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Business Is Booming in the Unemployment Industry

Australia’s mean and punitive benefits system is a key tool for disciplining workers while amassing profits for private firms. The labor movement needs to join with the unemployed to overhaul it entirely.

A commuter looks at at Sydney Harbour as he stands on the platform at Circular Quay station on June 1, 2020 in Sydney, Australia. Mark Kolbe / Getty

Key industries across Australia are collapsing and 25 percent of the workforce is either unemployed or underemployed. More than 1.6 million Australians are receiving the JobSeeker (unemployment) allowance, the highest number ever recorded. Notoriously mean in its allowance, Scott Morrison was forced to double the amount in the early weeks of the crisis so as to avoid a total collapse in consumer demand, bringing it to just above the poverty line. He also temporarily suspended the regime of “mutual obligations” (including “work for the dole” and other tasks) imposed on the unemployed in order to qualify for payments.

As of June 9, these changes will begin to be phased out. Although the increased rate is set to stay until September, mutual obligations will resume, and all those on JobSeeker will be required to attend appointments with jobactive service providers, the privately owned and generally for-profit agencies that purport to help the unemployed to find jobs. This is “phase one” — phase two will force unemployed workers to apply for jobs that don’t exist. Phase three will reintroduce financial penalties. The $7.3 billion industry is set to kick straight back into gear, implementing its punitive measures with renewed gusto, as has been its modus operandi for the last three and half decades. 

Penalties for All

In 2018–19, private providers imposed a staggering record 2.7 million financial penalties on unemployed workers — roughly four penalties per active jobseeker. According to analysis by Guardian Australia, three-quarters of these penalties were imposed when the jobseeker had done nothing wrong.

As the number of JobSeeker allowance recipients has doubled since COVID, we can expect the number of penalties to skyrocket. Going by current trends, the number could hit 5 million by this time next year. With unemployed workers recently stripped of their right to appeal unfair payment suspensions, jobseekers will be at the mercy of a for-profit and fully privatized unemployment industry.

This system was built to punish. Under its funding model, most government funding is tied to “outcomes.” When a jobseeker attends their “initial appointment,” the provider receives between $266 and $377. For placing an unemployed worker in an approved activity for fifty hours per fortnight (such as Work for the Dole), the provider receives $350. Placing someone into as little as four weeks of paid work nets providers $400.

In all this, profit is privileged over fairness. The system is notoriously ruthless: jobactive providers that achieve the fewest outcomes have their star rating reduced, which hurts their chances of retaining their government contract.

Now in its sixth year, most of the remaining companies involved in the scheme are adept at funneling unemployed workers into outcomes — usually by coercing them with financial penalties. Among the successful providers are the billion-dollar, US-based firm Max Employment (by far the largest employment service provider in Australia), and the self-proclaimed multimillionaire “job queen” (and prominent Liberal and Labor Party donor), Sarina Russo.

This combination of coercion and profit-seeking in part explains the proliferation of Work for the Dole injuries under jobactive. Like in the case of the tragic death of Josh Park-Fing at his Work for the Dole site in 2016, many unemployed workers are scared they will lose their payments if they speak out about dangerous conditions.

Jobactive

Jobactive was never designed to help unemployed workers into jobs. Employers understood this early on and have largely abandoned the program. In 2018, only 4 percent of businesses hired workers through the jobactive system, compared to 17 percent under the previous system. The Australian Council of Small Business chief executive Peter Strong spoke for many employers when he stated that jobactive is “creating millionaires on the back of the long-term unemployed by paying providers to offer a failed service.” A scathing 2019 senate inquiry echoed these concerns, noting that the system was “not fit for purpose,” concluding that it was “welfare to nowhere.”

While these observations are demonstrably true, they miss the point about the purpose of jobactive. It’s not simply a product of government cruelty or incompetence. Rather it reflects a deeper project to reshape the Australian labor market in the interests of capital.

