23/07/2001- Over the past three years, the Australian government has cut back on government involvement in the delivery of employment services by making more use of market forces and the private sector. It has halved its spending on employment programmes, retaining only the most cost-effective ones. And it has introduced measures that impose "work for the dole" obligations on younger adults claiming unemployment benefits.
Should other OECD countries follow suit? A new OECD report Innovations in Labour Market Policies: the Australian Way, reviews the advantages and shortcomings of this approach to labour market policy. In particular, it concludes that private sector and community providers deliver employment services effectively, and that the process of contestability à¢Â€Â? whereby poor performers are replaced by better performers à¢Â€Â? improves overall system performance.
Under the new Australian model, government involvement in employment services is channelled through a recently created organisation called Centrelink, which processes claims and payments for benefits such as age pensions, disability and unemployment assistance and co-ordinates the referral of job seekers to appropriate job-search agencies. Actual job matching and employment assistance tasks are devolved to the Australian Job Network, created in 1998 and involving some 200 private or non-profit organisations.
These services, which are open to nearly all unemployed people, are provided under contracts awarded through a competitive bidding process and monitored for service standards and outcomes. In parallel, a "Mutual Obligation" principle, introduced in 1998, requires unemployed people to take up some activity such as part-time work, voluntary work or training in return for unemployment assistance. When first launched, Mutual Obligation resulted in a significant decrease in entries to long-term unemployment for the youth age group concerned, and it has won strong public approval. It has recently been extended to include people aged up to 49.
Both job-seekers and employers have generally been happy with Job Network, and unemployment in Australia has fallen considerably since 1998. However, the OECD report does identify some problem areas. Payments to service providers, for example, do not always sufficiently reward those who achieve high rates of employment outcomes for their clients. Procedures for requiring job-seekers to attend Job Network services are cumbersome, resulting in benefit sanctions and administrative costs which may be avoidable. And under the current arrangements, individual case management, carried out by Job Network, is conducted largely separately from the activity, managed by Centrelink of referring job-seekers to other labour market programmes, contrary to the OECD's habitual recommendation that these functions should be integrated.
The OECD report points to the difficulty in distinguishing the impact on unemployment of active labour market policy measures from that of other factors such as the recent economic upswing. While Job Network has cut down on costs compared to previous labour market programmes, the actual results in terms of raising the exit rates of benefit recipients from unemployment into jobs, are not so different from those achieved under the Working Nation initiative of the previous government. Until recently, at least, the programmes did not seem to be having much impact on core long-term unemployment overall.
Innovations in Labour Market Policies: the Australian Way is part of a series of OECD reviews of public employment services in member countries which focus on job-brokerage, income support and referral to and management of labour market programmes.