FOREWORD

In its pre-election policy statement Pathways to Real Jobs the Government declared mass unemployment to be 'the greatest single issue facing Australia'. It set itself the goal of returning the nation to full employment, whereby all who want paid employment will be able to obtain it.

The first and most fundamental requirement for achieving full employment is to accelerate the rate of real job creation in the economy. A co-ordinated strategy is needed across all areas of Government. The preconditions are clearly identified in the Government's National Job Creation Strategy: sound macro-economic management, structural reform, measures to increase national savings and investment and measures to promote growth in small business. The combination of an improved national savings performance, the maintenance of low inflation and ongoing structural reform will help to raise the speed limits to growth.

Complementary action is needed in the areas of education, training and social policy to ensure that workers are equipped with the skills they need and are effective participants in the labour market. This Statement deals with one key element in this group of policies: namely, a strategy of active assistance for those unemployed Australians who need it most.

The role of labour market assistance

Experience both in Australia and overseas has indicated that many disadvantaged jobseekers, especially long­term unemployed people, are ill­equipped to compete for jobs even in periods of strong economic growth.

The Government's policy is to concentrate intensive labour market assistance on the long­term unemployed and those who are most at risk of joining this group. Well targeted and well designed labour market assistance can play an important role in giving these people a clear pathway to continuing paid employment. In helping those who are least able to compete in the job market, active labour market assistance helps reduce the disproportionate burden of unemployment on this group and enhances social cohesion.

In addition, by providing unemployed individuals with the work experience and skills required by employers, effective labour market assistance helps to expand labour supply, allow better matching of skill supply and demand and enable vacancies to be filled faster. In the longer term this should lead to increased competition in the labour market, reduce wage pressures and enable the economy to grow faster at a lower inflation rate.

Above all, effective labour market assistance contributes directly to the wellbeing and quality of life of individual Australians.

Reforming labour market assistance

This Statement announces major changes to current arrangements for active labour market assistance in Australia. These changes are radical and comprehensive, involving the most significant reorganisation of labour market assistance arrangements since the establishment of the Commonwealth Employment Service in 1946. At the same time they are creative and responsible - socially as well as fiscally - making best use of available resources and offering better help and genuine hope to unemployed Australians.

In developing its proposals for reform the Government has been guided by three key considerations:

The primary objective of the Government's reforms is to ensure that labour market assistance has a clear focus on real job outcomes and genuinely makes a difference to those assisted. Under these reforms labour market assistance will be client-driven, not programme-driven. Clients will benefit from higher standards of service, more flexible and customised assistance, and ultimately better and more lasting employment outcomes.

There will be a wider range of providers of labour market assistance and far stronger incentives to achieve sustainable job outcomes. Jobseekers will have greater choice as to who will help them; providers will have maximum flexibility as to how they organise and deliver their assistance; and taxpayers will have an assurance that public funds are being spent to best possible effect.

Current arrangements for labour market assistance emphasise process rather than purpose. Too often, jobseekers are churned through costly, ineffective and complex programmes via cumbersome and inefficient service delivery arrangements. Under Working Nation there was no such thing as an individual, just targets.

High costs and poor outcomes have exposed the structural weaknesses of Labor's Working Nation strategy. Promises of 'job guarantees' have been shown to be flawed and ultimately false. The expectations of thousands of jobseekers have been raised and dashed. Alternative strategies are needed to help long-term unemployed Australians into real jobs.

The 1996-97 Budget decisions involve significant savings on the previous forward estimates for labour market assistance. This is an essential part of the Government's broader strategy for increasing the growth capacity of the Australian economy, and ultimately for delivering sustained reductions in unemployment. No Government programme can equal the benefit that will flow from getting Australia's economic policy settings right as the base for creating jobs.

To the maximum extent possible the Government has concentrated its savings on areas of greatest inefficiency in previous policies and programmes, taking opportunities also to reform the structure and effectiveness of continuing programmes. In this way the impact on clients has been minimised and the basis laid for much improved services within the funds available.

The Government's decisions on labour market assistance are a prime example of this strategy. Under the former Government's Working Nation arrangements, no less than $860 million was spent in 1995­96 on three groups of costly 'brokered' programmes ­ JobSkills, the Landcare and Environment Action Programme and the New Work Opportunities programme which in general have failed to deliver lasting employment outcomes for their participants. Accordingly, in the interim arrangements to apply for 1996­97, the Government will be reducing expenditure markedly in these and similar areas, concentrating its efforts on those programmes which have proven most cost­effective in securing real job outcomes. At the same time it is moving to radically reform the arrangements for labour market assistance in the future, to the benefit of clients, taxpayers and the whole community.

