Research design

In Australia, basic job-search assistance is provided to all unemployed citizens and is compulsory for those receiving income support. Services range from job matching through to training and intensive support, such as counselling and motivational support. The data presented here are drawn from a survey of frontline employment services staff operating in various contracted agencies and public service institutions in Australia, the United Kingdom, the Netherlands and New Zealand.Footnote ² The survey was conducted for the first time between 1996 and 1999 (referred to here as the 1998 survey) and for a second time in 2008.Footnote ³ This paper considers the Australian data only. For the purposes of this research, frontline staff are defined as staff who work directly with jobseekers to help them become job-ready, or to assist them either secure, or retain, employment. For the 2008 survey, we sought responses from staff delivering Job Network services. Job Network was Australia's employment assistance program. It ran from 1998 until June 2009. Job Network did not service jobseekers classified as disabled, or those in need of special assistance.

The 1998 survey was completed by 625 Australian frontline employment services staff. At that time Australia had a partially contracted-out employment system, meaning survey participants worked for one of three types of employment agency: public service, private not-for-profit or private for-profit. The 1998 survey was paper-based. The response rate for the first survey was 56 per cent in total.Footnote ⁴ See Table 1 for the sample distribution.

TABLE 1.

Distribution of responses by survey period and agency type

The 2008 survey was designed to be as similar to the 1998 version as possible, although it was updated to reflect changes in nomenclature and industry practice. By 2008, all Australian employment services were delivered by private contracted providers, meaning survey participants worked for either a private not-for-profit or a private for-profit employment services agency. This second survey was completed online, and in Australia the response rate was 44 per cent. Thirty-four Australian employment services agencies participated in the 2008 survey and 1,512 frontline staff completed the questionnaire (see Table 1).

The survey instrument was comprised of around 100 questions designed to elicit information about how frontline staff carry out the basic service delivery tasks required in assisting jobseekers find work, including whether they use standardised assessment tools; scripted, information technology (IT)-driven driven interview techniques; or exercise discretion about the types of activities they negotiate with clients. Only a small number of the questions asked in the survey are discussed here. The questions selected are those that deal most directly with the degree of flexibility, standardisation and routinisation.

The first survey was developed following a series of exploratory interviews with Australian frontline employment services staff conducted in the mid-1990s. Once the 2008 survey data were collected, the research team undertook a second round of in-depth interviews with frontline employment services professionals. Fourteen interviews were conducted with staff from six different employment agencies, chosen on the basis of long-service in the sector. Interviews were used to elicit interpretations and explanations for the changes that had taken place, and were undertaken between November 2009 and February 2010.

The survey data were analysed using SPSS statistical software. For the sake of analytical consistency, all data were assumed to be non-parametric. The Chi-Squared Test was used to test for statistical significance between survey years, and between different types of agencies, for all associations with categorical variables. The Mann–Whitney U or the Kruskal–Wallis Test was used for all questions where the response was numeric. Statistical significance was tested for at the 0.05 level, although precise p-values are provided where appropriate.

Policy developments in the Australian employment sector

Australia has a federal political system with power shared between the Federal, or Australian, Government, and the six states and two territories that make up the Commonwealth of Australia. The bulk of Australian social services are delivered by state or territory governments. However, the history of Australian federalism is one in which power has steadily shifted away from the states towards the federal government, the result being that the Australian Federal Government is highly engaged in funding and administrating many core social services, including the delivery of employment assistance. In more recent times, the two sides of Australian politics have found common ground in regard to so-called New Public Management (NPM) reforms designed to promote increased public sector efficiency, including through forms of privatisation. As such, it was Labor Prime Minister Paul Keating, who held office from 1991 until 1996, who initiated the reform of Australia's employment system. In a 1994 White Paper, Keating outlined a new, competitive, client focused employment system where:

In Prime Minister Keating's view that required a shift away from the public delivery of employment services and a move towards the private sector with its penchant for flexible, market-driven solutions. In the White Paper, Keating asserted that ‘[h]ealthy competition will lead to service improvement’ (Keating, Reference Keating1994: 127).

The first wave of reform occurred under Labor between 1994 and 1996. It involved such initiatives as the introduction of private employment service providers; individual case management for long-term unemployed; the ability, on behalf of the job seeker, to choose his/her own employment agency and negotiate a service contract; the introduction of government funded training programs available to those who had been unemployed for over eighteen months; payment to private providers on a fee-for-success basis; and competition between providers based on the quality of their performance (Finn, Reference Finn1997; Considine, Reference Considine, Sol and Westervel2005: 43). Under the new model around two-thirds of Australia's employment services moved from a public service to a mix of private sector and not-for-profit agencies. In the early stages of privatisation, the public service was not required to bid for contracts in competition with private employment agencies.

