Marketized Coercion

John Howard’s Liberal government fully privatized employment services in 1998. But the present system had its genesis in the previous Labor governments of Bob Hawke and Paul Keating. In 1989, then-treasurer Keating commissioned the “Working Nation” white paper, which was released in 1994. It already contained many of the proposals that John Howard adopted some nine years later.

The report proposed to spend $2.1 billion (in 1994 dollars) on employment and training programs. Of this total, the white paper envisaged raising $800 million by penalizing welfare recipients for noncompliance. Describing these measures as “savings,” Keating justified the move by claiming it would create an incentive to push people off payments and into employment. He also justified the considerable gap between unemployment benefits and the minimum wage as creating an “incentive” to work.

Today, ESPs require welfare recipients to satisfy “mutual obligations,” often pointless and demeaning tasks, such as attending resume-writing courses or unpaid labor as part of the “Work for the Dole” program. In the Hawke–Keating era, these were known as “activation” requirements.

In those days, unemployment services were still managed by Commonwealth Employment Services. In 1998, Howard transferred the administrative wing of CES to the newly created Centrelink, an umbrella agency. Simultaneously, his government privatized employment services that had previously been publicly owned — spawning today’s ESPs.

However, thanks to Keating, in its final form, CES operated according to the same basic logic as today’s Jobactive Employment Service Providers. Instead of finding jobs for unemployed workers, the CES  “managed” them, pressuring the unemployed to find jobs on their own or face penalties. In its final years, CES even planned to install “Job Search Kiosks” in shopping malls, although thankfully this never materialized.

In sum, it was Bob Hawke and Paul Keating who began the long process of neoliberalizing Australia’s unemployment welfare system. The result of their efforts is a wasteful, punitive, and widely maligned system in desperate need of overhaul.

Full Employment and the CES

The old CES was not perfect, and there’s no going back to it. But in many respects, it was a vastly superior system to today’s privatized network of ESPs. Understanding its history can help us build a better welfare system that empowers unemployed workers.

The CES was established in 1946 as a part of the Curtin Labor government’s commitment to full employment. It was designed to locate labor shortages and to help people access jobs. However, it also had a coercive element — the CES conducted a “work test,” requiring welfare recipients to prove their willingness and ability to work.

Still, throughout the 1950s and ’60s, the CES helped to maintain a de facto full-employment economy. When the crisis of “stagflation” hit in the 1970s, the Whitlam Labor government abandoned the goal of full employment, hoping that moderate unemployment might limit wage growth, in turn limiting inflation.

After Gough Whitlam’s dismissal in 1975, Malcolm Fraser’s Liberal government conducted a number of inquiries into the unemployment benefit. It went on to cut labor-market programs by 54 percent, justifying this move with a campaign to smear welfare recipients as “dole bludgers.” Instead of blaming the economic system, Fraser sought to scapegoat individual unemployed workers.

Two reports from the Fraser era stand out for their arguments against the government narrative. The first was an inquiry into the CES, known as the Norgard report. It called for more resources to be directed toward the CES, and argued that the work test should be scrapped.

The second, the “Inquiry into Unemployment Benefit Policy and Administration,” argued that unemployment benefits were not a disincentive to work, and proposed to abandon the work test in times of high unemployment. Unsurprisingly, Fraser largely ignored both reports, merely implementing some of the less substantial Norgard recommendations.

The Golden Age of Unemployment Support

Dr Victor Quirk used to work for the CES. Now, he is a labor-market economist. He told Jacobin that over its life, the CES had developed considerable institutional expertise. “From the Norgard period up until 1989,” he explained, the CES found itself in a “bit of a golden age.”

This was in part because the CES had a geographic footprint spanning the country. CES officers could easily find out if employers were underpaying or mistreating staff, with the consequence that the CES would deny them access to the free employment service it provided. As Dr Quirk explained:

It was a way of regulating the behavior of employers to some extent, because your local CES would say “no, we’re not going to handle any more of your vacancies because of the way you’ve been treating people.”

Because employers were typically based in one area, they weren’t able to simply go to another CES office. This meant that CES officers could work out, for example, whether a restaurant was exploiting trial staff for unpaid labor.

As the local CES manager worked with local businesses and the community, the CES was able to gather labor-market information. For example, if a business laid off multiple employees, the CES manager would speak with the business, to find out the cause and to offer tailored assistance through labor-market programs.

In practice, the CES functioned as a real-time labor-market intelligence network spanning the entire continent, collecting information on the ground, and transmitting it to state and federal offices. When businesses contemplated establishing operations in an area, they were able to approach the CES to gain an understanding of the local workforce in order to inform their decisions.

This also meant that if employers had difficulty finding workers with the necessary skills, they could apply to the CES manager. CES could either help source unemployed workers from other labor markets or develop training courses with local Technical and Further Education (TAFE) institutions and refer unemployed workers to them.

The CES did not enjoy much support toward the end of its life. But for most of its life, it did play a functional role in assisting unemployed workers and staying up to date with labour market changes. However, in an era of mass unemployment, things have changed. According to Dr Quirk, employment services have “gone from managing labor scarcity to managing job scarcity.”

Beyond Coercion

Many elements of CES-era unemployment services are either inappropriate or undesirable today. Clearly, it was an institution adapted to the pre-digital age. In addition, the “activation model” for the unemployed was never useful and should not be revived. And sadly, although full employment may be desirable, it is not on the immediate agenda.

Yet, if we reimagine the best elements of the CES to suit the contemporary labor market, we could design an employment support system that actually helps workers, rather than forcing them into precarious, low-paid jobs that are sourced entirely from the private market. Indeed, this market-obsessed approach creates a structural blindness to valuable non-market-based work that would benefit communities across the country.

For example, Carers Australia and Deloitte Access Economics in 2015 found that replacing informal care work with paid jobs would cost $60 billion (the equivalent of 3.8 percent of GDP and 60 percent of the health and social work industry.) The Australia Institute recently calculated that the arts and entertainment industry contributes $14.7 billion to the GDP. Every million dollars spent on this industry creates nine jobs.

By comparison, in the construction industry, one million dollars creates only one job. By publicly funding these industries, the government could easily create decent jobs — and a reimagined CES could easily find unemployed workers happy to accept them.

An alternative is a proposal known as the “Liveable Income Guarantee” (LIG), a means-tested income guarantee that pays at an equivalent rate to the aged pension. This could also guarantee unpaid carers the support they need to assist family and friends.

This might sound like a radical proposal, but it’s not too far off the present reality. According to a parliamentary report from September this year, nearly half of those receiving unemployment payments are exempt from mutual obligations.

This is because some recipients are “undertaking approved voluntary work or a combination of voluntary and part-time work,” while others have a “temporary illness or incapacity, [or are] undertaking training or self-development, or being assisted to find a job through a disability employment service.”

The report also noted that as of June 2019, 40 percent of unemployment welfare recipients had received a “Partial Capacity to Work” assessment, exempting them from many of the more onerous requirements.

A LIG would pair well with a CES-like model based in communities that serves as a hub for other social services like housing, health care, and education. This could be a valuable tool to strengthen a long overdue expansion of the public sector. Especially in light of the failure of the private sector, a new CES could develop and lead community projects and address skills shortages — just as the old CES did, during its “golden age.”

Unemployment policy has to break the link between jobs and profits. There is plenty of work to be done, yet the private sector has shown it has little capacity and no willingness to do it. People without paid employment already make countless valuable but unrecognized contributions to society. They deserve to be supported, not demonized and penalized.