Supply-side employment services models fail and promote sociopaths

One of the ways in which neoliberal dogma altered the relationship between government and the citizens in Australia was in the way employment services were delivered. Before this dogma gained traction, the Australian government operated the – Commonwealth Employment Service (CES) – which was created in 1946 as part of the grand plan to sustain full employment and improve the material standards of living after the travails of the Great Depression and then World War 2. It was created by the – Re-establishment and Employment Act 1945 – which was “designed to help members of the forces transition back to civilian life by providing for their re-establishment in employment and civil life”. The CES was an integral aspect of this process and provided job matching services, occupational planning, vocational training and support, income support payments, and career guidance. It was a very effective service that operated over many decades after its introduction. There were spin-off services to help those with disabilities (particularly chronically injured service men and women). As neoliberalism took hold in Australia, the narrative shifted towards blaming the unemployed for their plight rather than understanding that the unemployment was due to a systemic lack of jobs being created because aggregate spending was insufficient. Parts of its operation were hived off to (grasping) private operators and eventually the whole operation was privatised in 1998. It has been downhill ever since and the problems arising from this decision by government continue to serve as a blight on the civility and decency of Australian society. The latest news, which I canvas in today’s post is just more of the same.

Some background reading:

1. Job Services Australia – ineffective and rife with corruption – scrap it! (February 23, 2015).

2. Oh for a decent public employment service! (January 28, 2011).

Background

As noted in the Introduction, the CES was a government-run employment agency that had a solid record of performance.

It helped millions of Australians find work and gain career advice.

But as the neoliberal mantra – that unemployment was a sign of individual deficiency – like laziness – gathered traction, the mood shifted towards punishing the jobless for what had previously been considered a systemic failure to create enough jobs as a result of total spending being less than necessary to fully employ everyone.

It was also a time that the obsession with fiscal surpluses became the vogue which constrained the federal government’s ambitions towards its earlier commitment to full employment.

The narrative shifted from full employment (providing enough jobs – a demand-side focus) to full employability (getting people ready for work – a supply-side focus).

It was claimed the unemployment was not due to a lack of jobs but, instead, reflected the fact that people didn’t want to work.

The astonishing claim throughout this period was that employers would quickly offer jobs if the unemployed would signal they were prepared to take them.

However, the surveys done at the time showed unambiguously that those without work would take a job offer if one was made.

The CES was seen as a service that could be privatised and after a steady outsourcing of many of its functions it was finally decided to privatise it and create a so-called competitive market for the provision of employment services.

At that point (1998), the Australian government created a new ‘industry’ – the ‘unemployment’ industry, when it privatised the CES and handed over labour market program delivery to profit-seeking private providers.

Our 17 traditional industries are productively engaged in producing manufacturing goods, agricultural produce, public services, education, recreational services, and the like which provide employment and incomes and enhance our material standard of living.

The ‘unemployment’ industry produced nothing but heartache, wasted billions of public money, and the private service providers regularly were found to be defrauding the system – through overstating their performance etc.

This parasitic private sector fringe – then called the Job Network – was, in effect, a new industry, whose product was unemployment.

In 1998, the focus on outcomes and the use of competition to allegedly drive greater efficiency and choice underlay the dismantling of the CES and its replacement by Centrelink (the government overseer of the privatised provider contracts) and the Job Network.

The privatisation of the CES and the shambolic and corrupt system that emerged (the Job Network) was part of the trend towards mean-spirited government that led to the abandonment of a commitment to full employment and the retrenchment of a comprehensive welfare state.

The Job Network was epitomised by the government’s pursuit of the diminished goal of full employability, which constructed mass unemployment as a supply-side problem rather than a system-level failure of the economy to provide enough jobs for those who desired to work at the current wage rates on offer.

Under full employability, the government no longer ensured that employment growth matched labour force growth but focused, instead, on getting individuals ‘work ready’, should there be jobs available.

It was the exemplar of the OECD’s Jobs Study approach which focused on supply-side activation – a fancy word for blaming the victims of a demand failure and threatening them with starvation should they not agree to submit to the pernicious management regime (relentless dole diaries, meetings with case managers etc) which included working for free.

It failed almost immediately as the corruption set in.

A 2002 report by the federal Productivity Commission – Independent Review of the Job Network – described the Job Network as a ‘managed’ or ‘quasi’ market for the provision of subsidised employment services, which aims to mimic the activities of competitive markets by allowing scope for competition, flexibility in service delivery, rewards based on outcomes and some degree of choice for the unemployed.