Despite the savings to be realised on the previous forward estimates, the Government's levels of funding for labour market and training assistance over the next four years compare favourably with those of the previous Government in the period prior to the introduction of Working Nation.

A new framework for labour market assistance

The Government has closely examined the evidence of research and evaluation studies, both in Australia and overseas, on the factors which make for cost-effective labour market assistance to jobseekers. It has drawn on that evidence in developing the reforms announced in this Statement. Key features of those reforms are as follows.

Future arrangements will be client-focused rather than programme driven. New and more flexible forms of assistance will be available to jobseekers, in a form which is tailored to their individual needs and circumstances. Most current labour market programmes will be cashed out to create a flexible pool of funding for labour market assistance. Resources for case management and some of the funding used for the administration of current assistance arrangements will also be added to this pool.


The Government will establish a new statutory authority within the Social Security portfolio to be the key point of public contact for people seeking access to Commonwealth services. The new agency will integrate the public contact services of the currently separate DSS and CES networks. These changes will remove duplication, simplify processes for clients and improve quality of service.

A fully competitive market for employment placement services will replace existing arrangements for labour market assistance. Fair and genuine competition will be assured through the application of competitive neutrality principles. A corporatised public provider will be established to assume many of the responsibilities currently exercised by the CES. The public provider will be required to operate on the same basis as its private and community sector competitors.

A fundamental aspect of the Government's reforms is to shift the focus of labour market assistance away from placements into short-term programmes and on to placements into long-term jobs. There will be a clear focus on final outcomes, defined first and foremost as real and sustainable jobs. Incentives and rewards to providers - namely, fee payments and future contracts - will be clearly related to performance in delivering these outcomes.

The Government will maintain the focus of labour market assistance on the long-term unemployed and others most at risk of becoming so. Its new arrangements will be sensitive to the needs of special groups in the labour market, including Aboriginal and Torres Strait Islander peoples, people with disabilities, youth and sole parents. Targeting of assistance will be based on the twin principles of need and capacity to benefit. Unrealistic 'job guarantees' will be abandoned.

Within the above framework, the Government will seek the views of interested parties to gain their views on how these new arrangements can best achieve their objectives of better outcomes for clients and better value for money. It is important that all affected by these reforms should have the opportunity to make an input.

Transitional arrangements

The Government is firmly committed to the policy framework outlined in this Statement for the future delivery of labour market assistance to unemployed Australians. At the same time it is committed to an orderly process of transition in which those affected will be fully consulted and have the opportunity to adapt their current operations to a new environment. Previous experience with the introduction of major changes to labour market assistance arrangements highlights the hazards of hasty planning and rushed implementation of major policy change.

The Government will implement its reforms in a manner consistent with principles of sound public administration, and in recognition of the large and complex implementation task involved. Accordingly, it is planning on a period of 15 months, to December 1997, to roll out the full implementation of its proposed reforms.

In the interim it will immediately be consulting with interested parties, putting in place arrangements to support its reforms, and implementing transitional changes and improvements to existing labour market programmes. We will move in an organised way from the present highly complex structure for labour market programmes to a far simpler structure in which providers will have complete flexibility in the means they use to find their clients jobs.

The search for outcomes will in future drive what is done, not a programme manual. The Government will set the policy framework and the mechanisms for quality assurance and proper accountability for taxpayers' funds.

Arrangements for public consultation

The Government recognises the far-reaching implications of the reforms announced in this Statement. Many in the community will be affected by these changes in one way or another, including unemployed people, employers, contracted case managers, other providers of labour market assistance and not least, public sector institutions and their staff. State and local governments, welfare organisations and community groups will also have an interest.

The Government intends to consult with the community and to hear the views of interested parties on its reforms. It will be arranging a process of public consultation during September 1996, involving meetings and discussions in all capital cities and major regional centres. Written comments and submissions from members of the public will also be welcome. Specific issues on which the Government would wish to hear views are listed at pages xi and xii.

Conclusion

The Government believes that the changes announced in this Statement will be of real and lasting benefit to unemployed Australians and to the wider Australian community. It looks forward with excitement to the implementation of its reforms.


Amanda Vanstone

Minister for Employment, Education, Training and Youth Affairs


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ISSUES FOR PUBLIC CONSULTATION

The Government is firmly committed to the policy framework announced in this Statement for the reform of labour market assistance in Australia. At the same time it is committed to an orderly process of transition in which those affected will be fully consulted and have the opportunity to adapt their current operations to a new environment. Accordingly, it will be arranging a process of public consultation during September 1996. Important questions on which it would wish to hear views in those consultations will include:

What tendering arrangements should apply in the new employment placement market, and what criteria should be used in the assessment of those tenders? What is the appropriate balance between national and regional tenders? For what period of time should the initial round of contracts be awarded?

