False economy: New Public Management and the welfare-to-work market in Australia Susan Joy Olney ORCID ID 0000-0003-3814-8855 Doctor of Philosophy AUGUST 2016 School of Social and Political Sciences Faculty of Arts University of Melbourne Thesis submitted in total fulfilment of the degree 1 This page is intentionally left blank 2 Abstract In 1994 the Australian Government opened case management services for the long-term unemployed to the market, laying the foundation for its now fully privatised employment services system. The system was a pioneering exemplar of New Public Management and it is widely hailed as a successful model of outsourced service delivery. However this thesis argues that the system’s measures of success, focused on aggregate employment outcomes and service delivery costs, mask the adverse impact of its marketisation on ‘hard to place’ jobseekers and ignore the flow-on economic and social costs of their persistent unemployment. Going beyond the existing literature and drawing together multiple sources of data, this thesis presents an in-depth analysis of the context, process and effects of providing employment assistance to people facing multiple and significant barriers to work in Australia. Its findings reveal the complex and multi-disciplinary nature of interventions encompassed in activating those jobseekers; the challenges of coordinating those interventions in contestable funding environments and thin markets; issues in assessment of those jobseekers’ barriers to work and how they are streamed for employment assistance; and individualisation of the problem of long-term unemployment. The findings also reveal that, counter to predictions and despite calibrated incentives, the prospects of the long-term unemployed in Australia moving from welfare to sustainable work have not significantly improved through two decades of radical institutional change underpinned by market-based instruments. This thesis challenges the ‘choice and contestability’ doctrine driving reform of human services. It argues that in the authorising environment, the symbolic value of market- based reform within policy and budgetary siloes trumps evidence of the cumulative impact of competition and explicit measures of performance in public services accessed by citizens vulnerable to exploitation or neglect in the market. In particular, it argues that much of the effort and investment devoted to helping the long-term unemployed overcome barriers to work through individual case management in the employment services system is misdirected, and that the real cost of failing to move the most disadvantaged jobseekers in Australia into work is not adequately factored into policy design, service provider incentives or system metrics in the welfare-to-work market. 3 Declaration I declare that: this thesis comprises only my original work towards the degree of Doctor of Philosophy due acknowledgement has been made in the text to all other material used ethics approval for interviews conducted for this thesis was granted by the University of Melbourne Human Research Ethics Committee the thesis is fewer than the maximum word limit approved by the Research Higher Degree Committee ______________________________________ SUSAN JOY OLNEY 4 Acknowledgements I thank Professor Mark Considine, Dr Siobhan O’Sullivan and Dr Scott Brenton for supervising my PhD from beginning to end. Their guidance, feedback and example of research excellence shaped not only my thesis but my approach to scholarship. I also thank Professor John Murphy for chairing my Advisory Committee throughout my candidacy. I am very grateful to have had the opportunity to draw on the knowledge and expertise of each of the members of my Advisory Committee as this thesis developed. I thank the earliest champions of this thesis, the referees for my application for admission to the PhD: Dr Eric McClellan, Professor Jenny Lewis, Dr Denis Muller and Julie Edwards, the CEO of Jesuit Social Services. Their support changed the course of my life and I am forever in their debt. I thank Professor Janine O’Flynn and Associate Professor Helen Dickinson for reading drafts of this thesis and for their advice and encouragement. Both were generous mentors and role models who inspired me with the quality of their work, their approaches to work and their passion for their work. I thank the people who granted me access to their organisations for this study and those who contributed their time and knowledge as research participants, whose identity I promised to protect. I also thank the many scholars, policy-makers and practitioners whose work informed this study or who provided referrals, advice and encouragement. I was lucky enough to be in the first group in the School of Social and Political Sciences at the University of Melbourne to undertake compulsory PhD coursework, and to be a founding Affiliate of the Melbourne School of Government Doctoral Academy. The wealth of knowledge, experience and peer support I found in both cohorts helped me to finish this thesis and sparked ongoing collaboration in research and teaching. In particular, I thank Dr Wilma Gallet for her support and friendship as we worked towards our PhDs. 5 I could not have completed this thesis without the support of the Australian Government and the University of Melbourne through an Australian Postgraduate Award and grants for research in the field. I also thank the Public Policy Network, ANZ Mental Health Association, Jobs Australia and WCIG for additional bursaries, scholarships and grants to attend conferences during my PhD candidacy. Finally, I acknowledge my family’s significant contribution to this thesis. My mother, Joy Hanrahan, taught me the importance of gender equality, social justice and lifelong learning early in life and all three underpin this work. My sister, Professor Pamela Hanrahan, provided guidance whenever progress stalled. My husband, Robert Olney, did not flinch when I decided to embark on this high-risk venture and I thank him for his faith in me and for waiting so patiently for the outcome. I dedicate this thesis to my daughters, Elizabeth Olney and Meg Olney, who outrank it as my magnum opus. 6 Table of Contents Abstract ......................................................................................................................... 3 Declaration .................................................................................................................... 4 Acknowledgements ....................................................................................................... 5 Table of Contents .......................................................................................................... 7 List of figures .............................................................................................................. 12 List of tables ................................................................................................................ 13 Glossary ...................................................................................................................... 14 Notes for international readers .................................................................................... 14 Part I - Introduction, Theoretical Underpinnings and Methodology .............................. 17 Chapter 1: Introduction ............................................................................................... 17 The rise of active welfare in Australia .................................................................... 17 The employment services environment in Australia ............................................... 21 The economic and social cost of long-term unemployment ................................... 29 Aim of this thesis..................................................................................................... 31 Structure of this thesis ............................................................................................. 33 Chapter 2: Market-based governance and the active welfare state ............................. 37 Introduction ............................................................................................................. 37 The quest for ‘efficient and effective’ government ................................................. 38 Before New Public Management ............................................................................ 44 The spread of New Public Management ................................................................. 46 The impact of New Public Management on the Australian welfare state ............... 48 The legacy of New Public Management ................................................................. 52 New institutionalism and joined up government .................................................... 55 The welfare-to-work market.................................................................................... 59 Servicing the hardest to help in the welfare-to-work market .................................. 65 The need for multi-layered analysis of responses to long-term unemployment ..... 68 7 Chapter 3: Methodology ............................................................................................. 69 Research Questions ................................................................................................. 69 Research Design ...................................................................................................... 70 Approach to data collection....................................................................................