NESA Response to Jobs Australia - "Reforming Employment Assistance: A Blueprint for the Future"

NESA Response to Jobs Australia - "Reforming Employment Assistance: A Blueprint for the Future"
NESA Response
          Jobs Australia
“Reforming Employment Assistance:
    A Blueprint for the Future”
                December 2013

              Prepared December 2013

     National Employment Services Association
             Level 8, 20-22 Albert Road
            South Melbourne VIC 3205

       P: (03) 9624 2300 | F: (03) 9686 3660
   E: | W:
NESA welcomes the opportunity to provide feedback on the Jobs Australia document
“Reforming Employment Assistance: A Blueprint for the Future”. As the peak body
representing not for profit, for profit and government providers of employment and related
services in Australia, we believe it is an important time for the future of the programmes
that the industry delivers, and agree that that the current framework is not optimal in its
current form.

NESA broadly agrees with a number of the key principles outlined in the Blueprint, however
we do not believe that wholesale reform is required to ensure that employment services in
Australia realise their potential. Furthermore, we note that the recommendations made are
not supported by evidence and don’t currently demonstrate their effectiveness in achieving
the suggested outcomes. In our view there is a real risk in introducing radical change that
has not been tested or piloted. Employment services would lose momentum and expertise;
and the change would be destabilising for job seekers and employers.

It is our position, drawing from extensive consultation with our members over time, that the
employment services framework itself is fundamentally good. Rather, it is now time to
ensure that the mechanisms within the framework support rather than hinder the work that
is needed to connect our unemployed citizens to the world of work and sustainable
employment and to meet employer needs.

The Blueprint also raises a number of questions for our members, which we believe need to
be answered before committing to such a large reform. We will cover these questions
through our response below and look forward to the opportunity for further discussion post
the feedback period.

Diagnosis of the Current System:
The Blueprint outlines that there are issues with the structure, conduct and performance of
the current system. A failure to embody market principles, distorted conduct of the primary
actors and underwhelming performance are indicated and form the basis on which reform is
required. The paper notes that the majority of shortcomings within the system are not a
failure of intent, but the failure to fully embody the principles on which the system is built
within the design.

While we would agree that the system has not yet reached its full potential, it is our
contention that the current system is not broken and that comparatively speaking performs
incredibly well compared to similar programmes internationally. For example while JSA
achieved an average outcome rate of 48.4% in the year ending September 20121 the Work
Programme in the UK achieved 3.6% from June 2011 to July 20122. Furthermore, the

  DEEWR 2012, Labour Market Assistance Outcomes Report September 2012, Canberra
  Public Accounts Committee (2013)- Thirty-Third Report
Department for Work and Pensions Work Programme outcome statistics
 Although a reasonable comparison, note should be taken of: (a) the relatively mature contracted
employment services sector in Australia compared to the immature UK system; (b) the relative
current economic strength of the Australian and UK economies. Eligibility for inclusion on the UK
Australian system of contracted employment services is highly regarded internationally and
the activation system embedded in the service is credited with assisting Australia in having
one of the highest employment rates in the OECD.3

Notwithstanding the positive outcomes of the current system, it is important to
acknowledge the issues of financial sustainability within the current Job Services Australia
contract and the additional pressures brought about by contract compliance measures.
However as discussed in our document Employment Services in Australia: Roadmap for the
Future (2015 and Beyond), we believe that the challenges within the current system can be
addressed through adjusting the mechanisms within the current framework.

For NESA, it is important that the positives of the system and the successes of those we
represent do not get lost in the race to knock down what the majority of our members
consider to be strong foundations.

Principles for a Modern System:
The Six Key Principles for a Modern System are outlined in the Blueprint as:

    1.   Job seekers and Employers are front of mind
    2.   A truly competitive provider market
    3.   A diversity of providers to match the diversity of job seekers and communities
    4.   A focus on durable outcomes
    5.   Risk-based quality assurance with less red tape, and;
    6.   A redefined role for government.

As noted in the introduction, NESA broadly agrees that these principles are the appropriate
basis for the employment services framework. We also agree that as an industry we have
learnt much over the past two decades during which time various iterations of contracted
employment services have existed. It is important to ensure that these learnings are
considered in the process of positioning employment services for 2015 and beyond.

