NEISE val Report by 9U10QL

VIEWS: 4 PAGES: 87

									 FINDINGS IN THE NEIS EVALUATION

                 Report prepared for the:
DEPARTMENT OF EMPLOYMENT, WORK PLACE RELATIONS AND
                  SMALL BUSINESS




                           by


the CENTRE for LABOUR MARKET RESEARCH

                      Ross Kelly
                      Phil Lewis
                      Mike Dockery
                      Charles Mulvey




                  Murdoch University
                 Western Australia, 6150
                       May 2001
                                                         TABLE OF CONTENTS
1.       EXECUTIVE SUMMARY ................................................................................................ 3
2.       INTRODUCTION .............................................................................................................. 9
3.       LITERATURE REVIEW ................................................................................................ 10
     Review Of Documentation On NEIS ...................................................................................... 10
     Overseas Experience ............................................................................................................... 10
     Policy Rationales .................................................................................................................... 12
     Potential Problems .................................................................................................................. 12
     Deadweight Losses ................................................................................................................. 12
     Displacement Effects .............................................................................................................. 13
     Displacement/deadweight: evaluation issues .......................................................................... 14
     Low Incomes of Scheme Participants ..................................................................................... 14
     Summary of Evaluations and Commentaries on NEIS ........................................................... 14
         DEET (1988) An Evaluation of the Pilot Phase of the NEIS. ........................................................... 15
         AGB:McNair Report (1990) ............................................................................................................. 15
         Auditor-General, (1991-92) and (1994-95). ..................................................................................... 16
         ten Brummelaar and Gatenby (1992) NEIS Evaluation: Intergovernment Components of NEIS ..... 17
         Johnstone (1993a) Evaluation of NEIS – Managing Agents – Administrative Arrangements and
         Issues................................................................................................................................................. 18
         Johnstone (1993b) Evaluation of the NEIS ....................................................................................... 18
         Snowden (1995) Summary of PPM Findings to 1995 ....................................................................... 19
         National NEIS Association (1999) Jobs Growth through Self-Employment, NNA. .......................... 19
         McLure Report (2000) ...................................................................................................................... 20
         The Nelson Report (2000) ................................................................................................................. 20
         DEWRSB (2000) Job Network Evaluation: Stage One ..................................................................... 21
     Conclusions............................................................................................................................. 22
4.       ANALYSIS OF DEPARTMENTAL DATA ................................................................... 23
     Introduction............................................................................................................................. 23
     NEIS Participants – An overview of the data set .................................................................... 23
         Outcome variables ............................................................................................................................ 24
     Participants’ Labour Market Outcomes .................................................................................. 25
         Labour force status ........................................................................................................................... 25
         Education status ................................................................................................................................ 26
         Off-benefit status ............................................................................................................................... 26
         Outcomes by target groups ............................................................................................................... 27
         All...................................................................................................................................................... 27
     Multivariate analysis ............................................................................................................... 28
     NEIS Business Outcomes ....................................................................................................... 33
     Cost Effectiveness................................................................................................................... 34
5.       SURVEY OF PARTICIPANTS....................................................................................... 37
     Characteristics of NEIS participants: representation of disadvantaged job seekers ............... 37
     Survival Rates ......................................................................................................................... 39
     Start-up and continuing capital requirements of NEIS participants........................................ 42
     Deadweight loss ...................................................................................................................... 44
     Participant Outcomes .............................................................................................................. 46
         Employment status ............................................................................................................................ 46
         Hours worked .................................................................................................................................... 48
         Earnings ............................................................................................................................................ 49
         Debt levels ........................................................................................................................................ 49
     Displacement effects ............................................................................................................... 51
     Employment Creation ............................................................................................................. 51
     Participant satisfaction with NEIS services ............................................................................ 53



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6.      SURVEY OF PROVIDERS ............................................................................................. 55
7.      STAKEHOLDER INTERVIEWS .................................................................................. 58
     Issues Identified by Stakeholders............................................................................................ 58
        Is NEIS targeted at the right people? ................................................................................................ 58
        Eligibility Criteria ............................................................................................................................. 58
        Self-Employment Development Scheme (SEDS) ............................................................................... 58
        Integrated Employment System (IES) ............................................................................................... 59
        NEIS Advisory Committees (NEISACs) ............................................................................................ 59
        Mentors ............................................................................................................................................. 59
        Rural and Remote Issues ................................................................................................................... 60
        Centrelink ......................................................................................................................................... 60
        Key Performance Indicators (KPI) ................................................................................................... 60
        Lump Sum Payments-Low Interest Loans ......................................................................................... 61
8.      ANALYSIS OF FINDINGS AGAINST TERMS OF REFERENCE ........................... 62
     Effectiveness of NEIS ............................................................................................................. 62
        Cost effectiveness and savings to Commonwealth ............................................................................ 62
        Post-NEIS outcomes.......................................................................................................................... 63
     Performance monitoring ......................................................................................................... 63
     McClure and Nelson Reports, NEIS recommendations.......................................................... 66
        McClure Report ................................................................................................................................ 66
        Nelson Report ................................................................................................................................... 67
        Policy drivers .................................................................................................................................... 71
        Deadweight loss ................................................................................................................................ 71
     Small business start-up programme ........................................................................................ 71
        Similar programmes ......................................................................................................................... 72
        Policy issues for small business start-up programme ....................................................................... 72
        Costs of a small business start-up programme ................................................................................. 73
REFERENCES .......................................................................................................................... 75
APPENDIX A ............................................................................................................................ 77
APPENDIX B............................................................................................................................. 78
APPENDIX C ............................................................................................................................ 79




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1. EXECUTIVE SUMMARY

This report presents the findings of an evaluation of NEIS and a set of recommendations
based on deficiencies identified through the process of the evaluation. The report also
responds to each of the terms of reference and makes recommendations where
appropriate.

The report has reviewed international and Australian literature on evaluations of self-
employment programmes, as well as providing summaries of previous evaluations of
NEIS. An analysis of participant outcomes data, a telephone survey of 350 participants
and all NEIS providers was undertaken and the findings are presented. Stakeholder
interviews were conducted and included representatives from the DEWRSB, peak
bodies representing industry viewpoints on the scheme as well as employment service
providers. Providers and participants were also interviewed in-depth, and issues raised
from this stage of the evaluation are presented in the report. The report concludes with
an analysis of findings against the terms of reference.


Recommendations
A number of key recommendations are made in relation to issues specified in the terms
of reference as well as with respect to issues uncovered through the respective surveys.

   1. Milestones should reflect the seasonality of regional economies. This can be
      achieved by allowing providers to specify their milestones in the contract or
      through an assessment by DEWRSB of previous regional commencement
      patterns.

   2. The economic circumstances of regions may have a large bearing on provider
      performance. Therefore, provider performance against all KPI measures should
      be weighted by regional specific factors.

   3. Quotas should be set for disadvantaged clients. A Key Performance Indicator
      (KPI) measuring provider performance (ie commencements) against their quota
      of places for disadvantaged clients should be introduced.

   4. KPI 2 measures 3 and 12 month off-benefit outcomes. Outcomes at 12 months
      after provider obligations cease are most likely beyond the influence of
      providers and affected by a myriad of other factors. Therefore KPI 2 should only
      consider 3-month outcomes. An alternative is to extend provider services to
      participants for a further 12 months and monitor accordingly (ie retain KPI 2 in
      its current format). Providers would need to be funded to do this.

   5. NEIS should be retained, but specifically targeted at the most disadvantaged
      clients.

   6. More general assistance to micro and small business assistance along the lines of
      NEIS should come under a small business or industry portfolio, not a labour
      market portfolio. The feasibility of utilising components of existing NEIS
      infrastructure, such as providers and contract management, should be examined.



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The following provides a brief overview of what the main findings of the evaluation:
International experience
       Self-employment schemes usually fall into one of two categories- they are either
        aimed at stimulating the small business sector, or are aimed at getting people out
        of unemployment and into work. All European Union (EU) programmes were
        essentially of the latter type, with eligibility usually restricted to unemployed
        people. In some instances eligibility is widened to include people at risk of job
        loss.
       All member States of the EU introduced self-employment programmes at some
        stage over the last two decades. They generally are considered successful,
        although they account for very small shares of labour market programme
        expenditures.
       One of the main issues addressed in evaluations of overseas programmes is
        deadweight loss1. Deadweight loss is highest for those programmes where the
        eligibility is widest. Schemes targeted specifically at clients who are
        disadvantaged have the lowest incidence of deadweight loss, the downside is
        that lower survival rates may result. However, in Denmark the scheme is
        focussed on the long-term unemployed and it has survival rates among the
        highest of any country.
       Displacement effects2 are also considered, although there is fairly limited
        information on the true extent of displacement. What studies exist suggest that
        the extent of displacement is fairly minimal.
       One of the major pitfalls of self-employment schemes is the prevalence of very
        low incomes among business operators.



Past evaluations of NEIS
       NEIS was established as a pilot scheme in 1985 and evaluated in 1988. The
        evaluation of the pilot stage found that long-term unemployed had success rates
        that were almost identical to those who were not long-term unemployed.
       One job for every 1.5 surviving NEIS businesses was created.
       The first major evaluation of NEIS took place in 1993, this revealed that 64 per
        cent of NEIS participants were still in business 3 months after cessation of their
        allowance. A further 9 per cent were in employment. For every 10 NEIS
        businesses, there were 1 full-time and 4 part-time jobs created. Survival rates
        dropped to 54 per cent 12 months after cessation, with 9 per cent still in other
        employment.
1
  Deadweight loss refers to people who would have started a business in their own right without the
assistance of the self-employment programme. More generally, it refers to people who would have found
employment without ever having taken part in the programme.
2
  Displacement effects are concerned with business or employees who are displaced by the businesses or
employment created through the self-employment programme. Thus, if a self-employment scheme places
a person into a business, but another business is put out of business as a result, then this would be
considered as a ‘displacement’.


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      Although participants who had been long-term unemployed prior to participating
       in NEIS had similar self-employment outcomes, their incomes were
       substantially lower.
      Despite apparent high success rates, NEIS was a costly programme when
       compared to other forms of assistance provided at that time.
      A 1995 evaluation of NEIS based on Post-Programme Monitoring surveys found
       that less than 1 per cent of eligible job seekers actually participate in NEIS.
      Employment outcomes for participants who had been long-term unemployed
       prior to being in NEIS were only slightly lower than for those who were
       previously short-term unemployed.
      Participants rated mentors quite highly with 93 per cent stating that NEIS had
       improved their chances of successfully operating a small business.