What procedures and assessment mechanisms are appropriate for use in the new service delivery agency to determine access to intensive employment assistance, both generally and for specific groups? How should the guidelines set down in Chapter 6 be applied in practice?

What procedures and guidelines should apply to the assessment of a jobseeker's capacity to benefit from intensive employment assistance? Under what conditions should an employment placement enterprise be able to refer a client to a specialist organisation for assessment of the client's capacity to benefit?

What is the appropriate form of an activity agreement between an employment placement enterprise and a client? What general guidelines should be used in determining the activity requirements to apply to jobseekers receiving intensive employment assistance? For long-term unemployed jobseekers not selected for such assistance, what range of activities should be recognised as meeting the alternative activity test requirements described in Chapter 8?

For what special groups should variations be allowed to the standard (12 months) duration of intensive employment assistance? What is the rationale for such variations, and how could they be applied in practice?

At what speed should the employment placement market move towards price-based tendering for intensive employment assistance?

How many hours of work per week should be regarded as the minimum necessary for a secondary outcome of part­time work?

Is it appropriate that, for certain groups of clients in intensive employment assistance, placements into part­time jobs or accredited education and training courses should rate equally with placements into full­time jobs for payment purposes? If so, which are these groups, and why?

What are the conditions under which advance payments should be made to employment placement enterprises? What terms should apply to the repayment of such advances?

If a fixed­fee structure were to be used in the first round of market tenders, how satisfactory is the indicative model described in Chapter 7? In answering this question organisations may wish to consider:

If a fixed­fee structure were to be used in the transitional period, what are the appropriate differentials between different categories of client?

Written comments and submissions

The Government would welcome written comments and submissions on the above issues or other matters relevant to this Statement. These can be addressed to:

The Secretary
Department of Employment, Education,
Training and Youth Affairs
Location Code 768
GPO Box 9880
CANBERRA ACT 2601

CHAPTER 1: INTRODUCTION

Unemployment imposes major social and economic costs on Australian society. In its pre­election policy statement Pathways to Real Jobs the Government declared mass unemployment to be 'the greatest single issue facing Australia'. It set itself the goal of returning the nation to full employment, whereby all who want paid employment will be able to obtain it.

The policy context

The first and most fundamental requirement for achieving full employment is to accelerate the rate of real job creation in the economy. The preconditions for this are clearly identified in the Government's National Job Creation Strategy: sound macro­economic management, structural reform, measures to increase national savings and investment and measures to promote growth in small business.

The Government is putting such a strategy in place. The Commonwealth's fiscal position is being repaired. Placing the Commonwealth on a sound fiscal footing will make a significant contribution to reducing Australia's national saving-investment gap, which is the key to bringing about a structural improvement in the current account deficit. The combination of an improved national saving performance, the maintenance of low inflation and ongoing structural reform will help to raise the speed limits to growth. Faster and sustained growth will generate the high levels of job growth required to achieve lasting reductions in unemployment.

The Government's structural reforms are designed to produce an environment in which Australian businesses, and particularly small business, thrive and create real jobs.

The Workplace Relations and Other Legislation Amendment Bill (1996) will clearly give employers and employees the primary responsibility for workplace relations and wage setting arrangements. It will open the way for more genuine enterprise bargaining and will simplify the award system. This means that firms and their employees will be better able to negotiate workplace conditions and practices that are relevant to their needs. It will ensure that Australia's labour market can respond quickly to changing economic circumstances and the opportunities offered by greater domestic and international competition.

The Government is also proceeding with microeconomic and regulatory reforms which will reduce costs and add to the competitiveness of Australian firms. For example, the Government will be pushing ahead with reform of the waterfront, shipping, communication and energy sectors. In addition, the Government has set up a wide­ranging inquiry into the regulation of the financial sector. A number of other measures, such as the Government commitment to reduce paper work and compliance burdens, will assist small business to get on with the job of creating employment.

Progress in all these areas is an integral part of the Government's co­ordinated strategy to deliver sustainable economic and employment growth and to make significant inroads into Australia's unemployment problem.


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The role of labour market assistance

The Government recognises that complementary action is needed in the areas of education, training and social policy to ensure that workers are equipped with the skills they need and are effective participants in the labour market. This Statement deals with one key element in this group of policies: namely, a strategy of active assistance for those unemployed Australians who need it most.

