beast of the CES, or that expert providers like those here have no future role.
We are not remotely close to conclusions and will not speculate further today. But I trust I’ve made clear the nature of our inquiry and first principles thinking.

There’s a place for healthy scepticism at this point as to whether we can ever get the incentives right in a fully privatised system. Ultimately the State must accept responsibility for the outcomes for the most disadvantaged.

The costs of failure are borne by the individuals trapped in deeper disadvantage, their families and governments at all levels who pick up the tab in other service systems.

Thank you for those still listening. Just a few final words on process, anticipating questions that may arise.

We’re part-way through some private hearings with the Department and stakeholders. This is nothing nefarious – it’s simply so Committee Members can start to get their heads around this complex world and so we can then frame the next steps.

You could drive a truck through our terms of reference, so if we call for submissions right now we will get a dusted-off version of the 2018 process with everyone’s greatest hits. Plus some complaints about the procurement process, and teething and transition problems with the new system.

So instead, I anticipate we will issue a Submission Guide in early November to give everyone a somewhat clearer idea of the questions we are reflecting on, and a few months to make thoughtful submissions.

To be clear, the chances of a proper and effective review are far more likely if we work together. I said at the outset this was a first date, and while desperate is never a good look in dating, the Committee is relying on there being many more in the hope of productive relationships.

There are excellent practices in the sector that we need to hear about. You have enormous knowledge, wisdom, insights and street-smarts. And the realities you understand must inform any future principles and changes to the overall system.

As the Minister said “so much of what is done is extraordinary and good and precious and valuable”. How do we preserve those aspects? What changes do you think would help? What frustrates you? What works best?

In the meantime we will continue to engage as widely as possible, and arrange second dates with providers and community visits over the next 9 months.

The Minister has asked us to issue an Interim Report by the end of February on ParentsNext, so that will be our early focus while broader submissions are prepared.

We have deliberately kept the Disability Employment Service and the Community Development Program for remote communities out of scope. Other employment programs are in scope including Transition to Work, Career Transition Advisory Service, Employability Skills Training and Local Jobs Program.

In closing, I’ll repurpose the words of Brotherhood of St Laurence Executive Director Travers McLeod from his recent Menzies Oration, where he quoted Treasurer Jim Chalmers saying the new government is not here to “stuff around” and will not be “a ‘fairy floss’ government”.

In that spirit, I’ll commit that this will not be a fairy floss review. We won’t shy away from difficult or controversial questions in our search for the unicorn - a future system that better delivers for the long term unemployed and employers.

I and my colleagues look forward to hearing from you, and learning more as we go. Thank you.