Analysis of Departmental data
An analysis of Departmental data for May 1998 to February 2000, was undertaken. The
analysis includes an econometric assessment of the determinants of outcomes. The
results of the analysis show that:
      Around 80 per cent are in some form of employment 3 months after the
       cessation of NEIS allowance. Of these, 65.9 per cent are in self-employment, 9.1
       per cent are in full-time employment and 5.8 per cent are in part-time
       employment. 12.5 per cent are unemployed and 6.7 per cent are out of the labour
       force.
      Evaluation of past programmes run by DEETYA with matched control groups
       suggest about 22 per cent of clients would have found work without
       participating in any form of assistance. As NEIS is not closely targeted this
       figure would be in excess of 22 per cent.
      Outcomes do not vary greatly between disadvantage groups, such as sole
       parents, people with a non-English speaking background and people from an
       Aboriginal and Torres-Strait Islander decent.
      Outcomes vary predictably by educational attainment, with the more highly
       qualified achieving outcomes that are 15 percentage points higher than those
       with the lowest level of schooling.
      Persons aged over 55 years have markedly lower probabilities of being in
       employment or exiting benefits.
      Results from the multivariate analysis show that males are more likely to
       achieve positive outcomes than females, while persons with disabilities and from
       non-English speaking backgrounds are less likely to be in employment.
       Controlling for other factors, the probability of being in employment increases
       with the level of education and the effect is particularly strong for people with
       degrees or higher.
      There is a strong negative effect on outcomes for those participants who were
       very long-term unemployed (greater than 2 years) prior to commencing NEIS.




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      Off-benefit outcomes are affected by the economic conditions in the State that
       the participant resides.
      There is a high level of satisfaction with the four main service components of
       NEIS, especially the training component. The tailoring of assistance to
       individual needs is regarded less favourably.
      NESB clients reported higher satisfaction levels for all facets of NEIS, while
       long-term unemployed clients had lower levels of satisfaction with the overall
       quality of assistance and service.
      There is no marked pattern of satisfaction levels with age.
      An extra 488 jobs were created from 2 567 placements over the period - 131
       full-time and 357 part-time/casual.
      For every 100 NEIS commencements there are 81 in either self-employment or
       other employment and 19 secondary jobs (created by the NEIS businesses). Not
       all of these jobs are net additions to employment, as some of them result from
       the displacement of other jobs. Also, many would have found employment
       without NEIS assistance (deadweight loss).
      On the basis of 3 month post-NEIS employment outcomes, the gross cost per
       positive employment outcome for NEIS clients is $13 547, and $10 965 per
       employment outcome when secondary jobs are taken into account.
      These figures understate the true cost (ie. the net cost) as they do not take into
       account deadweight loss or displacement effects. Taking these into account
       suggests the true cost could be in excess of $30 000 per employment outcome
       and $20 000 if secondary employment is included.
      Given that NEIS is not closely targeted at disadvantaged job seekers it is an
       expensive way of assisting participants into work.



Survey of Participants
      Although NEIS may be a useful avenue for disadvantaged job seekers, it is a
       relatively small programme and only very small numbers are offered places.
      87 per cent of NEIS participants over 50 years of age said they would have had
       some difficulty finding employment or would not have found work at all without
       NEIS. In comparison, only 28 per cent of 18-34 year olds said they would have
       found it difficult.
      52 per cent of participants surveyed are self-employed. 26 per cent are not in
       paid employment, 22 per cent are employees.
      12 months after cessation of NEIS allowance there are at most 73 per cent of
       participants are in self-employment. This drops to 63 per cent 9 months after
       NEIS finishes, with 57 per cent still in self-employment 12 months post-NEIS
       assistance. The survival rate continues to decline after 1 year, dropping to 52 per
       cent 18 months after benefit ceases.




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      43 per cent of secondary employment goes to disadvantaged groups (ie. less than
       19 years old, over 45 years old, NESB and ATSI).
      About 47 per cent of survivors and non-survivors have to raise capital to start
       their businesses. However, the amount raised by surviving businesses is
       substantially higher than non-surviving businesses.
      The 3 principal sources of funds are savings, loans from credit providers (such
       as banks) and loans from family and friends. Survivors, on average, raise up to 8
       time more than non-survivors from savings and 2.3 times more from credit
       providers.
      2 in every 3 participants do not to put further funds into their business once it is
       operating. Of these, 11 per cent attribute the reason to not being able to get
       additional finance. Most of these are participants who are no longer running
       their business.
      24 per cent of survivors and 38 per cent of non-survivors said that they would
       have preferred their allowance as an up-front lump-sum payment.
      62 per cent of all participants said they would have started a business without
       NEIS assistance- 73 per cent of survivors and 54 per cent of non-survivors.
       Evaluation of similar schemes in the UK record about 40 per cent.
      60 per cent of survivors and 45 per cent of non-survivors would still have started
       their business if the NEIS allowance were lower.
      The average net income for all participants was $438 per week, the median was
       $120. The corresponding figures for survivors were $780 and $250 and for non-
       survivors $179 and $25 respectively.
      73 per cent of non-survivors were earning $300 or less just before they ceased
       trading. 52 per cent of surviving business are currently earning less than this.
      About half of non-survivors end up with less money than they put into their
       business. 23 per cent of non-survivors are now in debt as a result of having
       started a business under NEIS. The worst affected are young families and sole
       parents.
      44 per cent of participants said that customers could have easily obtained their
       product or service elsewhere, suggesting that there is some degree of
       displacement.



Survey of providers
      Most providers thought the participant eligibility criteria were appropriate.
      39 per cent of providers thought that the business eligibility criteria were too
       tight.
      Over half of all providers could not meet the demand for places.
      About 20 per cent of providers were having difficulty in meeting their quota of
       places.



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       Virtually all providers said that NEISACs do not adversely affect outcomes.
       Over half of all providers thought that the structure of payments was
        inappropriate, but there was no consensus on how they should be changed.



Stakeholder Interviews
       Most stakeholders felt that disadvantaged clients were well represented in NEIS.
       There is widely held view among stakeholders NEIS should be targeted
        specifically at those who are most likely to succeed.
       There was a consensus among stakeholders that eligibility criteria are
        appropriate, although there was some concern over the interpretation of the
        business eligibility criteria in some instances.
       The difference between eligibility criteria for Self Employment Development
        Scheme (SEDS)3 and NEIS is difficult to justify.
       The Integrated Employment System (IES) still has some flaws, particularly in
        relation to whether job seekers are accurately identified as being eligible to
        participate in the scheme.
       There was some concern expressed over the quality and consistency of advisory
        committees (NEISACs). Similar complaints were made about mentors.
       It was thought that the way milestones are applied in the contracts does not
        adequately reflect the seasonality of economic activity in some regions.
       There was some criticism that NEIS is not adequately promoted. Also,
        Centrelink is not adequately informed about NEIS and, as a result, does not refer
        enough job seekers to the scheme.
       It was felt that KPI 1 is too inflexible for providers in regional areas. KPI 4
        measures providers on an outcome that is largely outside of their control.
       Some stakeholders suggested that performance measures should include the
        additional employment created by participants.
       All stakeholders were asked whether they thought that a lump-sum payment
        instead of the existing fortnightly payment would be beneficial. All rejected the
        approach, as it would be difficult for participants to manage their cash flow.




3
 Only 1 day on qualifying unemployment allowances is required for NEIS eligibility. SEDS is an
approved activity for job seekers who have been on either Newstart or Youth Allowance for a minimum
of 6 months.


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2. INTRODUCTION

It has been some time since an evaluation of NEIS has been undertaken on the scale of
the current evaluation. The purpose of the current evaluation is set out in the terms of
reference below, although it must be said that the current evaluation goes beyond the
terms of reference insofar as it also presents the findings from a series of stakeholder
interviews covering a number of topics pertinent to the operation of NEIS. The
interviews have allowed for a much deeper understanding of the scheme than is possible
from a pure analysis of the data, as it allows for issues confronting various stakeholders
to be explored in depth. It must be pointed out, however, that the findings from these
interviews are not quantitative in nature, they do not provide a numerical estimate of the
prevalence of a particular problem or issue. Rather, they offer some insights into the
nature of the scheme and how various stakeholders interact with it, or affected by it.
Further, it allows for some practical advice on ways to overcome the pitfalls and
constraints that confront those involved at all levels of NEIS.

The evaluation has involved Computer Assisted Telephone Interviews (CATI) of
providers and participants of NEIS. Although the participant survey provides useful
information on outcomes, it cannot be overstated that the data collected are mainly
concerned with providing information that is not normally collected from DEWRSB
PPM surveys. As such, there is a substantial section of this report dedicated to the
evaluation of existing Departmental PPM data to shed some light on the effectiveness of
NEIS. The data collected through CATI for this evaluation are essentially to get some
indication of whether there are underlying issues that may be affecting client outcomes
and perceptions of NEIS.

The terms of reference for this evaluation are provided in detail in Appendix A. A brief
summary is provided here of the main issues to be addressed.
q
The evaluation is to provide an assessment of the cost effectiveness of NEIS and
participant outcomes at various intervals following their cessation of NEIS allowance.
Also to be addressed in this evaluation are the key performance indicators and whether
they are suitable as benchmarks of provider performance.

The evaluation is also required to comment on the relevant recommendations made in
the Nelson and McClure Reports. These have also been used to provide a backdrop for
existing policy drivers for NEIS and continuation of the programme. The terms of
reference also require an investigation of whether participants would have started a
business under their own auspices.

Finally, programmes of a similar nature are to be identified along with the costs to the
Commonwealth of running a similar programme. Policy issues in relation to such a
programme are also to be addressed.




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3. LITERATURE REVIEW

Review Of Documentation On NEIS

The New Enterprise Incentive Scheme [NEIS] is aimed at extending the range of
options available to unemployed people to find work by providing encouragement and
assistance to those who wish to establish a small business. The NEIS was introduced as
a pilot scheme in 1985 and subsequently permanently established in 1987-88. In May
1998 it became part of the Job Network.