Experience both in Australia and overseas has indicated that many disadvantaged jobseekers, especially long­term unemployed people, are ill­equipped to compete for jobs even in periods of strong economic growth.

The Government's policy is to concentrate intensive labour market assistance on the long­term unemployed and those who are most at risk of joining this group. Well targeted and well designed labour market assistance can play an important role in giving these people a clear pathway to continuing paid employment. In helping those who are least able to compete in the job market, active labour market assistance helps reduce the disproportionate burden of unemployment on this group and enhances social cohesion.

In addition, by providing unemployed individuals with the work experience and skills required by employers, effective labour market assistance helps to expand labour supply, allow better matching of skill supply and demand and enable vacancies to be filled faster. In the longer term this should lead to increased competition in the labour market, reduce wage pressures and enable the economy to grow faster at a lower inflation rate.

Reform of labour market assistance

This Statement therefore foreshadows major changes to current arrangements for active labour market assistance in Australia. This is not a matter of change for change's sake; rather, of delivering on the Government's commitment, in Pathways to Real Jobs, to use labour market assistance more effectively to get unemployed people into real jobs. In developing its proposals for reform the Government has been guided by three key considerations:

The reforms are consistent with the recommendations of key international organisations such as the OECD (OECD 1994). Future assistance will be tailored to individuals rather than programme­driven and have a clear focus on employment outcomes. This assistance will be delivered in a contestable employment placement market, where there will be full competition between public and private employment placement enterprises.

The Government recognises the wide implications of its proposals. Many in the community have an interest in the proposed reforms, including unemployed people themselves, employers, contracted case managers, other providers of labour market assistance and not least, public sector institutions and their staff. State and local governments, welfare organisations and community groups will also have an interest.

The Government is committed to an orderly process of transition to its new arrangements for labour market assistance, in which those affected will be consulted and have the opportunity to adapt their current operations to a new environment. Consistent with this, it will be allowing a period of 15 months (to December 1997) for the full implementation of its reforms. In the interim, some changes will be made which reduce the complexity of current arrangements and foreshadow and prepare for the Government's reforms.

The Government is firm in its decisions on the policy framework and overall design of future arrangements for assistance to the unemployed, as detailed in later chapters of this Statement. As the success of its reforms will depend crucially on the details of their design, however, the Government wishes to consult on those details with all interested parties. To this end it will be arranging a process of public consultation during September 1996, involving meetings and discussions in all capital cities and major regional centres. Written comments and submissions from members of the public will also be welcome. Further details are given on pages xi and xii.

Structure of this Statement

The balance of this Statement details the Government's proposed reforms of labour market assistance for unemployed people. The Statement is structured as follows:


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CHAPTER 2: PRINCIPLES FOR REFORM

This chapter provides a brief history of the development of Australia's current labour market policies and delivery mechanisms. It then discusses some key results of international and Australian research on the effectiveness of labour market assistance policies and interventions. Drawing upon this evidence, it suggests some general principles which should guide the reform of active labour market assistance in Australia. The Government has applied these principles in developing the policies announced in this Statement.

Background to Australia's labour market assistance policies

The Commonwealth Employment Service (CES) was established fifty years ago as a public labour exchange, to assist in matching people with jobs to meet the challenge of Australia's post-war reconstruction. In the 1970s, when unemployment rates increased, Australia began to experiment with special employment and training programmes for disadvantaged groups. In introducing these programmes, Australia joined many other countries which, since the 1960s, have employed active labour market policies to help in combating unemployment. These policies aim to improve the employment prospects of the long­term unemployed and other disadvantaged jobseekers and thereby both the equity and efficiency of the labour market.

In 1985 the Report of the Committee of Inquiry into Labour Market Programs (the Kirby Inquiry) criticised the proliferation of labour market programmes established during the preceding decade. It also pointed to the unnecessary complexity of programmes offered to clients and employers, inadequate coordination and linkages and poor monitoring and evaluation. The review resulted in some initial rationalisation of programmes and a stronger training focus, but the structure of intervention continued to be focused on programmes rather than clients (Jarvie and McKay 1993) and a multitude of complex programmes soon reappeared.

In the late 1980s and early 1990s, in the face of continuing high levels of long­term unemployment, a number of strategies for specific client groups were introduced over and above existing labour market programmes. These included a strategy for long-term unemployed adults (Newstart), the Jobs, Education and Training (JET) strategy for sole parents and the Disability Reform Package (DRP) to assist people with disabilities into the workforce. The introduction of an expanded Newstart strategy in June 1991 extended this approach to all unemployed people aged 18 years and over. With the introduction of Working Nation policies and programmes in 1994, expenditure on labour market assistance was increased further and individual case management for the long­term unemployed and other jobseekers was expanded.