We have long advocated that the assistance to job seekers should better balance activation
and support and be based on their individual needs, rather than the relative nature in which
assessment and streaming for service is currently undertaken4. We also agree that the
system should make it as easy as possible for employers to engage with providers and the
system to obtain workers that meet their business needs.

There is no denying that the introduction of a competitive market framework increased the
overall performance and level of outcomes achieved by the employment services industry5.

Work Programme stipulate that individuals may be mandated to take part in the UK Work Programme
if they are in receipt of Jobseeker's Allowance: (a) after three months if not in education; or (b) after
nine months - if aged 18 to 24; or (c) after 12 months - if 25 or over.

  OECD (2012), Activating Jobseekers: How Australia Does It, OECD Publishing
  See previous NESA responses to government including Realising Our Potential 2013, Response to the
Employment Services 2012 Consultation 2011, and The Future of Employment Services in Australia
  Productivity Commission 2002, Independent Review of the Job Network, Report No. 21, AusInfo,
We believe that those principles currently in place provide a framework for an efficient and
responsive employment services system that delivers good value for money. What hinders
performance and innovation within the sector is not the current market principles but the
complexity and transactional nature of policy requirements6.

In this context, we also agree with moving towards a more risk based quality assurance
framework for the employment services industry. We agree that regulation must be
balanced between accountability and service delivery and must not result in further
complexity7. We do however think that this can be achieved with the current system design
and have undertaken work with the sector to develop a quality standards framework
specifically designed for this industry8.

Diversity of providers is one of the key strengths of the current system and we agree that
this must be maintained. It is critical to job seeker and employer choice, and provides for
the creation of specialist expertise to be targeted to individual cohorts. NESA also believes
that providers should be able to opt in to be specialist only, generalist, or specialist
accepting generalist flow – allowing for the widest flexibility of business models to suit the
areas in which providers operate. As discussed below, we do have some concerns that the
proposed licensing model may have the unintended consequence of reducing the diversity
of providers.

Reform to Achieve a Modern System:
At the centre of the Blueprint’s proposed reform lies the move from the current contracting
methods of purchasing to the accreditation and licensing of services. To support this, an
independent and legislatively enshrined regulator would take on much of the remit that
currently lies with the Department. It is suggested that this comprehensive change is
required to lift program performance. As mentioned earlier, based on feedback from our
members, we disagree that such change is required and believe that there is limited
appetite for it within the industry. Furthermore, it is unclear how this change would actually
lift programme performance.

We believe, based on feedback from our members, that the fundamental program design is
right. If government strips out the complexity and administrative burden and gets the
framework back to basics we will have a system that embodies the reasons for creating the
quasi market environment initially – recognising the industry’s expertise in assisting people
to gain and maintain employment and allowing them to efficiently get on with the job of
doing so.

Further, we are unconvinced that the framework outlined in the Blueprint would
significantly reduce the complexities of the system. For example performance monitoring
would still be required, albeit through a different actor in the system. It is also unclear how
this model would provide stability for providers, particularly if the regulator could bring in
additional licence holders in a particular area at any time.

  NESA 2012, Response to the Advisory Panel on Employment Services Administration and
Accountability Discussion Paper, Melbourne
  NESA 2013, Realising our Potential, Response to the Building on Success Discussion Paper,
  NESA 2013, Employment Services Industry Standards, Melbourne
Licensing as Purchasing Reform:

The Blueprint states that the current framework is not truly market based and as a result has
failed to deliver a truly competitive market for providers.

Regardless of free market principles, in the establishment of a licensing model the
purchaser/regulator will still need to set the criteria for who may qualify as a licensee, the
specific procedure for issuing licenses, the terms and conditions on which they are issued
and the regulatory and monitoring processes to be applied to the management of licenses,
including cancellation. There is little evidence that a licensing model would alter the level of
prescription government may exercise within program settings. While the Blueprint has
outlined in very general terms what this could look like, for our members, the model offered
raises more questions than it provides solutions.

There are a number of examples of models of licensing within Australian industries. Most
often cited with particular relevance to employment services are aged care, childcare and
the training industry. While these are mooted as models to review and compare when
looking at how licensing could be applied to the employment services framework, there is
one key difference between our market and those in which truly free market principles have
been applied – and that is the fact that we operate in a uniquely managed market

Employment services are intrinsically linked in to welfare payments for the majority of
participants. Government has a legislated requirement9 to provide access to support and
activities that assist job seekers in meeting their mutual obligation. There is a finite number
of participants in the market at any one time – yet they cover the breadth of the nation.
Services need to be available no matter where a job seeker is located.