The Howard Coalition Government won office in 1996 and held it until 2007. It began its re-structuring of the Australian employment sector quickly after forming government. The first round of Howard-era reforms focused on abolishing many of the training programs initiated by the Keating Government. The Howard Government closed the remaining public agencies and distributed contracts among private for-profit and not-for-profit agencies. The government also substantially changed the way the sector was regulated. At that time, Centrelink was created as a new arms-length public agency tasked with managing all social security payments as well as the provision of a limited public component of employment services. In practice, this meant that ‘basic’ employment services were delivered by Centrelink and ‘elaborated services’ came courtesy of the for-profit and not-for-profit agencies (Considine, Reference Considine, Sol and Westervel2005: 41–67). Australia's new employment system was called ‘Job Network’.Footnote ⁵

The first Job Network contracts ran from May 1998 until February 2000. The second contracts were operational from February 2000 until June 2003. In 2002, the Government announced that the third Job Network contracts would be for 40 per cent of the contracts only and the remaining 60 per cent market share were ‘rolled-over’ into new contracts for existing agencies. Under this system, agencies were selected for an extended contract based on their prior performance. The third contract commenced in mid-2003 and it ushered in a system whereby all jobseekers were referred to a private employment agency for customised assistance. This was unlike earlier iterations where only certain categories of unemployed people were streamed through the contracted service providers (Considine, Reference Considine, Sol and Westervel2005: 41–67).

Between 2003 and 2008, there was no comprehensive tendering process for Job Network. Instead small sections of the market went to tender, while some pre-existing contracts were extended. The need to quantify each agency's performance, for the purpose of offering extended contracts, was one of the drivers behind the development of the ‘Star Ratings’ system. Star Ratings are an audit and assessment issued twice annually by the purchaser to every employment services office in Australia. The grade is between zero and five, increasing in half point increments. It is calculated using a regression model which includes variables for local labour market conditions and characteristics of job seekers and a range of performance outcome measures such as the numbers who exit the benefit rolls, the speed with which they exit and the duration of subsequent employment (Access Economics and the Department of Employment and Workplace Relations, 2002: 8). The Star Rating system was launched in 1999.Footnote ⁶

Prime Minister John Howard lost office in December 2007. By that time, comprehensive outsourcing of these public services was a standard part of the employment sector in many OECD countries.Footnote ⁷ However, the Australian system was unique because, by the end of the Howard era, all Australian jobseekers in receipt of a government payment were assigned to an agent employed by a for-profit or not-for-profit employment services provider. In the next section, data collected at the start of Howard's term is compared to data collected within eight months of his Government's defeat. The analysis which follows examines the cumulative impact of the changes studied in 1998, together with the impact of subsequent changes in government policy. This comparison provides the first in-depth study of the way social services are affected by the comprehensive shift to contracting-out and quasi-markets, the key instruments of NPM. It enables a reasonable test of such impacts and an opportunity to observe long-range trends in the provision of welfare services.

Control at the frontline

The contracting-out of formerly public services is based upon the idea that the market (or quasi-market) can deliver more efficient and more flexible tailored services than can large public bureaucracies.Footnote ⁸ The rationale and justification behind the semi- and subsequent full-privatisation of Australia's employment system is closely aligned with those principles. For example, a discussion paper released by the Howard Government in 2002 asserted that ‘Job Network is delivering more diversity, innovation and choice at almost seven-times the number of locations of its predecessor, the Commonwealth Employment Service [CES]’ (Commonwealth of Australia, 2002: 4). A draft code of conduct for providers, contained in the same document, also required them to pledge to deliver accurate and relevant services by ‘tailoring assistance to meet clients’ needs’, ‘[and by] being flexible in service delivery as clients’ circumstances change’ (Commonwealth of Australia, 2002: 26). Both these claims suggest the government considered private provision through competitive tendering as a means of increasing flexibility at the point of service delivery. Greg Marston and Catherine McDonald (Reference Marston and McDonald2007: 237) interpret the privatisation process in a similar light when they argue that ‘[t]he competitive model was introduced [in Australia] in the belief there would be efficiencies in budgetary terms and greater efficiencies in service delivery outcomes’, while Thomas Bredgaard and Flemming Larsen (Reference Bredgaard and Larson2008: 343) talk of the ‘explicitly politically formulated arguments to create a more efficient and un-bureaucratic system [in Australia, the Netherlands and Denmark]’.