In its August 1995 review of labour market programmes the CES Advisory Committee echoed some of the criticisms of the Kirby Committee. It called for major changes to the structure and delivery of labour market programmes, noted that current administrative arrangements were "an impediment to maximising outcomes" and described the complex array of guidelines, forms, contracts, processes and constraints as "baffling to all but the very experienced" (CESAC 1995 p.xi).

In summary, a number of different approaches to labour market assistance have been attempted over the years. However, both the multiplication of programmes and the requirement to meet numerical targets for political as well as policy reasons have tended to take precedence over the needs of the individual. While the move to case management has helped to refocus attention on individual needs, the lack of flexibility afforded case managers has impeded the delivery of assistance in the way intended. A major rethink is needed if real progress is to be made in reducing the burden of labour market adjustment faced by the unemployed.

International research: some key results

The OECD has recently reviewed the evaluation material in its member countries in order to assess the effectiveness of active labour market policies. It concludes that, in order to be successful, programme interventions need careful targeting on both individual and employer needs. To avoid confusion and overlap, particularly among service providers and jobseekers, the OECD advocates a simple and clear framework for programmes.

Effectiveness of different forms of assistance

Both the OECD and the European Commission (EC) have reported mixed outcomes from participation in training programmes. According to the OECD, programmes that are broadly targeted for jobless adults, with formal courses rather than on-the-job training, often have no significant impact. The OECD concludes that "targeting appears to be a crucial design feature determining the success of training programs" (OECD 1996, p.6).

The OECD supports the widespread use of job search assistance. This type of assistance can include counselling, providing facilities to assist with job search and convening job clubs. It is usually the least costly intervention and has good outcomes compared to other types of assistance.

Wage subsidies generally have good outcomes and are regarded as effective in maintaining or re-establishing labour force attachment. The consensus is that they should be of short duration, with further employer access to subsidies made conditional on the retention rate of previously subsidised workers. These programmes often have high deadweight costs (through helping participants who would have got a job anyway) and substitution effects (where a jobseeker who attracts a subsidy is employed in preference to one who does not). However, the OECD acknowledges that substitution and displacement should not be seen as shortcomings if the objectives of the subsidy include redistribution of employment opportunities away from, say, the short-term to the long-term unemployed. Wage subsidies help keep disadvantaged jobseekers in touch with work and therefore increase effective labour supply (OECD 1995).

Self-employment assistance schemes are viewed as having good outcomes for a defined target group. Self-employment assistance also creates additional jobs by way of the new businesses taking on employees. Direct job creation programmes (including in Australia brokered programmes such as LEAP, JobSkills and New Work Opportunities) have relatively high unit costs and have shown little success in getting participants into permanent jobs in the open labour market. They do, however, help some disadvantaged jobseekers to maintain attachment to the labour force (OECD 1996, p.7).

The effectiveness of intensive assistance such as case management is not well covered in the overseas literature. However, the EC notes that intensified counselling and job search assistance improve the employment probability of the target group and especially the long-term unemployed (EC 1995, p.110). The OECD notes a study by Britain's Employment Service which found there were advantages in giving individual counsellors greater responsibility for their clients and reducing the number of separate counsellors the long-term unemployed had to see (OECD 1993, p.56).

The OECD stresses that further rigorous, high quality evaluation research is essential to add to the body of knowledge about the effectiveness of active labour market policies (OECD 1996). Evaluation procedures should be built into the design phase of programmes and, where possible, gauge both short and long­term impacts and use experimental methods.

Approaches to the public employment service (PES)

The OECD has reviewed the performance of the public employment service in selected member countries. In relation to the three basic PES functions (ie, job brokerage, the administration of income support and placement in labour market programmes) the review has examined the way vacancies and placements are handled, the use of advisory bodies and the decentralisation of decision­making.

The review highlighted the importance of the inflow of vacancies to the brokerage and placement functions of the PES. To stimulate the vacancy flow, the OECD advocates regular contact with employers, continuity of contact staff within the PES, scanning of local newspapers to gather vacancies, displaying vacancies using a combination of different types of vacancy display, providing screening services that are equivalent to those offered in the private sector and having staff available for in-depth counselling of hard-to-assist jobseekers (OECD 1996).

The means to a more effective PES, in the OECD's assessment, include greater mobility of staff between private and public employment agencies; more services opened up to competition; and one stop labour 'shops' (which integrate the three PES functions). It is considered inefficient to have a separate bureaucracy for the basic employment functions and income support administration because "it requires significant staff resources and if not integrated a separate office network" (OECD 1996, p.8). It is also ineffective, according to the OECD, because each administrative arm is working quite separately to a different set of goals instead of working together to achieve the best outcomes for their collective clients. The OECD also suggests that the main concern of the PES should be job brokerage rather than programme referrals. This would "avoid a situation where ... employers will only recruit from the PES register when they receive a subsidy" (OECD 1996, p.37).