However, this perverse “quasi market” soon revealed it was not immune from market failure.

There was policy schizophrenia in expecting an outcome-based funding model for employment services to deliver ‘better and more sustainable employment outcomes’ in the absence of concomitant policies to alleviate the macroeconomic constraint and create real employment opportunities.

In a highly demand-constrained labour market, characterised by persistent unemployment and marked regional disparities, it was always unclear how the supply-side focus of the Job Network could be effective.

he Productivity Commission’s Independent Review of the Job Network in 2002 found that the payments structure to Job Network providers has led to a substantial proportion of Intensive Assistance recipients being ‘parked’ – that is, taken onto the private agency books to get the first incentive payment but then ignored because the prospects of getting any further payments (for successful job placement) were bleak.

Job seekers with the greater chance of achieving a payable outcome were targeted while those in greatest need of assistance (with low employment probabilities) were left unsupported.

Subsequent evaluations of the effectiveness of the Job Network showed it failed to provide sustained employment prospects for the vast majority of the case load.

By 2005, employers were complaining of massive skill shortages despite the Job Network providers receiving billions of dollars in public money to develop such skills among the hundreds of thousands of unemployed persons under their ‘management’.

By 2002, with the model in shambles, the Government took a further step, reinforcing what it called its ‘Active Participation Model’ – aimed at reducing the outlays that were rising as unemployment continued to increase in the face of the on-going failure to stimulate aggregate demand.

In other words, it had to reduce the size of the unemployment ‘industry’ and the way to do that was to place its concept of ‘mutual obligation’ at the centre of the system.

Any reasonable person would say ‘mutual’ should imply a two-way interchange.

But the neoliberals in power were anything but reasonable.

Variations in the payments structures emerged – claimed to be enhancing the effectiveness of the system – but in reality they were designed to get people off the payments register.

As a result, the Government introduced penalties that would be imposed on the long-term unemployed people found to be – in the Government’s assessment – not genuinely seeking work.

This was called ‘breaching’ and the Government gave the Job Network providers the power to identify and punish unemployed people that the Government believes are deliberately avoiding work.

The data that emerged was shocking. There was an escalation in the number of people subjected to the loss of benefits.

The evidence was that Job Network providers acted capriciously and had no specific procedural guidelines for making decisions about breach recommendations leading to inconsistent treatment of the unemployed within a single organisation.

We learned that unemployed workers who failed to attend a first interview were more consistently and readily breached than others.

Rules of natural justice were not being correctly applied in all instances (some unemployed were subjected to unjust decision-making processes).

Moreover, those that were being breached include schizophrenics who were prone to episodic illness and unable to attend interviews on days when they were suffering the most; homeless people who were unable to access mail at old addresses informing them of an activity test interview and other disadvantaged citizens.

The upshot was the system had become a cruel, punishment structure rather than one that assisted unemployed people to find work.

In 2016, the Australian government went one step further and introduced the so-called – Robodebt scheme – which was an “automated debt assessment and recovery” scheme designed to recoup payments to welfare recipients, which the government deemed to be in breach of eligibility.

It proved to be an unmitigated disaster – it resulted in tens of thousands “false or incorrectly calculated debt notices being issued” and people being hounded for money by debt collectors who lacked empathy to say the least.

Many disadvantaged Australians were driven into mental illness and suicide as a result of the way the government agency in charge of the scheme behaved.

Eventually, in 2019 the courts found that the scheme was illegal and subsequently a judge “approved a A$1.8 billion settlement, including repayments of debts paid, wiping of outstanding debts, and legal costs.”

The – Royal Commission into the Robodebt Scheme – was established in 2022, after the conservative government was thrown out and its – Final Report (over a 1000 pages and 20.24 Mbs) – revealed a litany of errors and malevolance by Australian government officials who were running the scheme.

We learned that:

– Welfare recipients’ suicide after receiving automated debt recovery notices for significant sums.[40][41]

– Debt notices were issued to deceased people …

– Issuing debt notices to disability pensioners …

… Revelations that debt notices were issued to 663 vulnerable people (people with complex needs like mental illness and abuse victims) who died soon after.

And more atrocities.

