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Profiting off the unemployment boom

Sep 2, 2020 • 16m 10s

As Australia grapples with an unemployment crisis corporate job agencies are benefiting from a boom in government payments. Some are being accused of pressuring those looking for work. Today, Rick Morton on who is profiting from Australia’s unemployment industry.

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Profiting off the unemployment boom

300 • Sep 2, 2020

Profiting off the unemployment boom

[Theme music starts]

RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

As Australia grapples with an unemployment crisis, corporate job agencies are benefiting from a boom in government payments.

Some agencies are also being accused of pressuring those looking for work into face-to-face appointments during a pandemic.

Today, Rick Morton on who is profiting from Australia’s unemployment industry.

[Theme music ends]

RUBY:

Rick, at the start of the year, the Employment Minister, Michaelia Cash, made a decision that at the time I think went a bit under the radar. Can you tell me about it?

RICK:

Yeah, so Senator Michaelia Cash actually approved an advance payment worth more than $100 million dollars for private job agencies. So this was meant to cover their administration fees early in the Corona virus outbreak as they were facing this huge influx of newly unemployed people.

RUBY:

Rick Morton is a senior reporter at The Saturday Paper.

RICK:

But this payment was only really the beginning of a very lucrative payday for the sector during this pandemic. So, you know, as the rest of the country descended into the worst economic crisis since the Great Depression, the government actually made it easier for these agencies, known as job active providers, to claim bonus outcome payments, fees and other rewards for the work of, quote unquote, servicing the unemployed.

RUBY:

So, Rick, what do these agencies need money for? What does servicing the unemployed actually mean?

RICK:

So, you know, you automatically transferred to a job active provider if you're receiving an unemployment benefit. And when you're there, these employment agencies theoretically are meant to help you get work and they get paid for different outcomes.

So if you get work for three months, they get a bonus. If you could work for six months, they get a bonus. But they also get paid fees. So putting you into internship programs that the government set up. The Path internship program, which is notorious for, you know, putting internships into very wealthy companies. And they also get paid fees for putting you into work for the dole, which is not a mandatory requirement, but is often made out like it is so that they can kind of cream these fees off the top.

People who are actually very job ready have been kind of shunted into these mass training courses that provide very little benefit, if any at all, such as like a typing program or how to do a resumé. And sometimes, you know, these case managers at the job agencies will, you know, manage 130 unemployed people. And their whole raison d'être, I guess, is to get as many fees payable to them as possible. And so they know almost algorithmically how to maximize that with the cohort of people coming in. They've gotten very good at that other time.

The government really loves these job agencies because what they're there to do from the government’s point of view is to enforce an entire outsourced compliance framework. And so if these jobseekers miss any of the activities that the government requires them to do for whatever reason, even when they've got very good excuses, if they don't go to these activities, if they don't turn up to appointments with the job agencies, then they get pinged under the targeted compliance framework and they get their income support payments suspended in the first instance and then they actually get financial penalties.

RUBY:

Mm.

RICK:

You know, ever since these were privatized under the Howard government, this has been a pretty big money spinner and has made a lot of private agency owners extremely wealthy.

RUBY:

Extremely wealthy, how wealthy are we talking?

RICK:

Let's use an example. One of these people is Gold Coast “jobs queen”, Serina Russo, whose companies have received almost two billion dollars worth of government contracts since 2006.

And her most recent job active contract, which was struck when Tony Abbott was prime minister and ends in 2022, is worth six hundred and six million dollars.

So her personal wealth was last estimated at around 2015, and that was flagged more than $100 million dollars.

RUBY:

So, Rick, these companies, they make money in various ways. But broadly speaking, their mandate is to connect unemployed people to work and to training. But we know that there isn't much work at the moment. So how exactly are they making money, more money than they did before?

RICK:

The key reason, which I've discovered through an internal document that hasn't been made public that was sent to job agency providers, is that they're getting paid for outcomes while people are also on the JobKeeper payment. Now, you might recall that at the start of the pandemic, tens of thousands of workers were laid off as the government scrambled to design a wage subsidies scheme to keep them employed.

So those workers, in the meantime, went on to the NewStart allowance of the JobSeekers payment, as it's now called. Different payment. And as part of their requirements on that, they're automatically referred to a job active provider. So then we get JobKeeper. And when it was implemented, workers were reengaged by their former employer.

