Australia markets closed

Employment agencies to profit $210m off jobless Aussies

People queue outside an Australian government welfare centre, Centrelink, in Melbourne on March 23, 2020. (Photo by William WEST / AFP) (Photo by WILLIAM WEST/AFP via Getty Images)

Privately-run employment agencies in charge of finding work for unemployed Aussies will bill the government $210 million to deal with the volume of additional Australians needing work, which has nearly doubled since the Covid-19 crisis.

According to a report by inequality think tank Per Capita, the number of people needing ‘jobactive’ employment services will hit as many as 700,000, which is two times the normal figure.

Jobactive is a federal government program that connects job seekers with employers, and is delivered by a network of providers with more than 1,700 locations across the country.

But the system has received criticism for being ineffective. Across 2019, Labor attacked the system for failing to deliver on its promise to place Australians into stable jobs, arguing that the system was poor value for money.

In March 2019, a Senate inquiry into the Jobactive program slammed it for being “not fit for purpose”. More than two thirds of welfare recipients said Jobactive was not helpful in helping them find work.

Given the criticism, Per Capita questioned whether the costs of such funding a program during the coronavirus crisis were too high.

“Based on the existing fee structure, our estimates indicate that funding existing jobactive providers to provide employment services to 700,000 new recipients will cost the government around $210 million,” the report said.

Jobactive providers also charge ‘outcome fees’ that come to $1,515 per person when those who have lost jobs to Covid-19 find work again.

“It is questionable whether these newly unemployed people will receive services that are useful. This reflects concerns about both the capacity and capability of the jobactive providers, which have been identified in recent reviews of employment services.”

The report said jobactive providers’ services were already inundated by excessive cases, and that services will further suffer as a result of the influx of new cases.

“It is hard to envisage jobactive providers being able to do more than basic servicing, which can be done independently by job seekers using online digital self-service tools.”

The jobactive model is already undergoing significant reform. A pilot called the ‘New Employment Services Model’ is being trialled in parts of South Australia and New South Wales, with a view to be rolled out nationally from July 2022.

However, not even the reformed version would deliver good outcomes for unemployed Australians, according to the think tank.

“It is Per Capita’s view that neither the existing jobactive system, nor the New Employment Services model, is a good fit for the post COVID-19 unemployment scenario,” the report said.

“This is because both models are hamstrung by a dependency on job outcome payments, which leads to under-investment in the needs of people most at risk of long-term unemployment.”

Sign up to Fully Briefed, the Yahoo Finance newsletter.

Follow Yahoo Finance Australia on FacebookTwitterInstagram and LinkedIn.