The 30-year privatisation experiment with Australia's $9.5 billion employment services system should come to an end, a parliamentary inquiry into the sector has urged, finding the unemployed, employers and providers have been let down.
Headed by Labor MP Julian Hill, the inquiry found the current system – which contains the largest government contracts outside the Defence Department – was holding back the entire economy as it failed to properly train people or direct them to businesses that needed them while tying up employers in mountains of red tape.
Instead of a network of private service providers overseen by a federal department, it said the government needed to be much more involved in ensuring services were available across the country.
Mutual obligation responsibilities would be retained for those on welfare but wound back in some cases, with the inquiry's report likening the current penalty system to "using a nuclear bomb to kill a mosquito".
The employment services sector was privatised by the Howard government, but there has been growing criticism about the types of services provided and ongoing complaints that profit-driven providers fail to adequately support older, disadvantaged or long-term unemployed people.
Despite unemployment being under 4 per cent over the past year, almost 500,000 people use employment services for more than a year. Businesses have been complaining about a shortfall of suitably qualified workers since the reopening of the economy after COVID-related shutdowns.
Hill said the current system, known as Workforce Australia, and its previous iterations were more focused on penalising people by keeping them off welfare than training them or matching them with potential jobs.
"It's harsh but true to say that Australia no longer has an effective, coherent national employment services system; we have an inefficient, outsourced, fragmented social security compliance management system that sometimes gets someone a job against all odds," he said.
"Mutual obligations need to move away from a one-size-fits-all approach that ties the system up in red tape, drives employers away and makes people less employable, and be broadened and tailored to the individual."
The committee backed the continued use of mutual obligation on welfare recipients but said the current system – under which people lose access to payments for small breaches – was too onerous, both on those accessing welfare and businesses dealing with the paperwork around potential workers.
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The report found more than 70 per cent of people going through Workforce Australia had their welfare payments suspended for breaching compliance regulations. Between 35 and 50 per cent of people whose payments had been suspended more than 10 times were Indigenous Australians.
Research from Anglicare Australia suggested up to 20 per cent of people had their payments suspended even though it was not their fault.
In one case heard by the inquiry, a woman attended an appointment with a service provider but it was not recorded. The following day, she received a text saying her welfare payment was being suspended, leaving her unable to pay her rent.
The inquiry heard from businesses about the failure of the current system to direct suitably qualified prospective workers in their direction. They also complained about the red tape involved in dealing with constant job applications from people unlikely to get a job.
Among its 75 recommendations, the inquiry backed rebuilding the Commonwealth Employment Services system that was abolished in the mid-1990s. It would oversee the connection between jobseekers and employers but use the private sector to provide certain services.
A separate regulator would be created to oversee providers, research, data collection and complaints to deal with any issues that arise across the employment service sector.
Extra online support, job coaches, specialist youth employment services, targeted programs for Indigenous and non-English-speaking jobseekers, support services for employers and referrals for no-vocational barriers to work such as family violence and mental health issues were all proposed by the committee.
A common complaint heard by the inquiry was the lack of flexibility built into the contracts for employment service providers.
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In one case, a woman had to attend an appointment 30 minutes from her home in person every fortnight despite working 28 hours a week and not having any job search obligations. The requirement for in-person meetings was part of the official government contract.
The report found just 12,000 of the 20,000 people employed by employment service firms were engaged in frontline services. Staff spent more than 50 per cent of their time on administration rather than working with clients and employers.
It also found that while Australia spent around half the OECD average on employment services overall, it outlaid more than average on case management, job placements and administration of benefits such as JobSeeker.
Brotherhood of St Laurence executive director Travers McLeod said bold reform was needed to address the issues revealed by the inquiry.
"The Workforce Australia inquiry has confirmed Australia's employment services system is fundamentally broken and must be rebuilt," he said.
Centre for Policy Development deputy chief executive Annabel Brown said the inquiry had confirmed a completely outsourced employment service system had left people "doing it tough, out of sight and out of mind".
"Australians want a government that's an active, useful part of their local communities," she said.
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