NEIS is one of five services provided under the Job Network banner, with New
Apprenticeships now falling under the ambit of the Department of Education, Training
and Youth Affairs (DETYA). The scheme is relatively minor in terms of the number of
commencements, with around 6 400 people commencing over the 2000 calendar year.
In comparison, there were 320 000 commencements in Intensive Assistance and 62 800
in Job Search Training. In other programmes run by the Department, such as the
Indigenous Employment Programme (includes STEP projects and Wage Assistance)
had 5 300 commencements, while there were 49 500 in Work for the Dole, 2 400 in the
Return to Work Programme and 13 400 in the Community Support Programme. The
Job Matching service placed 297 000 people into employment in 2000. NEIS, then, is
clearly a small programme in the context of all forms of labour market assistance
provided by the Commonwealth government.

Apart from the scale of NEIS, it is clearly set apart from other Job Network services in
two ways. First, it is a programme aimed, essentially, at placing people into self-
employment rather than paid employment. Second, the programme has strict quotas
such that, irrespective of whether people are eligible, only a handful are accepted into
the programme. Other services provided by the Job Network, on the other hand, are
defined by client eligibility.

Periodic evaluations of the effectiveness of NEIS have been conducted over the years.
The primary focus of these has been to examine survival rates of NEIS sponsored
enterprises but administrative/process issues and other broader criteria have increasingly
been examined as well.

In this section we focus on NEIS and briefly discuss overseas experience of similar
programs, their policy rationales, the issues of displacement and deadweight losses
which may arise in relation to such schemes and the results of the various evaluations of
NEIS.


Overseas Experience
Labour market programs for the unemployed are usually designed to equip individuals
for employment and to assist them in finding such employment. However, during the
1980s and 90s the majority of European Union (EU) countries, Canada and the USA
introduced publicly funded schemes to broaden the range of options available to the




                                                                                       10
unemployed to include assistance to enter self-employment.4 The schemes can be
categorised into two broad groupings based on the policies that motivate the schemes:

       those with an industry policy focus aimed at stimulating the small business
        sector; and
       those with a labour market focus which are aimed at getting people out of
        unemployment and into work.

In turn there are programs which are locally or sectorally based and, alternatively,
programmes which are national in scope (Meager 1993). In Australia there are examples
of all of these types of programme but the most significant ones are national in scope
with a labour market focus.5

During the 1980s all member states of the EU introduced programs concerned primarily
with promoting self-employment among the unemployed that were national in scope. In
the EU the programs that were in operation in 1988 were, in terms of funding, not
particularly large and only accounted for 1.6 per cent of the total expenditure on labour
market programs across 9 EU countries.6 Spain and Greece had the highest
proportionate expenditure on the self-employment programmes with 6.8 and 5.0 per
cent respectively (Meager 1993). Without exception, these programs were driven by the
objective to increase the flow from unemployment to self-employment. As a result,
eligibility for the programs was usually restricted to the unemployed, although in some
instances the criteria were widened to included young people or people at risk of job
loss. The pattern of eligibility basically arises from the fact that the programs are
incorporated within the unemployment benefit system. Generally, the programs consist
of payments to the unemployed, who become self employed or set up a business, that
they would have received had they remained unemployed. The common claim, as a
consequence, is that the programs have only a small impact in terms of the net cost to
government. However, this argument is somewhat strained if the participants are the
cream of the unemployed who would have found long duration employment anyway,
particularly if the participants’ businesses fail and they return to unemployment as a
result (Meager 1993).

Despite the similarities in the source of funding for the programs, there are some
significant differences in the way participants are paid under the schemes. In Spain, for
example, the funds are paid in advance in the form of “soft loan” or grant, or a simple
capitalisation of the benefits that the participant would have received over time had they
remained unemployed. The UK and Germany, on the other hand, pay the funds as an
allowance. As Meager (1993) points out, the two are effectively equivalent in terms of
financing them from a budgetary point of view. However, they can result in different
outcomes for participants. The main argument in support of the capital subsidy
approach (up front payment) is that it helps participants overcome imperfections in the


4
  The scheme introduced in the USA in 1987 was experimental. Subsequent schemes have been
introduced and administered by individual states rather than at Federal level.
5
  There are a variety of self-employment programs other than NEIS offered through State and Territory
Government agencies. Some of these are listed in Appendix C.
6
  The countries included in the statistics were Spain, Greece, UK, Portugal, France, Ireland, Denmark,
Germany and Belgium. Italy, Luxemburg and the Netherlands were excluded from the statistics due to the
way there programs were defined.


                                                                                                   11
capital market. The other benefit of the approach is that it effectively provides the funds
interest free (Meager (1993)).


Policy Rationales
Most new jobs in Australia in recent years have been created by new businesses and
small businesses. Between 1995 and 1997 57 per cent of new jobs were created by new
businesses and 55 per cent of new jobs were created by small businesses. [Access
Economics (1999)] Friedman (1995) has said that “Self-employment will not clean up
or cure national economies, but it can do amazing things.” While the overall objective
of new enterprise incentive schemes is to extend the range of options available to
unemployed people to obtain gainful work, there are a number of other potential
benefits which have variously been claimed as flowing from such programs. These may
be summarised as follows:

          the businesses created through the schemes generate jobs in addition to those of
           the founder – on average, around 1.5 jobs within two years of being established;
          modest increases in income are achieved by the new entrepreneurs;
          substantial business and personal assets are created by these entrepreneurs;
          the promotion of an ‘enterprise’ culture;
          a savings/investment culture is promoted by the self-employment experience;
          beneficial family effects may be achieved –“.stabilising unstable situations,
           increased involvement in children’s education, increased self-esteem, increased
           civic participation.” [Friedman (1995) p. 37]
          even where the enterprise fails to survive, the training undertaken and the
           experience gained in the venture may contribute to the individual’s human
           capital in ways which enhance their prospects of securing new employment.


Potential Problems7
Needless to say a number of problems or potential problems with new enterprise
incentive schemes have been encountered and are discussed in the literature. In
principle, these problems ought to be taken into account when evaluating such schemes.
In addition to obvious issues such as survival rates of supported enterprises, issues to do
with deadweight losses, displacement effects and low incomes of the new entrepreneurs
have been matters of concern.


Deadweight Losses
Deadweight losses are incurred where participants are funded to establish a new
enterprise when they would have entered self-employment anyway [without the
funding]. Deadweight can be ascertained by asking participants whether they would
have established the business (entered self-employment) in the absence of the scheme
and under what circumstances they would have done so. Some schemes may incur very
substantial deadweight losses while others may incur small such costs. It has been
claimed, for example, that deadweight losses in the UK Enterprise Allowance Scheme
[EAS] may be as high as 40 per cent in the short term. [PA Cambridge Economic
7
    Parts of this section draw heavily on Meager (1993).


                                                                                        12
Consultants (1990)] However, a survey in Denmark concluded that only 17 per cent of
participants in that country’s scheme would definitely have become self-employed
without the aid of the scheme. [Rosdahl and Maerkdahl (1987)] Policy should aim to
devise schemes which minimise deadweight losses and thereby generate maximum net
effects. Where possible evaluations of new enterprise incentive schemes should attempt
to estimate deadweight costs and the factors which give rise to them in order to assist in
identifying the characteristics of a scheme which are prone to attracting deadweight
costs.

Deadweight losses may be minimised by targeting the most disadvantaged amongst the
unemployed for support to develop a new enterprise but this may increase the risk of
business failure. However, in Denmark policy has focused the scheme on the long-term
unemployed [and also has a very high proportion of female participants] but survival
rates are amongst the highest of any country. [Meager (1993)] In contrast to the Danish
scheme, NEIS in Australia mainly attracts well-educated, short-term unemployed
people. However, like the Danish scheme it attracts a relatively high proportion of
females relative to the Job Network eligible population.

It is also arguable that deadweight losses will arise where an unemployed worker is
assisted to start a new enterprise when they would have otherwise been able to secure
paid employment. This will be the case if policy is labour market-focused and assigns
no greater weight to self-employment rather than paid employment. The losses in this
instance would be the difference between the costs of establishing the individual in
businesses as compared to the costs of assisting them to find a paid job.

Care must be taken to avoid overstating deadweight losses. Most NEIS-type schemes
require participants to undertake some form of business training and provide either
lump-sum or periodic payment support. Hence, even though a scheme participant may
have gone into business without the support of the scheme, participating in the scheme
may enhance the prospect of a successful outcome.


Displacement Effects
Displacement effects occur when a business which is established through a new
enterprise incentive scheme affects existing firms by taking away some of their
business. To the extent that displacement occurs, the net employment impact of the
scheme will be reduced. There are particular difficulties in dealing with displacement
effects because it is very difficult to know what happens to those who are displaced and
whether the new or the displaced firms would have had the greater long-term viability.
These issues cannot easily be assessed through surveys of scheme participants.

In general, surveys offer few insights into the displacement effects of the programme.
The approach taken in several UK studies to establish the extent of displacement effects
has been to ask participants how much business they took away from firms already in
operation. This, however, is unlikely to produce any reliable measure of displacement
since scheme participants are not well placed to be able to make estimates of such
effects.

Elias and Whitfield (1987) suggest that the most reliable method would be to survey
participants, consumers and other producers from a well defined locality. Only one


                                                                                       13
study, undertaken in the West Midlands region of the UK, has been done along these
lines and found displacement to be very high, although it is pointed out that these results
are not necessarily capable of being generalised to other localities or sectors and, hence,
not a lot can be said about the overall displacement effects of the programme (Meager
1993).


Displacement/deadweight: evaluation issues
Very few evaluation studies have taken account of deadweight and displacement issues.
Where evaluation studies have taken place they have been concerned mainly with gross
flows and survival rates of participants. Meager (1993) argues that the lack of rigorous
assessment of displacement and deadweight results from the “inevitable deficiencies of
an approach that relies on the monitoring and following up of scheme participants”
(Meager 1993).