While some bureacrats were sacked none have gone to prison for knowingly running an illegal scheme that created massive damage to the most vulnerable citizens in our country – and having been found guilty of “public service misconduct”.

While the government scrapped the scheme, the fallout continues and the lessons do not seem to have been learned.

Fast track to 2025.

Latest scandal

The – Antipoverty Centre – in Australia is “an unfunded organisation run by people who rely on social security payments to live, working to put the voices and rights of people living in poverty at the centre of social policy development and discourse.”

It recently published research that showed that the practice of breaching continues and the damage for disadvantaged Australians is cumulative.

The UK Guardian article (November 2, 2025) – Centrelink threatening payment suspensions at rate of five a minute, new analysis suggests = summarised the report.

Centrelink is the government agency that oversees the privatised job services system.

It takes advice from the private providers about individuals and then breaches them if the recipients are deemed to not be ‘looking’ hard enough for work.

The Guardian reports that the massive number of breaches:

… have taken place under Centrelink’s mutual obligations regime, which is meant to ensure recipients are actively looking and preparing for work. If they do not fulfil activities – such as completing job applications or attending meetings with job providers – their payments can be suspended.

The evidence is that the suspended payments are then reversed once the reality is disclosed but not before the individual has been tormented by these privatised providers and forced to endure the stress of not having any income support.

The Robodebt scandal is also overhanging:

In the past, such suspensions could lead to cancellations. But since March, all cancellations have been paused because the government cannot say if they were happening legally.

The evidence is that the suspensions are biased against “People with a disability and Indigenous Australians” and that:

…jobseekers are having their payments suspended while in hospital for psychosis or after having a brain tumour removed, despite sending paperwork to Centrelink saying they were receiving medical treatment.

In my view, the Australian government regularly violates human rights in this regard.

A better system?

All of this mess is directly related to the belief that people do not want to work and thus evade the system designed to support them while they are meant to be looking for work.

The so-called ‘work test’ is at the centre of all of it – not doing enough to find work – irrespective of whether there are enough jobs available.

That last point is ignored by the neoliberals because they think the problem is a supply-side one – lazy individuals who just want to skive off the government support.

Unfortunately, the mutual obligation system that drives this punishment regime is one way.

The Government thinks it is upholding its side of the bargain by providing income support, despite it being increasingly below the poverty line and the individual has to jump through dehumanising hoops to get it, and then risk being suspended by some sociopath in Centrelink.

But the only sensible way the government can really uphold its side of the bargain is to offer jobs to those who are unemployed and struggling to find work.

Then mutual obligation starts to make better sense.

I consider society works best if all its members contribute the best they can recognising that that capacity varies greatly across the population and across time for any one individual.

Some people clearly are unable to work because of physical or mental characteristics and should be supported by the government to ensure they can live a decent, socially-inclusive life.

But most of us are capable of making some contribution and my ethical position is that we should be given the opportunity to do that.

The government should abandon the privatised unemployment industry and instead introduce a – Job Guarantee – which involves the unconditional offer of a socially-inclusive minimum wage job to anyone who cannot find work and desires to work.

Then the work test becomes very straightforward.

There could be a grace period for an individual who loses their job elsewhere – that is, they could immediately receive the Job Guarantee wage but be given a short period to organise themselves before having to start work in the Job Guarantee program.

And if an individual who is capable of working refuses then that becomes clear cut and no breaching or punishment system is required.

That choice means the individual will take care of themselves.

Research shows that most people who become unemployed would take the public job offer even as a temporary measure while they searched elsewhere.

Some would stay permanently in the Job Guarantee job.

Whatever works.

But the whole punishment regime would become unnecessary.

Here’s a job – congratulations on avoiding unemployment.

When economic activity is strong, very few people would be working in the Job Guarantee program.

Other times, more people.

But unless the government is prepared to ensure there are enough jobs, any supply-side system will fail and that failure leads errant minds to introduce all these hideous breaching and monitoring behaviours.

Sure, under a Job Guarantee, oversight would be necessary – one would be required to actually turn up for work or face the sack.

Just like any job.

And I don’t hear people complaining that sort of system is ‘unfair’.

Conclusion

The lessons of the last few decades about the folly of privatised employment services are still being ignored.

The system has been a disaster both in fiscal terms (wasting billions) and in individual terms (harming the disadvantaged).

It can never work.

That is enough for today!

(c) Copyright 2025 William Mitchell. All Rights Reserved.