An innovative, flexible approach to service delivery was therefore one of the things tested in both the 1998 and 2008 studies. After observation and in-depth interviews at a variety of local sites, a series of questions about typical work practices to elicit information about the way staff interact with jobseekers were developed. Frontline staff were asked to respond to a series of statements about discretion, autonomy and use of standardised tools in their day-to-day work. The actual wording of these statements can be found in Table 2. In a service where most of the transactions involve face-to-face interviews and choices about where clients should be referred, these questions provide key insights into the level and extent of standardisation and the scope for ‘tailoring’. The hypothesis driving this approach was that, in a traditional bureaucratic service, the role of frontline staff is to apply standard rules of eligibility to clients using pre-determined classifications in order to assign them to common pathways for receipt of benefits and services. Where services use the ‘tailoring’ approach, frontline staff are expected to exercise a high level of discretion, both in getting to the heart of the client's circumstances and in shaping an agenda of action (Considine, Reference Considine1999: 186; Kemp, Reference Kemp1981: 10; Hammond, Reference Hammond1997: 34).

TABLE 2.

Entrepreneurialism in the workplace

In 1998, frontline staff working in Australia's partially contracted-out, or privatised, employment sector did in fact demonstrate a high level of flexibility at the service level (Considine, Reference Considine1999). Results from the survey showed that 84.6 per cent of those surveyed agreed, or strongly agreed, with the statement ‘when it comes to day-to-day work I am free to decide for myself what I will do with each jobseeker’. However, by 2008, the proportion of frontline staff who either agreed, or strongly agreed, with that statement had fallen 22.1 percentage points to 62.5 per cent (see Table 2). That difference is statistically significant (p < 0.001) and suggests a large decline in frontline flexibility by 2008.

During the interviews conducted following the 2008 survey, this issue was raised with experienced staff members. ‘Tony’, who had worked for a not-for-profit agency since Job Network's inception represented a widely held view when he observed that ‘[w]e had far more flexibility [at the start of Job Network]’. He went on to explain that when Australian employment services were first privatised, the requirement to demonstrate why a particular activity was a suitable or legitimate job-search activity was not as onerous. He argued that by 2008, ‘they'd [case managers] be accountable for that spendFootnote ⁹ and they're very cautious because they've got to be accountable . . . So that creativity probably isn't there today that was there six or seven years ago’. He also said that:

And:

Other interviewees reinforced this account. For example, ‘Maxine’, who had been working in a for-profit agency for nine and a half years observed that: ‘the government just wasn't as . . . as structured I suppose, I don't know if that's the word. But the parameters they put on us were a lot more flexible then [at the start of Job Network], than what they are now.’ A similar account was given by ‘Sonia’, who had worked as a frontline staff member for fifteen years. She said: ‘I think people are very concerned now of doing something wrong and being pulled up from that point of view, I think the rules in that sense have become much more stringent.’

There are clearly a number of things embedded in these comments. The agreed decline in discretion is associated in their minds with a fear of making wrong decisions and this in turn is associated with significant penalties. This echoes a stronger regulatory regime in Australia, which, over this period, increased the capacity of the purchaser to recover payments from contractors if it later proved that the exercise of discretion was not justified. With the move towards the ‘roll-over’ of contracts and the use of Star Ratings there was also an increase in the contestability of local allocations, making local practices more important to business viability than before. This could be explained both as an increase in the quality of surveillance by the purchaser and in the depth of monitoring and discipline of local services by their own head office.

Another way to explore whether the level of flexibility employment services staff exercised at the frontline decreased over the course of Job Network is to consider the relationship frontline staff had with their supervisors. A system which encourages tailoring of services to both employer and jobseeker is likely to be one in which staff have the capacity to act somewhat independently. The 1998 study showed that, although there was a trend towards flexibility at the frontline when services were first outsourced, innovation was also linked to supervisory oversight and strong leadership. The expression ‘supervised flexibility’ was used to describe this approach to service delivery, reflecting a workplace in which frontline staff had the knowledge and capacity to direct jobseekers and marshal local resources. These case managers, as they were called at the time, were a primary source of expertise in the agency and with that expertise went a degree of independence from supervision. At the time of the first survey, 11 per cent of survey respondents felt their supervisor ‘knew a lot about the work they do day-to-day’. By 2008, that figure had tripled to 33.3 per cent. In 1998, 32.5 per cent of those surveyed disagreed or strongly disagreed with the statement. That figure had fallen to 10.5 per cent by the time of the second survey (see Table 2).