Under a free market licence model there are foreseeable challenges in assuring market
coverage. We already know that there are some ESAs and areas within ESAs that are more
desirable than others. Although the Blueprint seeks to address these concerns through the
suggestion of differentiated pricing to reflect regional disparities and simply paying more to
entice providers to enter undesirable markets10, we know that employment services
operates within a limited funding envelope.

The aged care market offers a prime example of the limitations a licensing model can
present in terms of providing adequate service coverage. A 2009 Senate committee found
that rural people face ‘problems with accessing appropriate aged care services’11 due to
reasons such as higher operating and capital costs, dispersed populations, travel and
distance impacts and workforce shortages which limit service availability and viability. How
will a licensing model deal with these issues and ensure adequate service coverage
differently to the current purchasing arrangements?

The Blueprint also proposes the removal of market share, however requires providers to
maintain minimum caseloads to remain in the market. How will this be equitably assured in
a managed market such as employment services?

  Social Security Act 1991
   Noted by David Thompson, JA CEO at the Conference Blueprint Launch in Manly, October 2013
   Commonwealth of Australia 2009, The Senate Standing Committee on Finance and Public
Administration Inquiry into Residential and Community Aged Care Report April 2009, Canberra
Will a low entry cost model of accreditation and licensing ensure that providers have the
capacity to deliver services to job seekers? In the Netherlands, Individual Reintegration
Agreements (IRO) allowed participants to negotiate an individual plan with a provider of
their choice. The public employment service went from contracting with fewer than 100
providers to nearly 2000 providers, 1500 of which were one person providers serving 10-15
customers. While we support a diversity of providers and also having both generalists and
specialists, if the outcome of licensing was a proliferation of providers in a particular area,
what impact would this have on job seeker and employer servicing?

It could also be the case that increasing competition through licensing would result in a ‘race
to the bottom’. This would be likely to occur without set pricing and a good understanding
from the purchaser of the real cost of delivery of employment services. The result of this
could be that only very large providers with the capital to withstand early losses could afford
to stay in the market. This would undermine the principles of choice and diversity. How
would this be avoided under this model?

NESA has articulated the following purchasing principles, and we would be interested in how
licensing meets these principles:

       Service – effective high quality and high performing employment and related
        services for individuals, communities, workplaces and the broader economy.
       Stability – minimise disruption in local labour markets; enable high quality responses
        through transparent purchasing arrangements; purchasing criteria to value
        demonstrated performance.
       Simplicity: Ensure that the framework is unencumbered by excessive administration
        and red tape and is outcome rather than process focused.
       Sustainability: Resources to deliver on outcome objectives across the life of the
        contract and enable the viability of the sector. Support the efficient management of
        services and organisations through the provision of high level modelling data at the
        point of purchasing and throughout the life of the contract. Our consultation with
        JSA members indicates a common view that full open market tenders can be
        counterproductive to the performance of the industry. The potential for resulting
        disruption to job seekers and employers can mitigate against achievement of the
        desired performance improvement objectives.

Other questions that arise from the Blueprint on these issues include: How will a licensing
model prove to be less costly and burdensome than the current tendering process? How
would it compare to longer contracts and more refined invitation to treat (ITT) or business
reallocation processes? As outlined in the table below – there appears to be very little
difference between licensing and tendering in terms of process.
Preparing to Obtain                    Obtaining Business                    Maintaining Business
Licensing                 Business area research               Application to Regulator              No fixed term – entry
                           o Labour Market                       based on to be                         and exit at discretion of
                           o Potential client base               determined process                     Regulator
                           o Establishment                      Financial viability                   Maintaining
                              including Real Estate              assessment                             accreditation standards
                           o Staffing options                   Offer of business based on            Passing program
                          Financial viability studies           regulator assessment and               assurance assessment
                          Entity creation/review                decision                              Meeting and exceeding
                          Development of                       Accreditation to required              yearly Performance
                           application strategy                  standards                              Measures
                                                                                                       Maintaining minimum
                                                                                                        caseload size
                                                                                                       Maintaining financial
Contracting               Business area research               Application to                        Fixed term contracts
                           o Labour Market                       Government Department                  with mid-term Business
                           o Potential client base               based on released                      Reallocation based on
                           o Establishment                       selection criteria                     performance measures
                               including Real Estate            Financial viability                    (Star Ratings)
                           o Staffing options                    assessment                            Meeting ongoing
                          Financial viability studies          Offer of business based on             program assurance
                          Entity creation/review                purchasers assessment                  assessment
                          Development of tender                 and decision                          Maintaining
                           strategy                             Accreditation to the                   accreditation
                                                                 Departments approved                   standards*
                                                                 Quality Standards*                    Business extension or
                                                                                                        re-tender at end of
                                                                                                        contract period
      *NB – This is policy that is yet to be finalised however is likely to require an agreement on obtaining business that
      accreditation will be gained within one year of business commencement and maintained over the life of the