The punitive mutual obligations model has enjoyed almost universal support in Canberra since its introduction due to its proven success in disciplining workers’ wage demands. This was pointed out by the Productivity Commission’s 2002 report into the unemployment industry, when it approvingly stated that mutual obligation requirements are an effective way to increase the “downward pressure that unemployment has on wage determination.” 

The mutual-obligation system forces unemployed workers into a demeaning and punitive regime of pointless and dangerous activities, until they are increasingly willing to do almost anything to escape — even if it means accepting jobs below the minimum wage at substandard conditions. 

This has led to fierce competition among unemployed and underemployed workers for low-skilled and low-paid casual jobs at the bottom end of the labor market. The result is strong downward pressure on wages and conditions for workers across the whole labor market.

This in part explains why both Liberal and Labor parties resist the current increased level of the jobseeker allowance permanent. If benefits were to be raised to a decent level, unemployed workers would no longer compete so fiercely for bad jobs, leaving businesses in a significantly weaker bargaining position.

Hawke’s Legacy

The roots of Australia’s mutual-obligation system can be traced back to the Hawke ALP government and the ALP/ACTU Prices and Incomes Accord (1983). During the skyrocketing unemployment of the 1980s, Hawke argued that the traditional “passive” postwar system of unemployment benefit eligibility — which asked only that unemployed workers accept suitable work if offered — was no longer a workable system.

In 1986, Hawke commissioned a three-year review of social-security policy chaired by social policy scholar Bettina Cass. The review found that the work-test gave too much discretion to the state-run Commonwealth Employment Service and lacked a “punitive purpose.” It recommended a more rigorous test that included training and re-training programs. 

The ALP enthusiastically accepted these recommendations. In fact, Hawke initially felt they didn’t go far enough — he wanted to introduce a Work for the Dole–style mandatory community service program for young unemployed workers, though a backlash caused him to back down.

Two years later, however, he rolled out a system of onerous requirements, known as reciprocal obligation. Under the new regime, jobseekers were compelled to attend workforce participation activities and, for the first time, accept casual employment below their skill level. This wasn’t just ALP policy. The ACTU had already recommended the introduction of a similar system for unemployed workers in its landmark 1987 report Australia Reconstructed. 

Under the new regime, unemployed workers who failed to meet their reciprocal requirements faced financial penalties, and in 1989, the Hawke government introduced quotas demanding the Commonwealth Employment Service double the number of financial penalties imposed to 25,000, so as to win $15 million for the federal budget. 

Reciprocal obligation played an important role in remaking of the Australian labor market under the Accord. As unions and employers joined forces to discipline wage demands and introduce more “flexible” work arrangements, the reciprocal obligation regime helped shoehorn people into jobs that they otherwise would not have accepted. This contributed to a significant increase in casualization — between 1988 and 1998, 69 percent of the net growth in employees was in casual employment, leading to the significant weakening of the bargaining positions of workers across the labor market.

Nothing Mutual About It

Despite the crucial role played by the reciprocal/mutual obligation regimes in undermining the interests of workers over the last three decades, the trade union movement has shown little interest in fighting against these attacks on unemployed workers. Worse, the ACTU’s 2012 submission to the McClure welfare review declared mutual obligations “appropriate” policy. 

This is a significant blind spot for the trade union movement. It’s not just that it throws unemployed workers under the bus — it also undermines the labor movement’s ability to defend employed workers, both casual and permanent. 


With employers and their representatives using the COVID-19 crisis as cover to introduce new attacks on workers, the easing of COVID-19 restrictions will almost certainly coincide with an offensive by capital to make up what it lost during the crisis. Capital will no doubt use all the tools at its disposal to help it achieve this end. One such tool is the mutual-obligation system.

 

If organized labor is to stand a chance in the upcoming struggle, it too must acknowledge that an attack on unemployed workers is an attack on all workers and join the campaign to abolish the mutual-obligation regime.