Another dimension of this independence was the extent to which frontline staff felt they could trust their own judgement, versus the practice of referring unfamiliar eventualities to someone more senior. Table 2 shows that while 11.3 per cent of those surveyed in 1998 strongly agreed that when they come across something not covered by the ‘procedureal guide’ they would refer it to their supervisor, that percentage increased to 34.5 by 2008. The difference between the 1998 and 2008 results are statistically significant for both supervision related questions.

A further measure of flexibility at the frontline is linked to how frontline staff use their IT system. In this context, heavy reliance on IT driven systems is considered more likely to generate routinisation in service delivery. Of course, this is not always the case and IT systems can provide ways to increase local flexibility, for example, by increasing access to a wide menu of activities that clients can be directed to. So we examined the nature of these IT systems at the local level to ascertain that they were in fact based on system-wide requirements for structuring interactions with jobseekers, which limits frontline staff options and reduces discretion both to make mistakes and to create innovations. In response to the statement ‘our computer system tells me what steps to take with jobseekers and when to take them’, 17.4 per cent agreed or strongly agreed in 1998. By 2008, that figure had increased to 47.4 per cent (see Table 2). That difference is statistically significant (p < 0.001) and suggests reduced service delivery discretion.

In a follow-up question in the 2008 survey, staff were asked about the extent to which they felt the IT system (EA3000) dictates how they do their job. EA3000 provides an interface between the Department of Education, Employment and Workplace Relations (DEEWR), Centrelink and employment service providers. DEEWR is the government department responsible for contractual oversight in the employment sector. EA3000 is the primary means by which client data are shared between the three bodies, and it is also integral to the contract compliance requirements placed on employment service providers by the purchaser. Marston (Reference Marston2006: 84) argues that Job Network's operation is ‘contingent’ on ‘a complex infrastructure for data sharing and performance monitoring between government and community [contracted] agencies’ and that the advent of e-government reinforces the NPM agenda (Marston, Reference Marston2006: 85).

Some 23 per cent of survey respondents indicated that EA3000 dictates how they do their job to a large extent. Just over a quarter selected the second strongest level of agreement (25.7 per cent), while 20.8 per cent opted for the third strongest (on a seven point scale). In total, 69.5 per cent of those surveyed felt that EA3000 dictates how they do their job, to a reasonable extent (see Table 3). Close to 70 per cent of Australian employment services staff reported that a computer program directs them in their job, suggesting that flexibility was not a prominent feature of Australian employment services by 2008.

TABLE 3.

Flexibility and IT (2008 only)

The issue of IT directed services was discussed by ‘Tony’ who recounted that:

Similarly, ‘Sonia’ claimed that at the time Job Network was starting, the IT system was: ‘[n]ot half as important as it is now, not even quarter, you're ruled by IT at the moment’.

The use of client classification tools, or other structured assessment instruments, is designed to standardise the judgements being made about client needs. It replaces part of the skill set that a case manager might otherwise need. When asked about how assessment tools changed over the life of Job Network, ‘Juan’, who had been in the sector for twenty years, and who works for a for-profit employment agency, recalled that ‘about five, six years ago we used a very quite basic form, a quick fast thing, but then I think later on they're changing it, so the form is getting longer, the form gets to be more detailed’.

Not only are the forms getting longer, but their use is becoming more common. In 1998, 70.5 per cent of survey respondents said they did not use a standard client classification tool when deciding how to work with jobseekers. By 2008, that proportion had dropped to 15 per cent (see Table 4). This change is statistically significant (p < 0.001). When asked about the tools used by frontline staff, ‘Sonia’ responded that:

TABLE 4.

Use of standard classification and own judgement when working with jobseekers

The use of a client classification pro-forma is intimately linked to more detailed control of the workplace by both the purchaser and the agency's head office. As a means of investigating a further dimension of this issue, survey participants were also asked how influential ‘answers to a standard set of questions’ are when deciding how to work with jobseekers. The results for that question also showed a shift in frontline practice over the ten-year period. In 1998, 49.6 per cent of surveyed frontline staff reported that standard questions were not influential at all. By 2008, only 7.8 per cent of survey respondents gave the same response (see Table 4). The difference between the 1998 and 2008 survey results is statistically significant (p < 0.001).

