10.12 Employment services

The bulk of Commonwealth Government employment services are provided through Job Services Australia, which currently offers services to around 760,000 job seekers. Funding under Job Services Australia is around $1.3 billion per year.

The existing round of employment services contracts are due to expire in the middle of 2015. A review has been conducted with a view to making further modifications to the next round of contracts (Department of Education, Employment and Workplace Relations, 2012a).

While the average cost per job seeker has declined since the introduction of the Job Network and then Job Services Australia, there are still concerns about whether the employment services arrangement provides the most cost effective way of getting unemployed people into work.

In particular, there is a focus on how well the arrangements work at placing the longer-term unemployed. At present, around 400,000 Job Services Australia clients have been out of work for more than 12 months and of these 170,000 have been out of work for 36 months or more.

Substantive changes to the current employment services model do not appear to be warranted at this time. International evidence suggests that the Australian approach is seen as being at the frontier of good policy in this area. Job Services Australia and its predecessors demonstrate the benefits of using contracting arrangements compared to traditional government provision of these services.

Changes could, however, be contemplated to improve the effectiveness of the arrangements. This could include, inter alia, examining the case for changes to the payment structure to providers to provide greater incentive for job placement (in other words, outcomes rather than servicing).

This could result in increased payments for placing the most disadvantaged job seekers and reduced payments for placing ‘job ready’ job seekers. Another option would be to delay access to employment services for those job seekers who are most ‘job ready’ on the grounds that they require the least assistance.

Wage subsidies

Employment services are also supported by wage subsidies, including the Wage Connect programme. Under Wage Connect, subsidies are available to employers who take on long-term unemployed job seekers.

The subsidy is paid at the rate of $233 per week for 26 weeks. The job seeker must have been on income support for at least two years and had limited work experience, in order for the subsidy to be available. There are 10,000 capped places per year for Wage Connect. In December 2013, the Government advised that there would be a pause on new entrants to the Wage Connect scheme as it was fully subscribed.

The effectiveness of wage subsidies is open to question, given that they may displace other job seekers or simply result in employment ceasing once the subsidy is finished. A study undertaken by the Department of Employment showed that while subsidies can be effective in certain circumstances, there is a need for targeting to minimise the deadweight losses which can occur (Department of Education, Employment and Workplace Relations, 2012b).

Another issue is the average rate of subsidy under Wage Connect, which is higher than similar programmes such as the Tasmanian Jobs Programme and Seniors Employment Incentive Payment.

An outline of selected Commonwealth Government wage subsidy programmes is shown in Table 10.12.1.

Table 10.12.1: Comparison of selected Commonwealth Government wage subsidy programmes
Name Details of incentive Amount of subsidy
Wage Connect Available in respect of individuals who have been on income support payments for at least the last 2 years and have minimal or no work experience. $6,050 over 6 months
Tasmanian Jobs Programme For full-time, ongoing new employment for Tasmanian businesses.  Employees must have been receiving an income support payment for 6 months before the job commences. $3,250 after 6 months
Seniors Employment Incentive Payment Available in respect of people aged 50 and over who have been hired and have been receiving income support for at least 6 months. $3,250 over 6 months

Source: Australian Government 2013a, 2013b and 2013c.

The wage subsidy under Wage Connect should be reduced to the same level as other similar programmes.

References

Australian Government 2013a, Tasmanian Jobs Programme, viewed December 2013, <http://docs.employment.gov.au/system/files/doc/other/tasmanian_jobs_programme_fact_sheet.pdf>.

Australian Government 2013b, Wage Connect Fact Sheet, viewed December 2013, <http://docs.employment.gov.au/system/files/doc/other/wageconnect-generalfactsheet.pdf>.

Australian Government 2013c, Mid-Year Economic and Fiscal Outlook 2013-14, Australian Government, Canberra.

Department of Education, Employment and Workplace Relations 2012a, Employment Services – Building On Success, Issues Paper, Canberra.

Department of Education, Employment and Workplace Relations 2012b, Employment Pathway Fund – Evaluation of Job Services Australia 2009-2012, Canberra.

OECD 2012, Activating Job Seekers: How Australia Does It, OECD Publishing, Paris.