And under the scheme, essentially what that meant is that their contracts with their work with their former employer never ended and they kept the attachment to the employer. And so that counted and still counts, according to the government, as a work outcome. So, people who lost their jobs, went onto unemployment and then went onto the JobKeeper and stayed on JobKeeper for three months or six months, which many will have done by the end of September, automatic bonus paid to job agencies.

And as well as this, the federal government removed requirements for payslips to verify job payments and providers were paid bonuses, even if work was interrupted by periods of self isolation or complications from health crises, so they call them permissible breaks. The job keeper thing alone is an incredible, astonishing loophole because it's money that's being churned quite literally through the system.

RUBY:

So Rick, how much money have job agencies made as a result of all of this?

RICK:

Well, conservative estimates drawn from the government's own data and payment schedules suggest private job agencies have been handed at least $500 million to date during the pandemic.

Now, if you wanna put that in context, that is half what the federal government gave the aged care industry to prepare for Covid-19. And we've already seen more than 400 deaths there.

So it's an extremely large amount of money for work that is very dubious.

RUBY:

We'll be back after this.

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RUBY:

Rick, right now, unemployment is the highest it's been in two decades. More people are signed up to job agencies, but there are fewer jobs. So, what pressure has that put on people who are looking for work and having to engage with these agencies?

RICK:

So, you know, during the Covid-19 pandemic, the job active caseload, it jumped. 800 thousand people to 1.4 million. It was 630 thousand in February. And, you know, the mutual obligations that normally accompany these jobseekers were temporarily suspended because of the virus. So as the pandemic kind of moved through, some job active participants say that they've been compelled to comply with impossible requirements from these providers.

So one example. On August 18, automated alerts from access providers were being sent to unemployed people, telling them that they had to go into the office the next day for an appointment. And one person said at the time, I'm in Melbourne in stage four lockdown. There are literally no reasons for me to leave my house.

And the government had said that they had relaxed these obligations. But for reasons that remain unclear, providers are not following all of the government advice about what they should and shouldn't be doing during Covid-19.

RUBY:

Mm.

RICK:

There was also the case of the newly unemployed man, Thomas Roker. Now, he was visited by a job agency twice, as in visited at his own home within the space of two hours. So the agency Help Employment was attempting to sign Roker up to a job plan for which it would receive a fee from the taxpayer. So, you know, he told the New Daily that he had his eight year old daughter with him and she was quite petrified of the whole situation.

And he said, quote unquote, I had to explain to her that it's okay, they're not here to take you away.
Now, at an August 6th Senate Select Committee hearing on government responses to Covid-19.

Archival Tape -- Rachel Siewert:

“I just want to go to a particular case that I've heard about...”

RICK:

Greens Senator Rachel Siewert actually asked about Roker’s case.

Archival Tape -- Rachel Siewert

“Are service providers enabled to go and visit people in their homes?”

Archival Tape -- Nathan Smith:

“Senator, the answer to that is that is not part of the servicing arrangements at all.”

RICK:

And in response, the employment department, Deputy Secretary Nathan Smith told the inquiry that face to face servicing should not be happening.

Archival Tape -- Nathan Smith:

“Without going into obviously the specifics and taking into account privacy considerations. That matter is being investigated by us at the mine.”

RICK:

And the matter was being investigated.

But as of the end of last week, I can confirm that Roker has not been contacted by the department as part of its investigation. So whatever that investigation looks like, it doesn't include his voice.

RUBY:

Right. And so do we know how many people are experiencing things like this? Job agencies pressuring them in this way?

RICK:

So, well, we don't know exactly how many, because one of the interesting things about this is that the complaints process that the department favors is to complain directly to the job agency itself. And there is no evidence that the department ever looks at those complaints. You can complain directly to the department. But again, we don't have any evidence that they collect them in any meaningful form. So the best evidence we've got is actually from the Australian Unemployed Workers Union, which advocates on behalf of the unemployed. And they say they've been flooded with complaints, just like the ones I've been talking about, where providers continue to pressure clients even when it is impossible for them to comply with the condition.

So, you know, the issue for unemployed people is that failing to respond to those myriad requirements from providers will result in those temporary suspensions of income support or even financial penalties.

So this isn't a hypothetical thing, right? From July to December 2019, there were 1.3 million suspensions of income support payments. So that could actually happen more than once per person. That's why they're so high. That's in half a year. So for people already living below the poverty line, those suspensions can have an enormous consequence for missed bills, rent and other responsibilities, such as actually getting to work when they've found employment.

In fact, we hear those stories all the time. People who had their payments suspended just as they meant to get to a new job. And they can't afford public transport or to put fuel in the car if they're lucky enough to have a car.