Another question investigated the extent to which discretion is being exercised at the frontline. Staff were asked how influential is your ‘own judgement’ when deciding how to work with jobseekers. At the negative end of the scale, ‘not influential at all’, there was very little change between 1998 and 2008 (see Table 4).Footnote ¹⁰ At the time of the first survey, 1.4 per cent said their own judgement is not influential at all, whereas 1.8 per cent gave that response in 2008. However, at the other end, ‘very influential’, there was a marked shift between the two survey periods. In 1998, 55.1 per cent said that their own judgement were very influential. By 2008, that proportion had almost halved to 26.3 per cent. That difference is statistically significant (p < 0.001).

Tables 2, 3 and 4 combined demonstrate that Australia's employment sector went from being relatively hierarchical, yet also flexible, at the start of Job Network, to a system in which frontline activities were more controlled and scripted. Job Network evolved into a far more regulated environment for both frontline staff and jobseekers. This runs counter to the expectation that contracting-out will increase agency flexibility and encourage greater tailoring. In the next section, we consider whether these findings hold true across all agencies, or whether certain types of agencies were better able to nurture flexibility among their frontline staff.

Standardisation across the employment sector

At the time of the 1998 survey, the Australian employment sector was a diverse ‘quasi’ marketplace. This involved the delivery of obligatory public services through privately run organisations. In 1999, Australia had 223 employment agencies, of various sizes and ownership types, delivering these frontline employment services.

At the time of the first survey, there was a significant difference between the responses from different types of agencies. At that time, government providers were still involved in delivering services and public servants registered comparatively high levels of supervision (Considine, Reference Considine1999). There was also a variation between the extent to which frontline staff, working for different types of agencies, exercised discretion in how they worked with jobseekers. Moreover, organisations varied in the extent to which standard formulae were used, with for-profit frontline staff the most likely to consider their own judgement to be very important when deciding how to work with jobseekers (Considine, Reference Considine1999). This suggested that contracting-out to private firms did increase flexibility in delivery. Other variations between agencies, such as in their use of sanctioning powers, the extent to which frontline staff felt they are advocates for their clients’ rights and minor differences in the way firms prioritised different types of clients were also found.

By 2008, the Australian employment sector had changed substantially. The process used to ‘roll over’ contracts based upon the Star Ratings meant that the 223 agencies operating in 1999 had been reduced to 113,Footnote ¹¹ all of which were privately run. The survey results also indicate that the levels of diversity that had been observed in the sector in 1998 had been largely lost. An analysis of the 2008 data shows very little difference in the responses offered by frontline staff working for different types of agencies. In Table 5, the data presented above in Table 2 for 2008 are presented again, this time by agency type. The results are remarkably similar across agencies.

TABLE 5.

Entrepreneurialism in the workplace by agency type (2008 only)

In response to the statement: ‘when it comes to day-to-day work I am free to decide for myself what I will do with each jobseeker’, of those who ‘strongly agreed’, 18.5 per cent work in for-profit agencies and 18.1 per cent work in not-for-profit agencies. The difference between the responses given by staff from different agencies to that question is not statistically significant (p = 0.3). Likewise, responses to the statements ‘when I come across something not covered by the procedural guide, I refer to my supervisor’ and ‘our computer system tells me what steps to take with jobseekers and when to take them’ were not statistically significant for different types of agencies (p = 0.4 for the former and p = 0.7 for the later) (see Table 5). However, there is a statistically significant difference between agencies for the statement: ‘my supervisor knows a lot about the work I do day-to-day’ (p = 0.027), with 39.8 per cent of frontline staff working in for-profit agencies strongly agreeing, compared to 30.5 per cent in the not-for-profit sector.

Overall, the 2008 survey data show few statistically significant differences between for-profit and not-for-profit agencies. Table 6 is a sample of thirty-two survey questions asked in 2008. They have been tested for statistically significant differences between agencies. A difference was found for only seven questions, or 21.9 per cent of the time. This suggests that the trend in the sector towards standardisation discussed above is not isolated to a particular type of agency. These results also suggest that, while there was an absence of frontline flexibility within agencies by 2008, there was also a lack of flexibility between agencies by the end of Job Network. In the final section, we consider what might have caused the increased levels of standardisation observed in the changes over this ten-year period.

TABLE 6.

Statistical significance by agency type (2008 only) (X denotes a statistically significant difference)