Julian Hill MPFederal Member for Bruce

Speech to National Employment Services Association (NESA) Conference 2023

Brisbane - 11 October, 2023

Thank you for the invitation to speak with you today.

It's been 12 months since the first speech I gave as Chair of the WAES Committee. Rather direct speech where I didn't pull any punches … kind of you to invite me back!

This is a very unusual Parliamentary Committee inquiry.

Instead of the standard 6-9 months for an inquiry we are already over 12 months in, noting we tabled an Interim Report on Parents Next in February this year.

But fear not, the inquiry will end! Soon! This can't go on!

Pleased to confirm we have finished the evidence gathering phase. We have visited every State and Territory, some multiple times.

Held numerous public hearings and private round tables and site visits, speaking with unemployed people and their advocates, businesses, providers including most people here, experts and those who are responsible for running the system.

This has been an intensive and exhaustive exercise conducted in a non-partisan way with genuine exploration by all members. We have thousands of pages of evidence and have examined all aspects of the employment services system.

We have also examined systems in multiple other countries both through research, direct dialogue and a recent visit to the OECD and a number of countries.

Subject to the Committee's deliberations I plan to table a report by the end of November.

One thing that is striking, is that when you look across the OECD and developed world, despite differences in cultures, political structures, history and economies, every country is perpetually grappling with the very same questions.

I won't speculate today in detail on findings or recommendations that may be in the final report as that's still a matter for the Committee. I will instead share some reflections on major thematic issues where Australian and international experience suggests reform is needed which I'll be discussing with the Committee in finalising our work.

Let me illustrate some of these with a series of questions and observations on the implications of evidence we have gathered.

Question about the objectives of the system: Why have an employment services system? What should be its objectives? Who are you trying to help? Who is eligible for help?

Let's be blunt: it's a sadly simple answer in Australia, as our system doesn't care about things like productivity, workforce participation, economic security, human capital, or secure work. It literally only cares about kicking people off welfare at every moment.

That may sound harsh but you can tell that simply by the service eligibility – only people receiving a social security payment are eligible for support nowadays.

Don't get me wrong, supporting people living on social security who can work back into work as quickly as possible is a critical and primary goal.

Australia could choose though to take a broader view of employment services, as many countries do, and also give a bit of help to other people without a job to get into work.

Or help people stuck in casual and insecure work or trying to survive in the gig economy who want to up-skill or improve their economic security.

Or those facing job loss or working in industries facing transition. We could focus more on boosting productivity by helping people to fulfil their potential as they seek work.

We could choose to more actively work with business to meet their needs and place more LTU people back into work.

We will make recommendations as to the fundamental purpose of a rebuilt system.

Questions about regulation, oversight and compliance. Would some functions be better delivered by government and institutionalised? How should employment services be oversighted? How does system learning occur? How should compliance happen?

Now, I want to say something that should not be controversial but seem clear from the evidence and common sense: some functions would be better delivered by government and should be institutionalised.

Don't freak out. I'll illustrate that with two examples which I think most people will welcome.

1. Regulation and oversight

The first illustration of my point about institutionalising some functions within government relates to regulation and oversight.

Most OECD countries have some sort of independent regulator.

The Committee has not formally considered recommendations however I will break my own rule and express an opinion today. I am strongly of the view that Australia should establish an Employment Services Quality Commission as an independent watchdog for the system.

Such a commission would be responsible for:

• Quality framework – re-building a view of what a quality employment service is, embedding this in a quality framework and advocating to government and the sector
• Licensing of non-government providers – functions or activities which may from time to time be delivered in the public sector may not necessarily be licensed but would be subject to oversight, inspection and quality assessments
• Workforce standards – establish and promulgate workforce standards as part of a longer-term shift to re-professionalise the sector
• Pricing – monitoring prices and advising DEWR and Government on appropriate pricing for quality services, including commissioning and payment models
• Complaints and investigations – a public facing complaints handling function
• Data transparency – championing data transparency across the entire system, based on the presumption that all performance and system data should be published unless there is a valid reason not to
• Continuous learning and quality improvement – leading impact evaluations, communities of policy and practice, service improvement trials and pilots (including Randomised Control Trials) and sharing good practice widely.