So this is the Byzantine way of Australia's unemployment system. This is how it operates, with automated penalties and providers hounding participants to sign up to various programs that will inflate their fees. They're very good at it. I mean, any provider of any government contract is very good at maximizing income and revenue, it’s almost one of the four laws of physics. And as you know, as the Commonwealth pours hundreds of millions of dollars into this actually booming job agency sector, it's one of the few industries doing very well in Covid, government ministers are quibbling about whether to actually raise the rate of income support payments. So we've got this real disconnect, I guess, between wanting to prop up, the department uses this word, they wanted to ensure the viability of job agencies. But then you've got, you know, scores and scores and scores of unemployed and there's no certainty for them whatsoever about what comes after December.

RUBY:

And let's talk about income support payments, Rick. What is the latest? Do we know what will happen to JobSeeker, or we know it as Newstart payments?

RICK:

Yeah. So the government’s already told us that they're going to cut the, what they call, the coronavirus supplement by $300 from September 25. So it's already been reduced. But what they haven't said is what is going to happen to the rest of that supplement, which is about another $200, I think from memory, after December. So if they got rid of it entirely, it would essentially mark the return to the base rate of the job seeker payment, which saw hundreds of thousands trying to live on roughly 40 dollars a day. And just for comparison, there are one point six million people on the job seeking payment, one point six million. That's not JobKeeper. That's JobSeeker. So people who have no job. So, you know, we know that the situation was dire, but we're getting more glimpses into what that looks like.

So earlier on this month, the Australian Institute of Health and Welfare quietly released its latest housing assistance report. There was no fanfare. There was no media release. But buried in the supplementary data tables is government data that has never been released, showing the level of housing stress experienced by people on different welfare payments. So this is every welfare payment. This is government data. It's the most rigorous data we've got on this situation. And it's looking at housing stress. And it actually shows that, you know, people on Newstart, which is our JobSeeker, 60 per percent of them, even with Commonwealth rent assistance, were living in housing stress. And if they didn't have Commonwealth rent assistance, it was 88 per cent. So Kristin O'Connell from the Australian Unemployed Workers Union said she thinks the government figures actually mask an even harsher truth.

Archival Tape -- Kristin O'Connell:

“I suspect it's because there are people who don't have stable housing and therefore they don't actually qualify.”

Archival Tape -- Rick Morton:

“They’re not captured at all.”

Archival Tape -- Kristin O'Connell:

“That's right. Because it would be less than 30 percent. But it's because they sleep on a couch or in a car or homeless.”

RICK:

Undoubtedly, you know, Covid-19 has increased the stress of Australians without work, rental or otherwise. The job agencies, meanwhile, have received hundreds of millions of dollars and will continue to earn fees and bonuses with the eight hundred thousand new unemployed people on their books.

Archival Tape -- Kristin O'Connell:

“So it's a terrible use of taxpayers' money. These programs are wasteful. The job agencies don't help people and indeed they harm people.”

RICK:

This is not a one off cost for the government. Those people were on their books now and that's a goldmine in terms of fees.

RUBY:

Rick, thank you so much for your reporting on this.

RICK:

Thanks for having me again, Ruby.

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[Theme music starts]

RUBY:

Also in the news today…

The Victorian Government has secured a six month extension of its state of emergency powers, with a Greens MP on maternity leave returning to Parliament to vote for the legislation.

Victoria recorded five deaths and 70 new coronavirus infections yesterday — the lowest single-day increase in cases since early July.

And Facebook has threatened to ban Australians from sharing news stories on their platform.

They issued the threat in response to proposed new regulations that would see Facebook and Google forced to pay Australian media organisations for their content.

I’m Ruby Jones, and this has been our 300th episode of 7am!

Thanks for listening, and if you’ve ever wanted to know more about how we make the show, I have some good news. This weekend we’re releasing a special episode taking you behind the scenes.

Make sure you subscribe to 7am on your favourite podcast platform to hear it.

See ya tomorrow.

[Theme music ends]

As Australia grapples with an unemployment crisis corporate job agencies are benefiting from a boom in government payments. Some agencies are also being accused of pressuring those looking for work into face-to-face appointments during a pandemic. Today, Rick Morton on who is profiting from Australia’s unemployment industry.

Guest: Senior reporter for The Saturday Paper, Rick Morton.

Background reading:

Exclusive: Jobactive virus kickbacks top $500 million in The Saturday Paper

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.
Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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auspol covid19 coronavirus economy unemployment welfare




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300: Profiting off the unemployment boom