      Experience locally and from other jurisdictions indicates that significant change in models is
      costly, for all stakeholders in financial terms and, importantly, in contract performance.
      Given that the Australian contracted employment services model is viewed as a leader on
      the world stage, the suggested reforms are risky, particularly when much of the change
      could be achieved by adjusting the mechanisms within the current framework. Extending
      contracts to 5 years is one example of change that would provide greater stability for
      providers, and which most of our members indicate is their preference.

      Independent Regulation as Governance Reform:
      The introduction of an independent regulator is suggested as a way to redress the power
      imbalance between provider and purchaser that has been noted exists in the current
      employment services framework. Not only does government act as policy steward, it is the
      purchaser and hands on administrator of the system.
The Blueprint recommends government must reconceive its role and that “as the systems
steward, government should see to strike a better balance between the interests of job
seekers, employers, providers and tax-payers”. NESA agrees that the balance must be
realigned. As an industry we have often raised questions whether the costs to deliver many
of the accountability and assurance measures is greater than the potential risk justifies, yet
we continue to see more resources allocated to this area annually.

NESA must ask the question - how will the creation of an independent regulator make any
significant change to the issues it is proposed to redress?

Put simply – the model outlined in the document seeks to give the regulator a very
significant level of power. Providing accreditation and licensing, administration, policing and
enforcement of regulations, overseeing performance, monitoring compliance and ultimately
making decisions about who stays and who must leave the market. In this vein there
appears to be little difference between this and the role of the department currently – with
the exception that the Minister would have no ability to direct the regulator, whereas in the
current circumstances, the Minister acts as the primary delegate when it comes to
significant decision-making.

Based on the experience of the Vocational Education and Training (VET), and the Higher
Education (HE) sectors, the role of the regulator and actions undertaken by that body have
raised concerns about over regulation. For example, concerns raised around the Tertiary
Education Quality Standards Agency have included that the approach is unnecessarily
bureaucratic, and that the TEQSA Act is not correctly applied and interpreted.12 How will the
role of the regulator in the recommended model be overseen to ensure such concerns will
not become an issue for our industry?

Reducing Provider Contact as Job Seeker Servicing Reform:

NESA agrees that modern technologies have a significant role to play in the future of
employment services. Social media platforms are becoming more and more ingrained in
everyday life. Very few people exist now without home internet or a mobile phone – and
the majority own a smart phone13. The possibilities for such technologies to improve service
delivery within employment services are boundless, including the way we think about the
labour market and job design for those we are assisting.

There is little doubt that providing more ways for job seekers to connect with services than
the traditional face-to-face meeting will likely lead to greater engagement – however we
must be cautious of removing the pivotal core of case management - the relationship, from
the equation as it is a fundamental piece of the employment assistance puzzle. As an
industry we have seen the impact of assessment and streaming services that are conducted
by methods other than face-to-face meetings. Quality is reduced. Job seekers are less likely
to reveal important information. Time and effort is expended reviewing and reassessing
further down the track when relationships have been developed.

   Lee Dow and Braithwaite (2013), Review of Higher Education Report, Commonwealth of Australia,
   Mobile Industry Group, Australian Mobile Phone Lifestyle Index 8th Edition,
Using this approach, it is also unlikely that job seekers will have truly informed choice.
Rather than additional time to find a provider, job seekers need information and support in
navigating the labour market from a skilled employment services professional. This is a
central weakness of this model. Additional time to make a decision was part of Contracts 1
and 2, and the evidence was the job seekers very rarely sought additional information or
asked questions of providers.