It would be much quicker and better to identify an existing regulator to graft this function onto, rather than establishing something from scratch.

One possibility would be for employment services to become a second limb of a restructured Australian Skills and Qualifications Authority. This of course would need to be considered by government in more detail and there may be a better option identified. Though this approach would have the advantage of more closely linking the employment services and skills functions.

I just want to draw attention to the last dot point of the functions outlined above. While it sounds dry, it is arguably the most important issue of any we have identified.

There is a major shift required to rebuild a culture of learning, improvement and evaluation right across the system.

The approach of recent decades of massive multi-billion dollar 'set and forget' tenders which are evaluated every 5 years or so with little data sharing, formal evaluation, learning and collaboration along the way has to change.

I would envisage the continuous learning and quality improvement learning functions would be led by Commission in collaboration with contracted learning partners. For example universities / academics, suitable disinterested Not-For-Profits or even peak bodies, as well as the Australian Centre for Evaluation championed by the Assistant Minister for Employment Services Hon. Dr Andrew Leigh MP.

For genuine system learning to occur, a cultural shift would be required, from compliance enforced from above to learning driven from the bottom up.

Partly for this reason I am also strongly of the view that the employment regulatory function should be located outside Canberra to be closer to the service delivery ecosystem, probably in one of the large capital cities. This would also help to kick-start a fresh approach and culture to system oversight and tap into a broader recruitment pool.

Notwithstanding competitive tensions and arguments we've heard about "Commercial in Confidence" and "Intellectual Property", in principle it is difficult to see why providers receiving Commonwealth funds in a human services system should not be required to participate meaningfully in collective learning and evaluation activities and share knowledge to improve system performance. This seems essential if a rebuilt system is to improve quality in a collaborative way.

We will address these issues in more detail in our report.

2. Compliance

The second illustration relates to compliance. You will have seen our Interim Report on Parents Next which expressed a unanimous view that social security compliance functions must be taken away from outsourced providers and brought back to the public sector.

Since tabling the interim report, I've found no reason to think that conclusion was wrong, either in principle or in practical terms, and that it should not have broader application.

Suspending or cancelling payments are not decisions that should be automated or ever taken lightly. The data on payment suspensions and cancellations is frankly shocking. The system is being choked by compliance red-tape and the impact overwhelmingly falls on the most vulnerable in society and we will make short- and longer-term recommendations about this.

It is reasonable to express a principled view that the State should never contract out the power in effect to impact someone's basic survival income to a private actor.

However it's also a matter of practical impact. The current approach of requiring Job Coaches to undertake excessive and onerous compliance related work not only wastes precious time, but also destroys trust.

And trust is the critical thing needed between an often-vulnerable unemployed person and those who are paid to help them help progress into employment.

Making providers the police for Services Australia may be 'efficient' from the Finance Department's point of view, but it degrades the effectiveness of the entire service.

Bringing compliance functions back in-house and reducing automation post-Robodebt will mean more friction and require additional public servants. But the current situation is self-defeating – a major false economy.

Questions about participation requirements:
- What requirements should there be for citizens receiving unemployment benefits to seek work and participate in services? - What sort of requirements most effectively get as many citizens back into sustainable work as possible?

These questions are very strongly contested. They're also inherently political and there is a values dimension. In most countries though the answers seem more driven by domestic politics than by evidence or thoughtfully articulated values.

After 14 months of listening to evidence, it is difficult to escape the conclusion that the current approach in Australia is ineffective and self-defeating.

As I've said before, we are 'Using a nuclear bomb to kill a mosquito'.

Your staff are drowning in red-tape much of which is due to the nature and extent of the current approach to mutual obligations. Shockingly, some providers tell us that majority of what their frontline staff do appears to be policing Services Australia requirements and doing admin into DEWR's terribly inefficient online ESS system. The Salvos Employment Plus report that 53% of their time now goes on these tasks. That is utterly ridiculous.

As the OECD tells us, incentives to work for most people are not the issue in Australia as social security payments are relatively low. Most people want to and have a strong financial incentive to work.

For those who are not in work, especially LTU, the evidence is that only a small percentage are actively cheating the system yet everyone else is lumped into that paradigm.