Low Incomes of Scheme Participants
A number of studies evaluating new enterprise incentive schemes in Europe have found
that many of the participants establish viable businesses but the incomes they earn from
them are very low.8 These low earnings outcomes were attributed to a tendency for the
schemes to encourage entry to “low margin, highly competitive activities, which have
poor survival chance, or displace existing businesses.”9 Experience is quite varied
however and not all evaluations find that low incomes are an inevitable outcome of such
schemes. In the US for example, experimental programmes were run simultaneously in
the states of Massachusetts and Washington. The two schemes were not identical in
design and evaluations of their outcomes revealed that the impact of the Washington
scheme on incomes was negative while the Massachusetts scheme had a positive impact
on incomes. A key difference between the two schemes was that Massachusetts
participants were eligible only to receive periodic payments while those in Washington
were eligible to receive their remaining unemployment benefits in one lump-sum
payment. In general, evaluations of the scheme employed in the UK have revealed
persistent evidence of low incomes on the part of the new entrepreneurs. According to
Owens (1989) this is not necessarily viewed by Government as a bad thing since it
moderates pressures for wage inflation in the economy as a whole.

The ethos of the NEIS is very much one of promoting viable new small businesses
which yield incomes at least sufficient to make participants wish to continue in the
business. If evidence of pervasive low incomes amongst NEIS participants was
uncovered, it would indicate that a review of the design of the scheme was called for.


Summary of Evaluations and Commentaries on NEIS
The NEIS has been subjected to regular evaluations and has also been the subject of
comment from other groups – such as the National NEIS Association and the McClure
Report on Welfare Reform. As well as periodic overall evaluations, a continuous Post
Programme Monitoring [PPM] of all clients three months after leaving a labour market

8
    See for example Benus (1995), Owens, (1989) and Meager (1993).
9
    Meager (1993) p. vi.


                                                                                        14
programme is conducted. Some reports focus on outcomes, others on administrative and
procedural matters. A brief summary of the main points arising from these various
evaluations and commentaries is given below. Reports are dealt with in chronological
order.


DEET (1988) An Evaluation of the Pilot Phase of the NEIS.

As noted above, NEIS was first launched as a pilot scheme in July 1985. The operation
of the scheme during the pilot phase, 1985/86, was subjected to an evaluation in 1988
which was sufficiently positive to lead the Government to establish the scheme as an
ongoing programme. The main findings of the evaluation of the pilot phase were that:

      69 per cent of NEIS participants were still in self-employment three months
       after the NEIS allowance ceased compared with an informal comparison group
       where 54 per cent were still in self--employment;
      The difference between the NEIS and comparison group outcomes is 15 per cent
       and this is the net impact of NEIS;
      Of those not still in self-employment, 7 per cent of the NEIS group were in other
       employment and 5 per cent of the comparison group;
      NEIS businesses had created one job for every 1.5 businesses against one job for
       every 2.6 businesses in the comparison group;
      The major sources of investment funds for NEIS businesses were income from
       the business (51 per cent) and the NEIS Allowance (18 per cent);
      61 per cent of participants said they could not have operated the businesses at all
       without the NEIS allowance;
      NEIS participants experienced difficulty accessing NEIS training and only 50
       per cent of the surveyed group had been trained;
      Where NEIS training was undertaken 77 per cent of participants were still in
       self-employment as against 69 per cent of those who had not undertaken
       training;
      The long-term unemployed recorded success rates almost identical to those who
       had been unemployed for less than 12 months;
      Those who had entered NEIS because they felt they could not get alternative
       employment recorded a success rate of 84 per cent, as against 77 per cent for
       those who expressed a desire to work for themselves and 62 per cent who
       thought they had identified a market opportunity.


AGB:McNair Report (1990)

AGB:McNair was contracted to evaluate NEIS for the Department of Employment
Education and Training. The consultants identified NEIS as a “Commonwealth labour
force programme working in tandem with State government small business loan
schemes.” And saw it as a “..mechanism for creating self employment opportunities”.
[p.1] The evaluation set out to ‘..examine the effectiveness of NEIS in achieving the
objectives set for the programme.” And “..also seeks to test the relative impact of the
two elements of NEIS, that is income support and training.” [p.1]




                                                                                       15
Telephone interviews were conducted with 69 [out of a sample of 233] participants in
1987 and 110 [out of a total of 270] for 1988. These samples are too small to yield very
reliable findings. However, with that caveat in mind, the main findings of the
AGB:McNair Report were:

      71 per cent of 1987 respondents were still in business 2 years after the NEIS
       allowance ceased – however this was only 29 per cent of the whole sample since
       businesses which could not be contacted were assumed to have failed;
      82 per cent of the 1988 sample were still in business 1 year after the NEIS
       allowance ceased - however this was only 42 per cent of the whole sample since
       businesses which could not be contacted were assumed to have failed;
      24 per cent of the 1987 sample and 18 per cent of the 1988 sample had a second
       job;
      of those not still operating their NEIS assisted business, about half were
       employed or running another business and 7 per cent were unemployed;
      58 per cent of respondents met at least one criterion of ‘disadvantage’ and this
       group recorded a survival rate of 72 per cent as against 78 per cent for all
       respondents;
      although most respondents who had taken a small business training programme
       [over 80 per cent had undertaken training] rated it positively, survival rates were
       no higher for those who had undergone the training than those who had not done
       so;
      of those still in business, 56 per cent said they would have started the business
       even without NEIS living allowance;
      of those not still in business, 28 per cent said they would have started the
       business even without NEIS living allowance;
      43 per cent of those still in business earned less from the business than the
       equivalent of unemployment benefit;
      73 per cent of respondents, including a number earning less than unemployment
       benefit, rated their business successful and were optimistic about its future;
      69 per cent of those still in business rated financial assistance they had received
       as a major influence on their success and, of these, almost 80 per cent rated
       NEIS financial assistance as a major influence;
      the main reasons given by those not still in business for their business failure
       were not enough income, ill-health/personal reasons and insufficient demand for
       their product or service;
      more than half of the [small – 22] number of respondents not still in business but
       now in paid employment said that the NEIS experience had been useful in
       obtaining their present job.


Auditor-General, (1991-92) and (1994-95).

In a report in 1991-92, [Auditor General (1991-92)] the A-G made a series of 19
recommendations for improving the effectiveness of NEIS. These related to NEIS
providers, monitoring of NEIS participants, training, budgets, participants’ contracts
and business returns and the management information system. In this report, the A-G
followed up to review progress in implementing the recommendations. They found that:




                                                                                       16
      Post-participation contact with NEIS participants in order to assess the success
       of outcomes had improved;
      DEET had arranged to collect separate data on costs and outcomes for certain
       disadvantaged participants and was considering extending the scope of this
       arrangement;
      Arrangements for collection of more extensive data on which to base evaluations
       of programme effectiveness had largely been implemented;
      DEET had approved guidelines to ensure that clear and proper procedures were
       in place to monitor payments to NEIS providers;
      The mentor support programme had had its funding increased;
      The development of core training modules had met the A-G’s requirement that
       common training programmes should be developed to avoid wasteful
       duplication;
      DEET had implemented a recommendation that NEIS participants’ contracts
       should ensure that receipt of other allowances and income be disclosed;
      The business returns questionnaire had been revised so as to increase the
       usefulness of the information provided so as to improve the Department’s
       capacity to evaluate performance;
      Recommendations for improving the NEIS Management Information System
       [MIS] had not been implemented but the same effect might be achieved by other
       initiatives being undertaken by DEET.


ten Brummelaar and Gatenby (1992) NEIS Evaluation: Intergovernment Components of
NEIS
This evaluation specifically addressed the intergovernmental component of NEIS. It
utilised the data collected in the AGB:McNair (1990) survey discussed above and, in
addition, conducted interviews with officers of State Governments and DEET who were
involved in the administration of the scheme. It particularly investigated the viability of
the business and the labour market and education/training status of participants after
NEIS assistance had ceased. It also investigated the extent of secondary job creation of
NEIS businesses.

The main findings which were addition to those of the original AGB:McNair (1990)
report were that:

      although NEIS assisted in establishing viable businesses, the cost per business
       was high;
    the average Commonwealth cost per financial year per participant still in
       business one year after ceasing to receive NEIS support was $25 300;
    for every NEIS participant still in business in the 1987 sample 0.4 full-time and
       0.6 part-time jobs were created, while for the 1988 sample the figures were 0.2
       full-time and 0.5 part-time jobs;
A number of procedural and administrative issues were identified as deficiencies in the
operation of the scheme and suggestions were made for overcoming these.




                                                                                        17
Johnstone (1993a) Evaluation of NEIS – Managing Agents – Administrative
Arrangements and Issues.
This evaluation focused specifically on the effectiveness of the way the scheme is
administered by DEET State Offices and NEIS providers. The main findings were:

      agents operating providing training and mentor services across large
       geographical areas and in remote areas were concerned about the resources
       available to them;
      NEIS participants experienced difficulties in obtaining finance for their business
       ventures;
      Administrative problems in relation to the NEIS allowance – such as delays in
       payments – continued;
      There was room for improvement in participant monitoring;
      There were variations in payments to NEIS providers in different States for
       providing the same services;
      There was inadequate access to the scheme for disadvantaged clients.

A number of proposals for overcoming these problems were advanced in the report.


Johnstone (1993b) Evaluation of the NEIS

This was the first major evaluation of NEIS. It involved telephone interviews with
around 4 800 NEIS participants, a mail survey of NEIS managing agents and case
studies and interviews with Government officers. The main findings were that:

Three months after cessation of NEIS funding:
    64 per cent of participants were still in business;
    another 9 per cent were in paid employment;
    for every 10 NEIS businesses, an additional one full-time and four part-time jobs
       were created.

Twelve months after cessation of NEIS funding;
   54 per cent of participants were self-employed;
   another 9 per cent were in paid employment;
   for every 10 NEIS businesses, an additional two full-time and three part-time
      jobs were created.

Further findings were that:

      administrative efficiency had improved but remained in need of further
       improvement;
      compared to other labour market programs, NEIS is costly – the cost per
       employed participant in one sample being $19 300 as compared to $3 400 for
       JOBSTART and $10 300 for JOBTRAIN;
      although only limited data on incomes were collected, only 42 percent of
       participants were self-employed and said that a pension or benefit was not their
       main source of income;



                                                                                      18
          23 per cent of those who were not in business 12 months after NEIS funding
           ceased said that their business failure was due to income being too low to live
           on;
          the proportion of NEIS participants who are long-term unemployed [12 months
           +] varies considerably from year to year – 40 per cent in 1990, 27per cent in
           1991 and 31 per cent in 1992;
          self-employment outcomes of previously long-term unemployed participants
           were about the same as for all participants but incomes were significantly lower
           for this group.


