Buying and Selling the Poor: Inside Australia’s Privatised Welfare-to-Work Market

Reform of Australia’s welfare-to-work system and its ripple effects are recurrent themes on the Power to Persuade blog. In today’s post, Siobhan O’Sullivan, Michael McGann, and Mark Considine discuss their landmark, long-term research into privatisation in Australia’s welfare-to-work system. Their new book Buying and Selling the Poor: Inside Australia’s Privatised Welfare-to-Work Market examines how well Australia is supporting its most vulnerable citizens, and  what might be done differently.

Our long-term study of Australia’s welfare system reveals the human impact of three decades of privatisation. 

Since the 1990s, Australian governments have privatised many public services, including programs to help the unemployed. Indeed, these employment services are now fully privatised in what has grown to become a multibillion dollar industry, involving about 40 private agencies.

In the privatised system, businesses bid for access to unemployed people, treating them as a commodity to be bought and sold. The goal is to profit from ‘helping’ the unemployed to transition from welfare to work by earning outcome payments from the government that are higher than it costs providers to place and sustain their client in jobs. However, one key difference between Australia’s welfare-to-work market and a conventional market is that there is virtually zero ‘consumer’ choice or option for clients to leave the market. Jobseekers must jump through complicated hoops to access welfare payments, risking poverty if  they do not comply or engage with employment services. Australia’s penalties for “noncompliant” jobseekers are among the strictest in the OECD.

Australia’s privatised system has a reputation for efficiency. It has been hailed around the world as lean, with an emphasis on ‘work first’ and jobseeker ‘activation’; where it is less celebrated is in relation to its ability to assist jobseekers facing multiple forms of disadvantage, into work. A growing proportion of jobseekers in the system are long-term unemployed; and for those in the most intensive service stream (Stream C), it takes about five years on average to move out of employment services. Yet the situation is not all doom and gloom. Some providers are successfully helping disadvantaged jobseekers into ongoing work.

Drawing on hundreds of case studies and accumulated decades of research into the evolution of the Australian system, our latest book takes readers inside the system to  explain what is and isn’t working. We wanted to figure out why some agencies do better at helping very disadvantaged people find jobs, when the overall system is weak at doing that. If we could crack that code, we thought we could share the formula to the advantage of all.  

In Buying and Selling the Poor we followed around 100 highly disadvantaged jobseekers as they traversed the Australian system, via four private welfare-to-work agencies. To understand why some agencies succeed where others fail, we spent extended periods embedded in frontline employment services. From morning until closing, we recorded interactions between staff, jobseekers, employers and training providers. Over many months, we developed a detailed insight into each jobseeker’s fate, as well as into what drives frontline staff. We then tested our findings with industry experts.

What we found was a system staffed by many highly motivated and caring frontline staff. However, those staff work in a system that is computer and process driven with limited capacity to offer deep investment in jobseekers with various complex barriers to employment. We also found a gendered system, in which the employment opportunities offered to women are very different to those offered to men. Finally, we found a system with high levels of staff churn. As contracts are won and lost, and case managers move from one agency to another, the system quickly and easily fails to offer continuity of service. This in turn makes human connects between case managers and jobseekers more difficult to establish and maintain.

The Australian system, like many similar systems around the world, is path dependent, meaning that largescale reform or redesign is hard to achieve. Up close the system is continually in flux, but viewed from a distance, it is largely the same system introduced by the Howard Government and referred to as Job Network. But more change is coming. Australia is about to embark on a new welfare-to-work experiment – this time, a move to digital-first service prevision – where an app will replace human case managers for most  jobseekers. But once again it is unclear how effective the new system will be in providing assistance to those most in need.

By the middle of 2022, Australia will have a new digital-first system. To optimise outcomes for the most disadvantaged jobseekers we hope for stability and longevity in service delivery contracts. This will allow providers to make long-term investments in both jobseekers and their own staff. We hope that the government will make good on its commitment to re-direct saving accrued by the digital-first system, towards the most highly disadvantaged. We also hope that those who are unable to successful use digital platforms are given the opportunity to work with a human case manager, if that is what they would like to do.

One thing is clear. Three decades into Australia’s privatisation experiment, our welfare-to-work system is not adequately supporting our most vulnerable citizens to get back to work.

If you are financially stretched and would like a copy of the book but cannot afford it, we have three copies we can send to the first three people who contact Associate Professor Siobhan O’Sullivan by email at siobhan.osullivan@unsw.edu.au.

 For more information about the book, extracts or to arrange an author interview, please contact siobhan.osullivan@unsw.edu.au or mmcgann@unimelb.edu.au.

About the authors:

Siobhan O’Sullivan is Associate Professor in the School of Social Sciences at the University of New South Wales.

Michael McGann is Lecturer in Public Policy at the University of Melbourne.

Mark Considine is Redmond Barry Distinguished Professor of Political Science in the School of Social and Political Studies, University of Melbourne.

Content moderator: Sue Olney