Long term unemployment: the ‘achilles heel’ of the Job Services Australia model
Peter Davidson Senior Adviser ACOSS, and PhD student Social Policy Research Centre, UNSW
[email protected]
Paper Presented at the Australian Long-Term Unemployment Conference Surfers Paradise, Gold Coast (QLD), 18 -19 August 2014
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Long term unemployment: the ‘achilles heel’ of the Job Services Australia model Two-thirds of recipients of Newstart Allowance have been unemployed for more than a year. Long term unemployment is associated with poverty, poor health, and higher levels of structural unemployment. As the population ages and gaps emerge in the paid workforce, Australia will have an opportunity to solve one of our worst social problems and meet one of our most pressing economic needs at the same time. While sustained economic growth is essential to reduce long term unemployment, it is not sufficient. Evidence from Australian and international program evaluations suggest that employment services can improve the job prospects of people unemployed long-term. Australia’s largest public employment program, Job Services Australia (JSA), is under review and a revised program is expected to be announced this year. This paper attempts to answer the following three questions: (1) What forms of employment assistance are most effective in reducing long term unemployment, based on recent international evidence? ‘Activation’ of unemployed people can reduce long term unemployment by requiring and assisting people with reasonable good job prospects to search for employment more effectively. Activation on its own is not sufficient. People who are unemployed long term or at risk of it usually face specific hurdles to employment such as low skills, a lack of work experience, or disabilities. Broadly speaking, paid work experience (using wage subsidies) in regular jobs and substantial vocational training (preferably linked to a job) are relatively effective in overcoming these barriers to employment while very short training courses (for example, less than three months) and ‘make work’ schemes, whether paid or unpaid (work for benefits) are relatively ineffective. That said, the international evidence suggests that successful interventions are generally those which are tailored to individual needs (of jobseekers and employers), rather than standardised. (2) Are resources in the JSA system effectively targeted to assist long term unemployed people? Australian and international evidence suggests that it is generally cost-effective to target the most intensive help towards people who are unemployed for one to three years, since fewer of this target group would find employment without assistance. The JSA system shifted resources from people unemployed long term towards those people unemployed for less than a year who were assessed as at-risk of long term unemployment. As a result, providers are typically funded to interview a person unemployed for one to two years every two months and purchase only $500 worth of work experience or training, on average. While not conclusive, the evidence suggests that this shift of resources reduced the effectiveness of the program in assisting those who were already unemployed long-term.
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(3) Does the JSA system encourage efficient investment in work experience, training and other supports needed by long term unemployed people? Overall Australian public investment in labour market assistance has been low - about half average OECD levels - since the Job Network was introduced in 1998. Within this pool of funds, Australia spends relatively more on job search assistance and less on work experience and training programs for unemployed people. While in theory outcomes-based funding of non-Government employment services should encourage cost-efficient investment in disadvantaged jobseekers, in practice it has rewarded providers who concentrate on low cost job search assistance rather than patient investment in work experience and training. Since the late 1990s, Governments have directly funded their preferred forms of work experience and training to fill some of the resulting gap in employment assistance. In the Job Network period, a ‘work for benefits’ scheme (Work for the Dole) was favoured over vocational training, and this was reversed with the introduction of JSA. If funds invested in Work for the Dole (a relatively ineffective program) were replaced by substantial vocational training linked to employment opportunities, this would likely have improved the effectiveness of employment assistance. However, providers were only resourced to purchase relatively ineffective short courses and faced pressure to place people in readily-available State Government-funded courses to meet jobseeker activity requirements at low cost. Average employment consultant caseloads were over 100 which left little room for individualised assistance. Under these conditions, the JSA program was likely to have a similar net employment impact to the Job Network, since the basic design of the two programs was otherwise similar. Average ‘gross’ employment outcomes following participation in JSA were at first similar to those of the Job Network, with just under 50% of participants in employment three months after leaving the program. Average employment outcomes fell after the GFC and declined further during 2012, but this is likely to be due to adverse labour market condition rather than changes in employment assistance. The conference presentation will conclude with a brief assessment of the Government’s restructure of Job Services Australia, which was not available at the time of writing.
Keywords Unemployment, long term unemployment, unemployment benefits, labour market programs, welfare reform.
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The problem: growth in long term unemployment and its effects There are many good reasons to reduce long term unemployment, including its health and social effects, and the link between long-term and structural unemployment1. An individual’s employment prospects decline sharply the longer they are out of work. This is due to long term unemployment itself and other factors such as poor health or low skills that predispose people to long term unemployment. Almost half (47%) of new recipients for Newstart Allowance (60%) leave that payment within the first 6 months. However, among those already on unemployment payments for 12 months, approximately half still receive those payments a year later2. Among unemployed people receiving Job Services Australia services (JSA) in 2012, 58% of those unemployed for one year, and 91% of those unemployed for two years, were in the JSA system a year later3. While the unemployment rate has fallen over the past two decades, a growing proportion of individuals reliant on unemployment payments are long-term recipients. Figure 1 shows trends in unemployment over the last two decades, a period during which the unemployment rate fell from 11% in 1993 to 4% in 2007, and then rose again to 6% in 2013 following the international economic downturn (GFC) in 20084. Figure 1: Unemployment rate, Australia
Unemployment rate (%) 12 10 8 6 4 2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Source: ABS, Labour Force survey.
Figure 2 shows changes in the duration profile of spells on unemployment payments over the same period5. In 2013, approximately two thirds (65%) of the 753,000 recipients of 1
Machin S and Manning A (1999); Saunders P. and Taylor R (2002). Department of Education, Employment and Workplace Relations (2012d); Australian Council of Social Service (2012). 3 Department of Employment (2014e). 4 Australian Bureau of Statistics (various years), Labour Force survey, Canberra. 5 This is a different statistic to long term unemployment as measured in labour force surveys. Some unemployment payment recipients are not classified as unemployed (e.g. because they are undertaking training) while some long term unemployed people are not eligible for income support (e.g. due to their partners earnings). 2
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Australian unemployment payments (Newstart Allowance and Youth Allowance – Other) had received income support for at least one year. Half (49%) had received it for over two years6. Figure 2
Unemployment payment payment recipients by duration (% of total) 90% 80% 70% 60%
GFC
Sole parents transferred >2 yrs
50%
1-2 yrs
40%