Snowden (1995) Summary of PPM Findings to 1995

Using data from the PPM for 1995, Snowden shows that, for the 67 per cent of
respondents in the sample:

          Less than 1 per cent of eligible applicants participate in NEIS;
          73 per cent of NEIS participants were in self-employment and 10 per cent in
           other employment three-months after NEIS assistance ceased;
          Only the Australian Traineeship System had superior employment performance
           outcomes to NEIS;
          Employment outcomes for the previously long-term unemployed were poorer
           than for the short-term unemployed but were nevertheless quite good – over 80
           per cent for those 12 to 24 months unemployed, 75 per cent for those 24 to 35
           months and 71 per cent for those 36+ months;
          The gross cost per successful employment outcome in 1995 was $17 581;
          The net cost for each person employed consequent to NEIS, assuming indirect
           job creation rates equivalent to those found for 1993, was $5 851;
          Because NEIS specifically excluded business proposals likely to be in direct
           competition with existing businesses Snowden (1995) considers displacement
           effects to be low – around 10 per cent10;
          No estimates of deadweight losses were possible but recent targeting of NEIS
           towards long-term unemployed people should minimise these.


National NEIS Association (1999) Jobs Growth through Self-Employment, NNA.

The NNA report is not based on original research regarding performance outcomes.
Instead it reviews the findings of other studies and concludes that the evidence indicates
that the scheme is performing with “extraordinary success.” The main thrust of the
report is to propose a large variety of administrative, procedural and financial initiatives
designed to improve NEIS’ performance.

The report proposes, inter alia, that:

          The number of NEIS places should be increased to 22 000;



10
     The NNA (1999) Report also argues that displacement effects are likely to be small.


                                                                                           19
          The scope of NEIS should be extended to include pre-NEIS training and by
           adopting a new marketing strategy;
          Eligibility for NEIS should be broadened [the Small Business Option] by
           including young entrepreneurs, redundant and retrenched workers and other
           people not on unemployment benefits;
          Pre-NEIS training should be made available;
          Mentoring support services should be extended to the broader business
           community;
          The tender process for NEIS should be separated from that for Job Network;
          The Self-Employment programs should be enhanced in a number of ways.


McLure Report (2000)

The McLure Report is a review of the Australian welfare system and offers advice on
welfare reform. The report takes a positive view of the role of ‘micro-business’11 in the
economy and the community. The report argues that:

          Micro-businesses are a growing element of the economy, generate many jobs
           and enable many people to gain financial independence;
          Micro-businesses ‘…can act as a source of employment for groups within the
           community which traditionally encounter inequity in finding employment as
           employees.’ (p. 50);
          Local micro-businesses promote social cohesion since they tend to utilise local
           networks of suppliers, employ local people and re-invest locally;
          Micro-businesses offer special opportunities for mature workers to find
           employment;
          Successful local businesses can act as effective mentors for NEIS participants.

For these reasons, the McLure Report recommends that the Government “Continue and
increase support for small and micro-business development programs such as the NEIS
and funding for small business incubators.” (p.52)


The Nelson Report (2000)

The Nelson Report was concerned with issues relating to mature-age workers. It
devoted a chapter to the matter of mature-age workers establishing a small business.
The Report discusses the NEIS in relation to mature-age workers in length and in some
depth. The report:

          is very supportive of NEIS but warns that starting a small business is a high-risk
           option;
          draws attention to problems associated with difficulties in accessing working
           capital;
          emphasises the importance of business training and the work of mentors;


11
     A ‘micro-business’ is a business employing fewer than five persons.


                                                                                          20
      suggests that ‘..there appears to be a considerable degree of confusion in the
       community about how to access information about Commonwealth and
       State/territory programs to assist small business starters.” (p. 211)

Eight specific recommendations emerge:

      DEWRSB should develop an information package for Centrelink to distribute to
       employees facing retrenchment which should draw attention to the risks
       involved in small business and highlight the need for training and financial
       advice;
      Centrelink officers should inform potential participants of the importance of
       obtaining financial advice;
      NEIS mentors should visit participants more often – perhaps monthly;
      NEIS providers should ensure that mentors are adequately trained in their role;
      DEWRSB should monitor progress of NEIS businesses at 3, 6, 12 and 24 month
       intervals to better assess outcomes;
      DEWRSB should investigate why mature-age NEIS participants have lower
       positive outcomes than younger participants;
      The Minister should examine whether the scheme should be expanded to include
       those buying franchises or an existing business;
      DEWRSB should ensure that comprehensive information about NEIS is easily
       available.


DEWRSB (2000) Job Network Evaluation: Stage One

NEIS was absorbed into the Job Network in 1998 and was included in the evaluation
conducted by DEWRSB in 2000. This evaluation begins with a review of descriptive
statistics on the number of NEIS commencements and the characteristics of participants.
It reports that a job seeker satisfaction survey and a qualitative provider survey showed
that:

      93 per cent of NEIS participants felt that participating had improved their
       chances of successfully running their own business;
      42 per cent of participants found out about NEIS by word of mouth;
      providers claimed to be rigorous in their selection of job seekers for NEIS
       training;
      providers and participants were positive about the training provided prior to
       NEIS training;
      training courses varied in duration from six to eight weeks and providers
       reported that they considered training of at least seven weeks duration as
       desirable;
      both providers and participants considered the training to be valuable and
       effective;
      mentors were rated quite highly [in a range 72-94 percent for various aspects of
       the services they provide];
      because NEIS participants’ assets must not exceed certain limits if they are to be
       eligible for the NEIS Allowance, many of the businesses which they set up are
       micro-businesses;


                                                                                      21
          indigenous Australians make up 4.3 per cent of the Job Network eligible
           population but only 0.6 per cent of NEIS participants;
          as a response to the low participation rate of indigenous Australians in NEIS the
           Government established the Indigenous Small Business Fund, administered
           jointly by DEWRSB and ATSIC, to develop opportunities for indigenous-owned
           and managed businesses.


Conclusions
The various evaluations and commentaries on NEIS in Australia are generally fairly
positive. This is in line with evaluations in most other countries which operate similar
schemes.12 In a recent OECD paper, Martin (2000) says “One specific form of wage
subsidy that appears to be successful for a small group of unemployed individuals is aid
to starting a small business. Controlled experiments in the United States suggest that
such schemes result in employment gains for men, primarily between the ages of 30 and
40, who have relatively high levels of education.” [p.98] He then recommends that
Governments should “... use subsidised business start-ups for the minority among the
unemployed who have entrepreneurial skills and the motivation to survive in a
competitive environment.” [p. 99] Since individuals will tend to self-select into self-
employment schemes on the basis of such characteristics, and since fairly rigorous
programs of screening, project evaluation, training and mentoring are provided, survival
rates tend to be quite high. Moreover, even for those who leave self-employment, rates
of employment in other occupations tends to be high also. This latter phenomenon may
reflect the good motivation of those who choose the self-employment option and/or the
effects of the NEIS training in enhancing the human capital of participants. NEIS
businesses also appear to create additional employment at rates higher than those of
established businesses. However:

          it appears that the cost per job created may be quite high relative to more
           standard means of getting unemployed people into paid employment;
          displacement effects, while probably low, are largely unknown;
          deadweight losses are unknown and difficult to estimate;
          relatively low incomes appear to be common in surviving NEIS businesses;
          indigenous Australians are under-represented in NEIS.

Since the evidence on these issues is not clear cut, there is a need for policy to be
informed by more reliable estimates of programme costs, displacement and deadweight
effects and business outcomes in terms of subsequent earnings.




12
     See, for example, Metcalf (1998).


                                                                                         22
4. ANALYSIS OF DEPARTMENTAL DATA

Introduction
As part of a wider evaluation of the New Enterprise Initiative Scheme (NEIS), an
analysis of Post Programme Monitoring (PPM) data collected by DEWRSB for
participants in the programme has been undertaken. The next section provides a
descriptive statistical overview of the data and the characteristics of the individuals in
the samples. This is followed by a detailed review of the main labour market outcome
indicators for NEIS. Included are the estimation of models to identify the factors
affecting the labour market success of NEIS participants. For the evaluation of NEIS
the available data set contains data only for clients who have participated in NEIS.
Thus the data contains no new information on the counterfactual: what outcomes would
these clients have achieved if they had not participated in NEIS? As a result, estimates
of the effectiveness of NEIS are made with “gross” outcomes for the participants in
order to make comparisons to those observed for other programmes and for control
groups used in other studies.

NEIS Participants – An overview of the data set
The data set contains records for persons who have participated in NEIS following the
implementation of the Job Network in May of 1998. There are records for 5 594
placements with commencement dates ranging from May 1998 to February 2000. Table
4.1 provides an overview of the individual characteristics of the sample of NEIS
participants.
Table 4.1      Characteristics of NEIS participants, (Per cent)
                                                                        Per cent
Male                                                                               56.6
ATSI                                                                                1.5
Disabled                                                                           10.1
Non-English Speaking Background                                                    14.7
Sole parents                                                                        0.7
Long Term Unemployed                                                               39.0
Level of education:
Unknown                                                                             0.2
Special school                                                                      0.0
< year 10                                                                           8.2
Year 10 or _11                                                                     28.0
Year 12                                                                            18.4
TAFE/Ass. Dip                                                                      25.9
Degree                                                                             15.1
Post Grad                                                                           4.1
Age at commencement:
Up to 24 years                                                                      9.6
25 - 34 years                                                                      34.3
35 - 44 years                                                                      33.0
45 - 54 years                                                                      18.7
55 years and over                                                                   4.5
On benefit at commencement.                                                        76.4


                                                                                          23
Outcome variables
Three major areas of outcome are measured - individual or job seeker outcomes,
business outcomes and programme satisfaction outcomes. In common with the bulk of
Commonwealth administered labour market programmes over the past few decades, key
performance indicators for job seeker outcomes relate to the participant’s labour market
outcomes as measured by the post programme monitoring (PPM) surveys and their
benefit status as determined by administrative systems. The indicators available in the
data file are:

      labour force status (employed, unemployed, not-in-labour force) three months
       after leaving assistance;
      if employed, employment status and hours worked;
      whether had any employment in the three months since leaving NEIS;
      whether undertaking further education or study three months after leaving NEIS;
      whether receiving benefits three months and again at six months after finishing
       NEIS.