Income support arrangements

Income support arrangements for unemployed jobseekers influence the effectiveness of active labour market policies. In looking at this issue the OECD stresses the need for the income support system to be made as 'active' as possible and looks at policies in place in selected member countries for achieving this. Key features of these policies include: early identification of those likely to become long-term unemployed; linking income support eligibility with availability for work, job search activities and participation in active labour market policies (no later than after 6 to 8 months unemployment); ensuring that program participants continue to be available for work in the open labour market; and applying benefit sanctions to enforce job search requirements and participation in active labour market assistance.


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Lessons from Australia's recent experience

It is important also to learn from recent Australian experience on the factors which bear upon the efficiency and effectiveness of labour market assistance. Major lessons which can be learned from the recent evaluation of the Working Nation strategy (DEETYA 1996a) and from other recent reports are summarised below.

Case management provides a basis on which to build for the future

Case management provides a 'one to one' counselling arrangement for the long-term unemployed and those assessed as at high risk of long-term unemployment. Jobseekers, CES staff and case managers view case management positively. Customer satisfaction research shows that clients want ongoing, personalised relationships with the same staff person (Parasuraman et al. 1991). Case management assists in building this relationship and has been shown to increase satisfaction with service (DEETYA 1996b).

Qualitative evidence obtained in the Working Nation evaluation also suggests that case management can play a useful 'deterrence' role. Rather than face the scrutiny of case management, many jobseekers who could easily find work, or who were already employed, chose to leave the CES register.

The case management system has had to confront the difficulty that the disadvantages of a sizeable minority of jobseekers (estimated to be about 15 per cent of those eligible for case management) are so severe that the jobseekers are generally not in a position to benefit from employment-related assistance. These disadvantages are diverse but include psychological disorders, alcohol and drug abuse.

On the other hand, existing labour market programme arrangements have limited the flexibility of case managers to address the barriers the jobseeker faces in a fully coherent way (NBEET 1996, p.68). The existence of distinct eligibility rules for programmes can restrict the scope of the case manager to design a staged sequence of assistance to address what are often multiple barriers.

The establishment of a strong contracted case management provider sector in recent years offers a sound basis for the development of future assistance arrangements. Notably, service options for clients have increased. However, the regulatory arrangements covering the public provider, Employment Assistance Australia (EAA), and the private and community contracted case managers have not been consistent with the principle of competitive neutrality. These arrangements included a restriction on the proportion of clients to be assisted by the contracted case management sector. With case management still a relatively new approach in the employment context, training and skilling of providers are also important priorities for both sectors.

Focus on the right outcomes

The incentive structure which was established for case managers and the CES network under Working Nation focused much of the attention inappropriately on placements in programmes rather than the achievement of sustainable employment outcomes. Case managers and the CES network were credited with a final outcome once a jobseeker remained off allowance for 13 weeks. Outcomes have therefore included the placements of jobseekers into brokered programmes which involve short­term work experience only, such as LEAP, JobSkills and New Work Opportunities. This incentive structure has not been conducive to maximising sustainable, real job outcomes. These arrangements have also been criticised for encouraging false expectations that labour market programmes will guarantee secure employment (ACOSS 1996, p.5).

Timely and accurate identification of jobseekers requiring early intervention is essential

For the past two years an early intervention strategy has aimed to identify jobseekers who were likely to become long-term unemployed in order to ensure they receive assistance as early as possible in their period of unemployment. Jobseekers have been identified as being at high risk either through an automated jobseeker screening instrument (JSI) or by individual CES or Department of Social Security officers.

Timely and accurate identification and classification of jobseekers are essential to ensure that those who require early intervention to overcome their barriers to employment receive assistance before they lose their motivation and self­esteem. Data collected in the Working Nation evaluation suggest that a large proportion of at high risk jobseekers are being correctly screened. However, the information on which early intervention decisions are currently made is less accurate than desirable. A major reason for this is the understandable reluctance of some jobseekers at registration to disclose information which is important to establishing the extent of their labour market disadvantage, such as level of education and literacy and numeracy skills. Refinements to the strategy which take account of this problem are important (NBEET 1996, p.74).