We will recommend some practical things we could do about that and make sure citizens and services are accountable, without tying everyone up in pointless red tape and compliance.

In determining what participation requirements are reasonable and most effective, it is critical to differentiate between what is appropriate and most effective to support Long Term Unemployed people vs. those closer to the labour market.

The significant majority of Long Term Unemployed people today have multiple individual barriers. Sometimes more immediate problems in their lives even than unemployment. Homelessness. Family violence. Episodic mental illness and severe anxiety. Unresolved trauma. Caring responsibilities. Health issues. Chaotic lives or psycho-social disorders.

And, of course, large numbers of our fellow citizens face structural barriers beyond their control. Most commonly I'd point to age discrimination. Some of the most impactful discussions the Committee has had have been with people over 50 who are desperate to work again yet just cannot get a go. There are also barriers like racism, thin labour markets, education barriers, lack of transport and other factors.

Yet far too much of the public discourse perpetuates the irrational view that if only long-term unemployed people applied for more and more and more jobs and did more and more courses, then that would change reality.

To draw an analogy: If you throw enough spaghetti at a wall some will stick. But most just gets stuck on the ground and you make a giant mess. Any toddler can teach you that. Yet this is how the system currently implements mutual obligations.

People are diverse and the caseload is comprised of a very very heterogeneous group of citizens that need tailored responses and goals, recognising there are multiple pathways back to participation and employment.

Yet despite the promises of the previous review, tailored and efficient services are still not what Workforce Australia is providing. We will make recommendations about this.

To be clear, before anyone gets their figurative knickers in a knot, this does not mean a voluntary system. The evidence is clear that if there are no requirements then disengagement from support, long-term unemployment and welfare payments will rise and social exclusion worsen.

Every society we have examined has some sort of participation requirements whatever people call them – mutual obligations, shared accountability, 'rights and duties'. It's not the name that matters, the question is what that system requires.

Evidence is overwhelming that for long term unemployed people the most effective thing, above all else, is to build a trusted relationship with a skilled, supportive case worker. Where they work together to set realistic goals for a client to progress, which is what people and providers then are then mutually accountable for.

Yet in addition to tying up providers and the system in red tape, the current approach is far too 'one sized fits all' and too often still tries to force people to do things they simply cannot do or distracts them from meaningful job search.

When this happens, instead of improving someone's chance of employment, the system actually marginalises people and harms their chances of work by:

• Requiring LTU people to do pointless things that may actually harm their future chances
• e.g. applying online for unsuitable jobs may mark them down with algorithms,
• e.g. inappropriate study options may use up VET entitlements.
• Or by fostering stigma and shame through constant rejection and failure which harms mental health and makes people less employable as they lose confidence.

It's also bad for employers. Big business and small business have also told us that excessive conditionality remains a key reason that employers don't engage with the system.

Despite improvements with the PBAS changes employers still get deluged by inappropriate applications, or harassed by employment services chasing outcome payments trying to place people who are not job ready or suitable for a given vacancy.

We will need to make recommendations on how to ensure the overarching goal of mutual obligations is to support participation not pointlessly punish people.

This will mean broadening the range of mutual obligations, and tailoring them for individuals in a far more considered and collaborative process.

Questions about Government vs. Providers: What role should government play? What role should not-for-profit and private sector entities play? How should we think about competition?

One of the most common issues raised is what I think is a false binary between 'government' and 'providers'.

It's obvious that full privatisation has failed. The previous government implicitly admitted this when creating Workforce Australia by bringing those closest to the labour market back into digital services. Any country thinking of adopting the fully marketised system that Australia had for over two decades would be nuts to do so.

The question however is what is the best mix of services, given what we've learned from our experience and that of other countries.

On digital services, there are real problems with the current conception. Serious questions have been raised through the inquiry as to whether the assessment processes and caseload management are appropriate. I'm struggling to see how someone who is assessed as not digitally literate should be in a digital only service environment. There are also legitimate concerns about how long someone can stay in online services without face-to-face human contact.

We will make recommendations responding to these issues.

Looking at the whole system though, and especially for those with the most barriers to the labour market, it's difficult to escape the conclusion that Government needs to be a more active steward, involved throughout the system in different ways, able to respond and adapt to changing regional conditions and local labour markets.