Business outcomes relate to the performance of NEIS business that is created, and are
quite unique to NEIS. The key performance indicators available here include:

      the number of full-time and part-time employees employed in the business;
      the number of hours worked by the participant, their business partner and spouse
       in NEIS business; and
      whether the business being run is still mainly or partly the original NEIS
       business.

Client satisfaction indicators relate to:
     small business management training;
     advice from business mentor;
     support given by NEIS provider;
     assistance tailored to individual needs;
     overall quality of assistance and services.

Undoubtedly, these provide useful information as to how NEIS providers rate among
one another in terms of servicing their customers, and possibly as to how they can
improve their services. However, the role of client satisfaction surveys from an
evaluation perspective is somewhat cloudy. Given that there are actual measures of
labour market and business outcomes, what further information does client satisfaction
convey about the effectiveness of the programme? If a client has a negative labour
market outcome, is it a better result if they are satisfied than if they are unsatisfied?
Does it matter if a client with a positive outcome is dissatisfied? The intrinsic value of
client satisfaction surveys is that they may help identify those attributes or components
of a scheme which are most critical in generating positive outcomes. But this too, is
problematic, since it is likely that satisfaction levels are endogenous — that is,
dependent upon the client’s outcomes. Including measures of client satisfaction among
the explanatory variables when modelling outcomes, when client satisfaction itself is
determined by outcomes, will lead to spurious estimates of the effect of client
satisfaction. Below, two methods to attempt to control for this endogeneity in


                                                                                       24
modelling the effect of the quality of different aspect of providers’ services on outcomes
are tested.

The following section presents a descriptive overview of labour market outcomes for
NEIS participants and an econometric assessment of the factors that determine
outcomes.


Participants’ Labour Market Outcomes

Labour force status

Employment outcomes are known for 46 per cent of participants. Those records for
which outcomes are not known consist primarily of non-responses to the PPM survey,
either because the individual did not answer that question on their PPM survey form,
did not return their survey form at all or because the form did not reach the individual.
Each of these presents the potential for non-response bias. For example, those who
achieved favourable outcomes may have been more likely to complete and return the
PPM forms. Also, those whose businesses failed may have been more likely to change
address and thus less likely to receive their PPM survey forms. Both of these would
have the effect of biasing upwards the proportion within the sample displaying positive
outcomes compared with the true proportion in the full population of participants.
However, it is also possible to think of ways in which non-response bias may work in
the opposite direction. Those who are unemployed and continuing to receive benefits,
possibly requiring further assistance, may be more likely to comply with administrative
requirements. A priori, there is no way of knowing the magnitude or even direction of
non-response bias. With response rates of around 50 per cent, the extent of bias should
not be too great a concern. Response rates in the vicinity of 30 per cent are common for
many survey-based evaluations.

Around 80 per cent NEIS participants who responded to the PPM survey report being in
employment three months after completion of assistance. This is extremely high
relative to other forms of assistance for the unemployed, but that is to be expected since
the participants are mostly in employment — self-employed in their own business —
when assistance ceases. In other forms of assistance, such as training programmes,
participants still need to find work after completion. Perhaps the programme for which
NEIS outcomes are most comparable is the wage subsidy programme that was in
operation prior to the Job Network, JobStart. This was generally regarded as one of the
more effective programmes (see DEETYA 1997, Dockery and Stromback 2000a), and
is similar to NEIS in that the participant is normally in a job at the point of cessation of
programme assistance. The circumstances of employment, however, are clearly very
different. PPM outcomes for JobStart ranged from around 50 per cent to 65 per cent of
participants with known outcomes being in unsubsidised employment (see Dockery and
Stromback 2000).




                                                                                         25
Table 4.2       PPM employment outcomes, 3 months after completion of NEIS
                                             Percent of known
                                             outcomes
Full-time self-employed                      43.4
Part-time self-employed                      22.5
Full-time employed                            9.1
Part-time employed                            5.8
Total employed                                              80.8
Unemployed                                                  12.5
Not in the labour force                                      6.7
Total                                                      100.0
Number with known outcomes                   (2567)
Missing/unknown                              (3027)

These figures represent “gross” outcomes, as they make no allowance for the proportion
of participants who would have found work anyway. In DEETYA’s 1996 evaluation,
22 per cent of a control group matched to JobStart clients by key characteristics were
found to have found work without participating in any form of assistance (DEETYA
1997). As NEIS generally has not been closely targeted to disadvantaged job seekers,
the deadweight losses are likely to be larger than for most programmes. Hence the 22
percent mark for the JobStart control group may be taken as an approximation of the
lower bound of the proportion of NEIS clients who would have found work anyway.
So, of the 80 per cent of participants in NEIS who are employed at the time of the PPM
survey, it would be expected that at least one quarter of these would have been in work
had they not participated in the scheme.

Full-time employment outcomes outnumber part-time outcomes by about 2 to 1. Few
respondents had left the labour force three months following cessation of their NEIS
allowance, while 12.5 per cent reported being unemployed. Of those who did report
being either unemployed or not in the labour force, 22 per cent had been in some form
of employment in the past three months.

Education status

Of those unemployed or not in the labour force, 13 per cent were in education or study
and these are evenly divided between full-time and part-time study. Around 8 per cent
of employed persons were in education or study, predominately on a part-time basis.

Off-benefit status

Data for the variables indicating the off-benefit status for participants three and six
months after completion of NEIS are only available for those who were on either NSA
or YAL benefits at commencement. Unfortunately, the coverage for these variables is
not complete. As they are extracted from administrative systems, rather than collected
through surveys, they are likely to offer more robust outcome measures than the PPM
employment status variable. For the 4 273 with known outcomes, 70.9 per cent were
off-benefits three months after completion of NEIS. This increases to 72.1 per cent
after six months.
Of course, it need not be the same individuals who are off-benefits at both points in
time, but as it turns out the groups are largely one and the same. Around 94 per cent of


                                                                                     26
those off-benefits after three months are still off-benefits after six months, suggesting
some persistence of outcomes over time. Equally, those who are still on benefits three-
months out of NEIS have a relatively low chance of moving-off benefits in the
following three months, with only 19 per cent making the transition. This is probably
lower than would be expected for a random group who had received no assistance at all,
suggesting a selection effect in which those who fail to benefit from NEIS comprise a
relatively “at-risk” group.

Outcomes by target groups

Table 4.3 reports the percentage of positive outcomes by major client groups. Perhaps
what is surprising about this table is the lack of variation in outcomes across individuals
with different characteristics. Aboriginal and Torres Strait Islander persons and those
from non-English speaking backgrounds do not display greatly different rates of success
than others. The likelihood of being observed in employment or off-benefits is about
ten percentage points lower for persons with a disability. From the lowest to the highest
levels of education, the chance of being in employment varies by around 10 percentage
points, and by around 15 percentage points with respect to the proportion off-benefits.
Persons aged 55 years and over can also be identified as a group with markedly lower
probabilities of finding employment or exiting benefit support. These observations are
tested more formally in the multivariate analysis below.

Table 4.3       Positive outcomes by target groups (proportion of known outcomes)
                                     Employed       Off Benefit     Off Benefit
                                      (3 mths)       (3 mths)        (6 mths)
Female                                         77.7           69.9            72.0
Male                                           83.2           71.5            72.2
ATSI (a)                                       76.9           67.7            61.3
Disabled                                       70.9           60.0            61.1
Non-English Speaking Bkgd                      75.8           72.3            72.3
Sole parents                                   77.8             a.              a.
Long Term Unemployed                           76.7           62.4            63.6
Level of education:
< Year 10                                      77.5           64.8            63.2
Year 10 or 11                                  77.3           69.8            71.0
Year 12                                        78.4           70.2            72.3
TAFE/Ass. Dip                                  83.7           69.7            70.9
Degree                                         84.6           76.0            77.9
Post Grad                                      87.6           79.1            79.1
Age at commencement:
up to 24 yrs                                   82.1           68.4            69.5
25 - 34 yrs                                    83.2           73.1            75.2
35 - 44 yrs                                    80.3           72.3            72.6
45 - 54 yrs                                    80.4           69.5            70.7
55 yrs and over                                72.1           58.3            58.8
All                                            80.8           70.9            72.1
Note: a. not reported due to small cell counts.




                                                                                        27
Multivariate analysis

Multivariate analysis can be used to identify the effect of various individual and
programme characteristics on the likelihood of achieving a positive outcome. From
Table 4.3, for example, females achieve lower employment and off-benefit outcomes
than males. But without an unwieldy series of cross-tabulations, it cannot be
determined whether this is a true “gender” effect, or simply due to differences in other
characteristics of the male and female sample populations, such as age and level of
education.

As the dependent variable is a binary variable, the standard logit model is adopted.
Consider an underlying latent variable Y* that can be thought of as the tendency to be,
say, in business, unsubsidised work or to be off-benefits. More formally, Y* is a linear
function of observable individual and programme characteristics X that affect
participants’ outcomes and a set of unobservable characteristics .

(1)    Y*i = Xi + 
       where i refers to the individual participant

The latent variable Y* is not observed as such. What is observed is whether an
individual has a positive outcome or not. The observable outcome, denoted Y, is a
variable that takes the value of one if the individual is in economic activity and zero
otherwise. To relate this to the underlying latent variable it is assumed that Y=1 if Y*>0
in which case the likelihood of a positive outcome can be represented as

(2)    Prob(Y=1) =  (Xi )

Taking  (.) to be the logistic distribution function leads to the logistic regression model
or logit. Equation 2 is estimated for the three main dependent variables relating to
individuals’ labour market outcomes: the probability of being in employment as
measured by the PPM survey, of being off-benefits 3 months after completion and 6
months after completion.