A job guarantee is an unrealistic strategy in addressing the needs of the long-term unemployed

Working Nation introduced a 'guaranteed job' for all jobseekers who had been on unemployment allowances for 18 months or more. Under the Job Compact these jobseekers were to be offered a job or an employment programme placement for at least six months. It was intended that by the end of 1997-98 all Job Compact clients would have received this offer.

The targets set for the Job Compact were very ambitious. Working Nation forecast that the population of jobseekers eligible for Job Compact assistance would decline by 47 per cent from the June quarter 1994 to the December quarter 1995. In fact the number in this group declined by less than 20 per cent over the period. The main reasons for this were a higher than expected inflow of clients into the Job Compact group and a reluctance among employers to take on sufficient numbers of long-term unemployed people.

The JobStart wage subsidy programme was to be the main plank of the Job Compact. It was intended that JobStart would provide around 70 per cent of employment programme placements for the Job Compact group. However, during 1995­96, only one­third of employment programme places were provided through JobStart. The evaluation found that many employers had concerns about the level of skills and motivation of the long-term unemployed and were unwilling to take on Job Compact clients, despite increased incentives for them to do so.

It was necessary, as a consequence, to provide a much higher proportion of employment programme placements for the Job Compact group through the brokered programmes (which create new short-term jobs) than originally intended. However, these placements were significantly more expensive than those in JobStart and the outcome levels of participants were significantly lower. Forty one per cent of Job Compact clients who participated in JobStart, for example, obtained unsubsidised employment following their placement, compared to only 22 per cent of those who participated in the New Work Opportunities programme.

The combination of high costs per placement and significantly higher numbers of clients to be assisted meant that the cost of meeting the Job Compact commitment was not sustainable. In addition, poor outcomes meant that over 70 per cent of Job Compact clients who participated in employment programmes were unemployed again after their programme placement. Alternative strategies are required to address the needs of long-term unemployed clients.

More attention to the needs of employers could increase the access of the unemployed to jobs

It is axiomatic that access to job vacancies is important in placing unemployed jobseekers in employment. The findings of the Working Nation evaluation suggest that employers would be more likely to lodge vacancies if the services provided to them were improved (DEETYA 1996a, pp.89­90). The attitude of employers to using the CES was strongly influenced by the quality of jobseekers sent to them. These findings point to the need for better screening of jobseekers before they are referred to employers. This should improve the extent to which the needs of both employers and jobseekers are met and lead to an increase in the number of vacancies lodged.

The evaluation findings also suggest that the case management approach offers some potential to successfully market the individual jobseeker to the employer. This provides support for a more devolved approach to labour exchange and employer servicing functions.

Labour market programmes improve the job prospects of the unemployed, but to varying extents and at varying costs

Net impact studies of labour market programmes compare the outcomes of programme participants with those of a similar group of jobseekers who have not received assistance. These studies show that labour market programmes enhance the employment prospects of programme participants, although the extent of improvement varies between programmes. Estimates of the improvement in employment prospects, measured around six months after programme participation, range from eight percentage points for JobSkills to 23 percentage points for JobStart. The estimates for programmes such as Job Clubs, JobTrain and SkillShare fall between these two figures (DEET 1995). Future work will establish whether these improvement in jobseekers' employment prospects are sustained beyond six months.

While the outcomes from different programmes vary, the cost of providing assistance also varies considerably. The unit cost of assistance, for example, ranged from around $600 for Job Clubs to around $10,000 for New Work Opportunities. The aim of the more costly programmes is to provide appropriate assistance to the more disadvantaged clients. In view of the cost, however, such programmes should be targeted only to those with both clearly demonstrated need and the capacity to benefit.


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Principles for reform

On the basis of the lessons learned from the research outlined above, the Government has distilled five general principles to be observed in the design of future labour market assistance. These are:

Principle 1: The assistance provided to jobseekers should be based on their individual needs and their capacity to benefit from it in terms of achieving a sustainable employment outcome.

This principle implies the need for a process of assessment of the barriers jobseekers face, so that the appropriate level of assistance can be provided to meet their individual needs. Such a process is crucial to effective assistance.

An assessment process undertaken at registration should identify those jobseekers whose personal circumstances and labour market skills suggest they could have difficulty in attaining employment. For those already unemployed, the duration of unemployment should itself be an indicator of the jobseeker's level of need.

The assessment process should also take into account the capacity of the individual to benefit from assistance. This implies that intensive assistance should not be automatically available to all those identified in the assessment process, but confined to those who have the potential to benefit from it.

Intensive assistance should be concentrated on those who are significantly disadvantaged in the labour market. This will help to avoid deadweight costs. The provision of self-help facilities and some limited job search assistance should be sufficient for many newly unemployed jobseekers whose personal circumstances and skill levels suggest that attaining re-employment will not be overly difficult.