NESA supports job seeker choice and believes job seekers should have a say in their service
delivery. However, we are concerned that self-service and moving to less face to face
contact with job seekers in the early stages of their unemployment will have a significant
impact on our ability to reduce long term unemployment. We know that early intervention
strategies are important.

The paper also outlines a move to 3 streams of job seeker servicing. It is important that we
are able to understand how this will be achieved. The Advisory Panel on Employment
Services Administration & Accountability (APESAA) recommended that the JSA Stream
structure be simplified by combining Streams 2 & 314. In our response to the APESAA report,
we outlined our concerns around the impact of this solution15, and suggested that – based
on member feedback, a better solution would be to combine Stream 1 & 2, and set the
funding level at that of the current Stream 2 level, ensuring that interventions are accessed
early and more adequate services are funded for those in Stream 116. We still believe this to
be the most appropriate solution should government wish to decrease the number of
service streams.

It has also been suggested by some that Stream 1 job seekers should be removed from
employment services altogether and receive assistance only through the proposed online
self-service portal given that they are considered the most job ready. A significant number of
those that are classified as relatively job ready have significant barriers to employment that
require some intervention and assistance. Access to appropriate services is just as important
to these job seekers if we are going to reduce the levels of long-term unemployment in

Additionally, NESA believes that removing Stream 1 from the framework fails to recognise
the important role that job ready job seekers play in employment services – both for
providers and employers.

As the Australian Chamber of Commerce and Industry (ACCI) outlined in their response to
the Building on Success discussion paper17, the services provided in JSA and DES are no
longer mainstream to employers for filling vacancies. NESA agrees with ACCI’s position that

   DEEWR 2012, Advisory Panel on Employment Services Administration and Accountability Final
Report, Canberra
   NESA 2012, Response to the Advisory Panel on Employment Services Administration and
Accountability Final Report and DEEWR Responses, Melbourne
   NESA notes that there are significant numbers of long term and very long term unemployed job
seekers in Stream 1 within the JSA model based on data provided by DEEWR, and that job seekers are
getting spending more time in Stream 1 than ever before. These jobseekers receive significantly low
levels of funding and Employment Pathway Fund (EPF) allocation and as such are less likely to be
receiving a service that meets their individual needs and addresses barriers to employment.
   ACCI 2013, Response to Employment Services Building on Success March 2013, Canberra
employment services should be part of the general job market, not perceived as a service
solely for the disadvantaged and disengaged.

JSA is used by as few as 7% of employers when filling vacancies. ACCI’s point that
“Employers and job seekers alike need to see it not as a welfare offering, but a legitimate
part of the job market”18 resonates strongly with our position. Discussions with members
confirms this. For those that deliver employment services – job ready job seekers are an
integral part of the dynamics of employment services, and are often the key to unlocking the
door of employers.

Benefits of a Modern System:
If red tape and system complexity are reduced, and providers are freed up to focus on job
seeker and employer centred service models, there is no doubt that system performance
would be improved.

 Benefits of a Modern System

           Job seekers truly at the centre
           Employers engaged with job seekers
           Providers have certainty
           Government delivers better societal response
           Australian community is more productive
           Compatibility with other policy priorities

As an industry however, it is critical that we thoroughly consider if the reforms outlined in
the document as moving to a modern system will lead to the benefits suggested. Do the
anticipated gains from these reforms outweigh the risks to all of the stakeholders? Can we
achieve the same or similar outcomes without completely changing the game?

We know that the impact of large-scale change is significant on the industry. Job seeker and
employer services, performance, and industry morale are all affected when such change is
implemented. Periods of uncertainty often lead to increased staff turnover, and skills and
expertise can be lost from the sector.

Increasing performance requires stability and certainty for the future – yet, as outlined
earlier, we are unsure how moving to a license based free market model of purchasing will
provide this.

NESA is also unsure how the changes outlined in the Blueprint will increase employer
engagement with job seekers. It has not been clearly articulated how the reforms will aim
to meet employer needs. How will the reforms address the issues of supply and demand,
and create employment opportunities for the job seekers we service?

Will job seekers truly have choice if they are locked in to servicing arrangement for a year
after they have chosen a provider? Will providers really have the freedom to design services
or will regulation tie organisations up in increased red tape and compliance requirements?

These are all questions that we feel need to be answered in relation to the Blueprint. We
have little doubt that as the discussion and consultation continues with Jobs Australia and
the industry, many of the answers sought will come to light. We look forward to the
continuing discussion.
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