The results are reported in Table 4.4. In additional to the individual characteristics, we
have included the unemployment rate to capture differences in the state of the labour
market facing NEIS clients. The rate used is the ABS trend rate for the individual’s
State and averaged over the quarter in which they completed their placement. All
remaining explanatory variables are constructed as one/zero dummies. The first two
models are for the predicted likelihood that a participant was in unsubsidised
employment three months after completion of NEIS. For comparative purposes, model
(1) is estimated without variables relating to the individual’s benefit status at
commencement, since it cannot be included for models (3) and (4). These variables are
included in Model (2).

Many of the coefficients on variables capturing individual characteristics are highly
significant. Generally speaking, the signs and magnitudes of the coefficients are
consistent across all models, but the results are more robust in the models for the
likelihood of being off-benefits due to the substantially larger sample available for the
estimation. Males were significantly more likely to achieve positive outcomes than
females, while persons with disabilities and from non-English speaking backgrounds


                                                                                         28
were significantly less likely to be in employment. The deleterious effect of having a
disability is particularly strong, and also applies to the likelihood of exiting benefits.
The negative effect a non-English speaking background on employment, however, does
not carry over to benefit status. The estimated effect of being an Aboriginal or Torres
Strait Islander is negative, but statistically is not significantly different from zero. The
coefficients for sole parents are also insignificant, however, the sample number is very
small for both these groups.

The signs and magnitude of the coefficients indicate that the probability of being in
employment increases with level of education after controlling for other factors, the
effect being particularly strong for persons with degrees and higher. The comparison
category here is those who did not complete Year 10.

Compared to the “prime” age-group of 25 to 34, those who are younger than 25 and
those aged 55 and over are less likely to exit benefits. As shown in Table 4.3, the
probability of either being in employment or leaving benefits falls markedly for persons
aged 55 and over. Outcomes for persons aged 35 to 44 are not statistically different
from those for persons aged 25 to 34.

A lengthy duration of unemployment prior to entering NEIS considerably reduces the
chances of a positive outcome. Compared to newly unemployed persons, the results are
ambiguous for participants who had been unemployed for between 3 and 6 months on
commencement. Model (1) suggests these persons actually achieved better employment
outcomes, but the result is only weakly significant. The negative effect of
unemployment duration on employment prospects becomes evident for durations of
unemployment beyond 6 months in the models of the probability of exiting benefits. In
all models there is a very strong negative effect for the very long-term unemployed
(those unemployed for two years or more before commencing NEIS).

In Model (2) for the probability of being in employment as measured by the PPM
survey, a variable indicating whether or not the client was receiving NSA/YAL at the
start of their placement is included. The results indicate that persons who were on the
main unemployment related benefits of New Start Allowance and Youth Allowance at
commencement were in fact more likely to achieve a positive outcome than those on
other benefits or those not receiving benefits. The results for NSA/YAL recipients may
be reflecting a stronger attachment to the labour market for persons on these allowances.
The results for other benefits may simply reflect that there is no effect, or that we have
grouped together a range of benefits with conflicting effects. Sample sizes do not
permit individual inclusion of the other benefit types.




                                                                                         29
Table 4.4    Logit model estimates of labour market outcomes for NEIS
participants

                                                       Dependent Variables
      Explanatory          In employment        In employment Off benefits after 3 Off benefits after 6
       Variable            after 3 months       after 3 months        months             months
                                 (1)                  (2)               (3)               (4)

Intercept                       2.204    ***        1.990    ***        2.012    ***         1.969    ***
Male                            0.458    ***        0.298     **        0.152     **         0.093
ATSI                           -0.251              -0.313              -0.088               -0.449
Disabled                       -0.611    ***       -0.628    ***       -0.378    ***        -0.393    ***
Non-ESB                        -0.442    ***       -0.431    ***       -0.006               -0.070
Sole parent                    -0.079               0.105                  —                    —
Level of Education
 < Year 10                         —                   —                   —                    —
 Year 10 or 11                 -0.138              -0.120               0.160                0.271     **
 Year 12                       -0.109              -0.111               0.129                0.284      *
 TAFE/Ass Dip                   0.246               0.225               0.066                0.184
 Degree                         0.387       *       0.348               0.412    ***         0.577    ***
 Post-grad degree               0.588       *       0.510               0.522     **         0.576    ***
Age at Cmmncmt.
 Up to 24                      -0.127              -0.166              -0.258      **       -0.341    ***
 25 to 34                          —                   —                   —                    —
 35 to 44                      -0.194              -0.166              -0.003               -0.074
 45 to 54                      -0.208              -0.192              -0.165      *        -0.192      *
 55 and over                   -0.704    ***       -0.663    ***       -0.610    ***        -0.672    ***
Prior duration of Ut
 0 to 3 mths                       —                   —                   —                    —
 3 to 6 mths                    0.340       *       0.254              -0.151               -0.112
 6 mths to 1 yr                -0.158              -0.244              -0.445    ***        -0.358    ***
 1 yr to 18 mths               -0.011              -0.105              -0.637    ***        -0.589    ***
 18 mths to 2 yrs              -0.306              -0.404      *       -0.667    ***        -0.748    ***
 2 yrs or more                 -0.458    ***       -0.502    ***       -0.953    ***        -0.927    ***
Unemployment rate              -0.094              -0.088              -0.119    ***        -0.111    ***
On NSA/YAL at com.                                  0.408     **
On other ben at com.                                0.029

Observations                   2560                 2560                 4262                4262
Chi-Square                        95 ***             103 ***              179 ***              186 ***
Deg. of freedom                   20                   22                   19                  19
Concordant                    63.6%                64.0%                62.5%              63.1%
Notes: ***, ** and * denote significance at the 1 per cent, 5 per cent and 10 per cent levels, respectively.

The State and quarter specific unemployment rate has the expected sign in all models
and is highly significant in the off-benefit models.


Incorporating client satisfaction scores

Participants’ reported level of satisfaction with a range of aspects of the services
delivered by NEIS providers are collected on a scale ranging from 1 to 4. Data are
missing in just over half the post-job network records, due to non-response to the PPM
survey. However, zeros appear in about 9 percent of the remaining cases, and these



                                                                                                            30
have been interpreted as also being missing values. In the vast bulk of cases in which
zeros appear, they appear for all of the five satisfaction ratings.

For convenience in this discussion variables have been coded such that a higher
numerical ranking represents a higher level of satisfaction. It can be seen from Table
4.5 that NEIS clients in the post-Job Network period have been mostly satisfied with the
services that they receive. Over eighty per cent of respondents indicated they were
either satisfied or highly satisfied with all elements of the services, with the exception of
the tailoring of assistance to individual needs which returns a satisfaction rating of 75.7
per cent.

Table 4.5      Reported satisfaction levels for NEIS clients, per cent

                                 Very                                            Very
Service component             dissatisfied Dissatisfied        Satisfied       satisfied
Small bus. mgmt training                 1.8         4.4               47.7            46.0
Advice from business mentor              7.0        10.9               44.5            37.6
Support given by NEIS
provider                                 6.3        10.8               46.6           36.3
Assistance     tailored    to
individual needs                         7.6        16.7               48.5           27.2
Overall quality of assistance
and service                              4.7        10.1               50.3           35.0

Coding the satisfaction ratings from a value of 1 for “very dissatisfied” to 4 for “very
satisfied”, the mean can be used to compare the levels of satisfaction across the different
service components and across different client groups. From Table 4.6 there are only a
few significant differences in reported satisfaction levels across the different client
groups. Males, on average, appear more satisfied with the small business management
training, the support given by the agent and with the overall quality of assistance and
service. Persons from non-English speaking backgrounds reported higher satisfaction
levels on all aspects of the services while the long term unemployed reported a lower
level of satisfaction with overall quality of assistance and service. There is no marked
pattern of satisfaction levels with age. Persons aged 45 to 54 seemed particularly happy
with the small business management training component, while 25 to 34 year olds seem
more satisfied with the way the assistance is tailored to their individual needs.
Aboriginal and Torres Strait Islander persons display markedly lower levels of
satisfaction with all components of the services received than any other group.
However, these differences are not statistically significant given the small sample size.




                                                                                          31
Table 4.6      Client satisfaction scores, means by service component and target
group
                           Small                     Support     Assistance      Overall
                          business Advice from given by          tailored to quality of
                        management business           NEIS       individual assistance
                          training     mentor        provider       needs      and service
Male                          3.41**          3.15         3.15*          2.96      3.18**
Aboriginal/TS Islander        2.92(a)         2.84          2.77          2.62      2.69(a)
Non-English Spkg Bg          3.46***      3.26***       3.26***        3.06**      3.27***
Sole parent                      3.47      3.37(a)          3.33          3.11      3.42(a)
Long Term
Unemployed                       3.36         3.13          3.11          2.95      3.12**
Has Post-school quals            3.38         3.10          3.12          2.95         3.18
Age: Up to 24 yrs                3.37         3.11          3.17          2.93         3.16
   25 to 34 yrs                  3.37         3.17          3.17       3.00**         3.20*
   35 to 44 yrs                  3.36         3.11          3.10        2.91*          3.14
   45 to 54 yrs               3.43**          3.12          3.10          2.96         3.14
   55 yrs +                      3.40         3.07          3.12          2.94         3.10
All                              3.38         3.13          3.13          2.95         3.15
Notes: ***, ** and * denote that mean is significantly different from that for the
remainder of the sample at the 1 percent, 5 percent and 10 percent levels, respectively.
(a) significance is ambiguous depending upon an assumption as to equality of the
variance in the two sub-samples.

Turning to Table 4.7, the means show that there are small differences in the satisfaction
levels recorded by groups with different employment outcomes. However, they are also
not insubstantial in light of the size of the differences between the key client groups.
The differences in the means between those with positive outcomes (either self- or
otherwise employed) and those who were either unemployed or had left the labour force
are highly statistically significant for all five satisfaction variables. As mentioned,
causality may run in both directions in this relationship. Better outcomes may cause the
participant to reflect more favourably upon the services provided to them, or the higher
ratings may truly reflect a better level of services, which in turn improves the chances of
achieving a positive outcome.