Principle 2: Providers should have access to flexible forms of assistance that fit the needs of jobseekers.

It is important to ensure that the providers of labour market assistance, whose role it will be to gain an understanding of the jobseeker's needs and assist the jobseeker in returning to work, are as unfettered as possible in choosing the appropriate forms of assistance. Decisions about how best to meet the needs of clients should be placed firmly in the hands of providers and their clients.

Experience suggests that the existence of discrete programmes, each with its individual set of objectives and eligibility guidelines, prevents providers from having the flexibility and autonomy they need to reintegrate jobseekers into the workforce most effectively. A pool of funds with which providers could purchase the required services on behalf of the eligible jobseeker (up to a set financial level) should encourage them to carefully consider the individual barriers of each client and the most cost­effective method of overcoming them.

Young people, indigenous people, people with disabilities and sole parents have been shown to experience particular difficulty in accessing employment. Whilst these groups do not necessarily require intensive individual assistance, they will require some additional forms of assistance to obtain employment. For these groups, specialist forms of assistance will continue to be necessary to overcome their barriers to finding work.

Principle 3: The incentive framework should reward providers of labour market assistance primarily for placing jobseekers in real jobs, with additional incentives for placing those most in need.

The primary objective of labour market assistance is to get people into jobs that are sustainable. The reward system should be structured so as to focus outcomes on this objective. This implies making as large a proportion of the fee payment as possible contingent on the jobseeker achieving a sustainable real job.

There will be situations where jobseekers who do not have marketable job skills will require further education or training before they can be considered 'job ready'. In these circumstances it may be appropriate to reward a placement into an accredited education or training course. However, employment should remain the primary goal. Hence, for most clients, a higher level of payment should be made for primary outcomes real jobs than for intermediate outcomes such as participation in accredited training. Young people are a special case, for whom placements into recognised education and training courses may legitimately be regarded as a primary outcome.

It will be necessary to apply differential pricing in order to avoid a concentration of effort on those who are relatively easy to place. This will ensure that jobseekers in disadvantaged groups, who require more assistance to achieve outcomes, attract higher levels of outcome payments.

The effectiveness of the incentives framework should be monitored and reviewed in order to maintain the appropriate mix of rewards for primary and intermediate outcomes and to ensure that the more difficult to place receive a fair share of the available assistance.

Principle 4: A competitive market for employment placement services should separate purchaser from providers and ensure that providers operate on the basis of competitive neutrality.

A competitive market for employment services should heighten accountability to clients and the public, improve customer responsiveness and service quality and provide for greater efficiency. Competition amongst providers should assist in focusing on priorities; providers should be able to concentrate on providing the services that they are best at. With competition, clients could also exercise much greater choice, allowing for a better match between jobseeker needs and provider expertise.

Competitive neutrality is essential to the successful provision of competitive employment services. It relates to concerns about special advantages that government business enterprises might enjoy because of their ownership. Competition should be on the basis of comparative efficiency and ability to meet customer needs, not on the basis of differential access to resources.

In addition, significant benefits should flow from an arrangement where the purchasing of employment assistance for unemployed people is clearly separated from the direct provision of that assistance. Through the public tender process for employment services, such separation would help to ensure that the goods and services are of high quality and competitively priced.

Principle 5: Conditions for payment of income support for unemployed people should be linked closely with active employment assistance measures.

For people receiving unemployment allowances access to both income support and government-funded employment services should be provided through an integrated service delivery agency - a 'one stop shop'. This would make the link between receipt of income support and active job search clearer and more explicit.

The ability to integrate relevant information relating to individual jobseekers through the 'one stop shop' would facilitate improvements in the administration and application of compliance mechanisms such as the activity test. This could include information on barriers to employment, job search behaviour including referral to vacancies, and income support. For example, in determining the extent to which a jobseeker is actively seeking employment, it would be possible to take into account more readily information on the degree of disadvantage of individual jobseekers that is obtained through the assessment process undertaken at registration.

Principle 6: Jobseekers and employers should be able to receive high quality and streamlined service from the agencies and providers with which they interact.

The introduction of a competitive market for employment services could be expected to significantly enhance the quality of service to jobseekers. Many jobseekers should require only registration, income support assistance and self-help facilities. The integration of these facilities into a 'one stop shop' should create opportunities for increased efficiencies by minimising the extent of double handling. It should also enable staff to focus on the linkages between the various services the organisation provides.

Employers should benefit also. The increased flexibility with which providers could address the needs of their clients should ensure that only suitable, job-ready clients would be referred to them for vacancy filling.

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