The Department's staff are terrific people. The call centre staff genuinely care and we spent time to meet them and see their work firsthand. Similarly, the policy folks in Canberra and regional offices are fine public servants who genuinely care.

But it's also a fact that the Department today has no view whatsoever as to what is a good service model or what or why something works. They are largely detached from regional labour markets and local communities, and the day-to-day reality of supporting unemployed people back into work.

They're like the puppet masters sitting way up in the rafters, jerkily pulling the strings, trying to control things way below on the stage. It's not a pretty show to watch and they need to be closer to the action.

But responding to this doesn't mean that creating a giant new bureaucracy that does everything is the answer either.

We will look at recommendations that recognise Government can play a stronger and more active role in stewarding the system, while appreciating the value of contestability, the importance of specialist services and quality providers.

One thing that is clear from the evidence is that the claimed benefits of choice and contestability are not being realised, and that there's an excessive belief in the importance of competition.

The outcomes of the last procurement round in many places seems quite insane – multiple regions where all providers lost contracts destroyed overnight local knowledge and relationships and workforce capability (e.g. Cairns, e.g. Geelong)

The system still appears to be driven by a flawed notion that you need high levels of competition in all places and all parts of the quasi-market so:

• 'people can choose':
• Overwhelmingly they don't, and anyway we make the services largely the same. In economic terms, human services are an experience good, not a choice good.
• 'providers work harder and compete for fear of losing contracts':
• Yet we have an excessive focus on 'provider viability' – allocation of people to services by 'the Department's Secret Sorting Hat! We are sure it exists in a hidden basement, we just haven't found it yet. But allocation of people seems driven by provider viability more than an assessment of the best pathway and service for each individual.
• Excessive fear and excessive competition actually drives providers to be conformist and just play it safe within the Department's detailed prescriptions, not innovate or take any risk.
• 'providers will innovate, experiment and be efficient':
• The nature of the quasi-market also means that there is heavy and very expensive public sector regulation and oversight, and risk averse behaviour by providers, such that most providers cluster very strongly in the median with little service diversification or variation.

Clients clearly need more agency over their service and employment pathways, and we will consider recommendations to focus the system on collaboration, quality and service improvement for mainstream case management services, and develop a richer ecosystem of specialist services and social enterprises, better connected with local communities.

You have a dinner to get to and I have a plane to catch so in wrapping up I'll just note there are numerous other topics we will address in our report that I haven't touched on today.

• Assessment and re-assessment processes.
• What greater role social procurement and social enterprise can and should play and how effective bespoke programs can integrate with the Commonwealth system.
• How to build far stronger connections with employers.
• Mechanisms to ensure more client informed services.
• The importance of functional and efficient ICT systems including urgent short-term as well as longer recommendations.
• How efficient prices for quality services and activities can be determined, especially when labour markets change.
• Which specialist services are core to any rebuilt system such as youth, indigenous and CALD.
• Relationship to other Commonwealth employment programs including CDP, DES and Settlement Services.
• Incentives and disincentives to work created by the broader social security system and DSP assessments (without making recommendations which are outside of our Terms of Reference).
• Engagement of digital jobs marketplaces with the Commonwealth employment services system.
• The need for a complete overhaul in collaboration with the States and Territories on how Australia works to get ex-offenders quickly connected to employment services and into work.
• Work for the Dole and the contribution that community employment programs could play.
• Options to expand and experiment with active labour market programs if we are serious about supporting long term unemployed people into work, considering both financial and non-financial supports for business.
• The critical moral and practical question as to what society can reasonably expect of people who have little or no realistic prospects of paid work in the private sector in the near future, if ever.

In summary, I am very clear now the status quo won't do.

We need serious reform to rebuild Australia's employment services system.

I am also eyes wide open that change will take time and investment, and that not everyone will agree with every proposal.

Ultimately of course what happens will be up to Executive Government. But please be assured we have been working in good faith and will complete our report in that spirit. In that spirit, thank you for the ongoing invitations, but no meetings!

Thank you for the contribution you've made to the inquiry and I look forward to discussing the report with you after its release.