Table 4.7       Means of satisfaction variables by PPM labour market outcomes

                               PPM Employment outcome
                                                       Unemp/ not
                                                        in labour
                              Self employed Employed      force                 All
Small business mgmt training            3.4        3.4          3.2                   3.4
Advice from business mentor             3.2        3.2          2.9                   3.1
Support given by NEIS
provider                                3.2        3.2          3.0                   3.1
Assistance tailored to
individual needs                        3.0        3.0          2.8                   3.0
Overall quality of assistance
and service                             3.2        3.2          3.0                   3.2


                                                                                        32
It is because of this endogeneity that including the satisfaction ratings directly in the
models of outcomes should be treated warily. Indeed, the inclusion of each of the five
measures individually returns a highly significant coefficient on the satisfaction rating,
as expected. When jointly included, satisfaction with business management training
dominates the others along with the overall rating. This may be taken to suggest that, of
the four components, clients relate business management training most closely with
their eventual outcome.

Two strategies were tested in order to deal with the endogeneity problem. However,
none of the satisfaction variables were significant when included in outcome models,
and hence have not been reported in the results here. So while there is some evidence
that business management training is seen by clients as one of the more important
elements of the assistance they receive, it has not been possible to further establish that
the quality of service provided on any particular component — small business
management training; advice from business mentor; support given by NEIS provider
and assistance tailored to individual needs or in overall terms — is a significant
determinant of labour market outcomes.


NEIS Business Outcomes

To this point the emphasis has been on outcomes for participants in the scheme. This is
the most common way to frame an evaluation of a labour market intervention and
provides consistent comparisons with outcomes for other forms of assistance. But since
NEIS assists clients to start up a new business, the impact extends to other outcomes for
these businesses, including jobs created for other persons as employees of NEIS
businesses. DEET’s 1993 evaluation found that, on average, one extra person had been
employed for every two NEIS businesses still in operation at either three or twelve
months after cessation of assistance.

NEIS business outcomes are measured through the PPM survey. Figure 5.1 provides a
schematic representation of the business outcomes. Around two-thirds of participants
with known outcomes are in self-employment three months after completion and in
almost all cases they are employed in a business that is mainly or partly the original
NEIS business. In any case, businesses reported as “mainly” the original NEIS business
outnumber those reported as “partly” the original NEIS business by around 8 to 1. Most
of these businesses do not employ additional staff, and for those who did most extra
staff were employed on a part-time basis. The maximum number of extra employees
recorded was 31.

In terms of the number of jobs, the additional employment effect of NEIS amounts to
around 25 per cent on top of the jobs from the primary employment outcomes for
participants. In the data provided the results indicate the employment of an additional
488 jobs (131 full-time and 357 part-time) from 2567 placements. Hence, for every 100
commencements there are, on average, an additional 19 secondary jobs created at the
three-month evaluation point in addition to 81 clients in either self-employment or other
employment. This translates to a 1 to 1 ratio of jobs created to commencements. This
claim must be tempered, of course, to the extent that clients may otherwise have found
work or commenced businesses irrespective of participation in NEIS (deadweight loss)


                                                                                        33
and to the extent that jobs in NEIS businesses have come at the expense of jobs that
would have existed in other businesses (displacement effects). Previous evaluations
have suggested that displacement effects of NEIS could be expected to be minor,
particularly when compared to wage subsidy programs (DEET 1993).

Of those businesses that were mostly or partly the original NEIS business, 19 per cent
further recorded some hours worked by their business partner, and one third reported
some hours worked by their spouse.


Cost Effectiveness
Estimates provided by DEWRSB put the cost per full NEIS placement in the first
contract period at $10 940. In the second tender this could rise to $12 405, comprised
of 52 weeks of adult rate of Newstart ($9 395) plus the average net amount paid to Job
Network providers per NEIS participant ($3 010). These represent upper bounds of the
true unit cost as not all placements run for their full entitlement.

Nearly all observations in the dataset relate to the first contract period. Using the cost
per placement figure for this period and the outcome rates reported above returns a cost
of $13 547 per positive employment outcome for NEIS clients, and $10 965 per
employment outcome when secondary jobs are taken into account.

These are costs per “gross” outcome rather per “net” outcome in the sense that no
allowance is made for the proportion of participants that would have gained
employment anyway. By way of comparison to other forms of assistance, these gross
figures overstate the cost to the public of participation in NEIS by including allowances
paid. This has not been the case in previous evaluations of the cost effectiveness of
interventions. In DEETYA’s 1997 evaluation of the net impact of labour market
programmes, savings in benefit payments were actually deducted from placement costs.
The point is that these allowances that are counted as “costs” under NEIS would have
had to be paid by the government even if the persons did not enter NEIS for as long as it
would have taken them to find other employment or otherwise exit from benefits.

It is hard to gauge exactly how all this can be taken into account in the absence of
information on what outcomes and benefit drawings would have been in the absence of
NEIS, other than to provide cost estimates for a range of scenarios. In calculating costs
in Table 4.8, the original cost estimates for the second tender period have been used, in
order to distinguish between the benefit component and other costs. Ignoring
deadweight loss, then the costs range from $12 453 per primary employment outcome if
only 25 per cent of the benefit payments would have been incurred anyway, to $6 636 if
it is assumed three-quarters of the benefit payment would have been incurred anyway.
These figures are marginally lower when secondary jobs are included, at $10 079 and
$5 371, respectively. The cost per employment outcome for participants rises to as
much as $30 000 if it is assumed that half of the participants would have gained
employment had they not entered NEIS and only one-quarter of the benefits payment
would have been incurred.




                                                                                       34
Table 4.8     Costs per employed outcome: NEIS
                Deadweight loss (proportion who would have found work anyway)
Proportion of   Zero (ie. gross costs) 25 per cent           50per cent
benefits paid   Primary Primary + Primary Primary + Primary Primary +
anyway          only        Secondary only         Secondary only       Secondary
25 per cent         $12 453 $10 079 $18 036 $13 449 $32 697 $20 205
50 per cent         $ 9 544 $ 7 725 $13 824 $10 308 $25 060 $15 486
75 per cent         $ 6 636 $ 5 371 $ 9 611 $ 7 167 $17 424 $10 767


On the basis of the range of these estimates, NEIS would be considered far more cost
effective than those targeted closely to the most disadvantaged jobseekers, such as
Jobskills and New Work Opportunities. To repeat, these estimates are inflated to the
extent that not all NEIS placements run to their full duration. Even so, given that NEIS
is not closely targeted to disadvantaged jobseekers, it seems clear that it is a relatively
expensive way of assisting the participants into work. However, as noted above, the
substitution effects of NEIS are likely to be small, such that jobs gained under NEIS are
significantly less likely to come at the expense of jobs for other job-seekers or workers.
Thus the cost-effectiveness story may be very different if one could estimate the number
of “new” jobs created in the economy through NEIS as opposed to other forms of
assistance.




                                                                                        35
Figure 4.1    NEIS Employment and Business Outcomes

                                NEIS PARTICIPANTS




       Unemployed/NILF              Self-employed            Other employed
           (19.2%)                     (65.8%)                  (14.9%)




                Mainly or partly the                Not the original NEIS
               original NEIS business                     business
                      (96.6%)                              (3.4%)




                  Has additional               No additional staff
                       staff                       (87.4%)
                    (12.6%)




             Average number of
             additional staff employed:

             Full-time: 0.65
             Part-time: 1.74
             Total: 2.38




                                                                              36
5. SURVEY OF PARTICIPANTS

This component of the evaluation involved 15 minute telephone interviews with 350
people who had received NEIS assistance at some time since the introduction of the Job
Network. Participants were asked to respond to a structured questionnaire covering
issues pertinent to the evaluation of NEIS outcomes.

The main objectives of the participant survey were to obtain data on participant
outcomes for a range of intervals since completing NEIS, information to shed light on
deadweight loss and displacement issues, employment creation effects, satisfaction with
providers’ service provision, and various issues that may constrain successful outcomes
under the scheme.

Chapter 5 provided details of participant outcomes based on the full set of DEWRSB
administrative data on NEIS participants. It is not the purpose here to replicate these
results from survey data but rather to explore issues which are not covered by DEWRSB
data.

Characteristics of NEIS participants: representation of disadvantaged job seekers

Both the McClure Report and the Nelson Report argued that one of the important
contributions made by NEIS was its role in providing avenues to employment for
people who are disadvantaged in the labour market, particularly mature-age workers.
The following table shows the number of people participating in NEIS from groups
generally regarded as over-represented in the pool of unemployed.

Table 5.1      Participant characteristics by Job Network service, per cent
                             Job Search      Intensive     NEIS
                              Training      Assistance   May 98 –
                                                         March 01
 > 50 years of age                   6.3           18.7         4.5a
 ATSI                                0.6             5.0         1.5
 NESB                               11.9           21.5         14.7
 Sole parent                         0.5             0.7         0.7
 < Year 10 schooling                 7.4           32.8          8.2
a) Data for NEIS are for over 55 years of age.

The data in Table 5.1 show the characteristics of the sample used for the current survey
in the final column. Data presented for the other Job Network services shown in Table
5.1 are from the Job Network Evaluation Stage One: implementation and market
development. NEIS has a smaller number of mature-age commencements than Intensive
Assistance and is of a similar magnitude to Job Search Training. The representation of
ATSI clients is fairly low compared to Intensive Assistance. Sole parents have only a
small share of commencements, but are typical of the other services shown here. The
share of participants with less than 10 years schooling for NEIS, like Job Search
Training, is substantially lower than Intensive Assistance. However, given the nature of
the scheme and its screening of the most viable candidates this is to be expected. The 6-
8 week course of training may present a barrier to less educated job seekers
participating in NEIS. The same could also be said of NESB job seekers.


                                                                                      37
Employment creation is one of the benefits commonly referred to by proponents of
NEIS. In particular, the McClure Report notes that the scheme provides opportunities
for disadvantaged job seekers to find employment. Table 5.2 below shows the number
of employees by disadvantage type and their share of total employment created by
surviving NEIS businesses. Just under half the employment created goes to
disadvantaged job seekers.

Table 5.2      Employees by characteristic
                                               No.         Per cent (of total employed)
 Age <19                                             18                               9.8
 Age >45                                             33                             18.0
 NESB                                                19                             10.4
 ATSI                                                 9                               4.9
 Total                                               79                             43.1

The ability of NEIS to attract and service disadvantaged clients is broadly in line with
Intensive Assistance, with the notable exception of NESB clients. This represents quite
an equitable outcome, taken at face value. However, in the context of the number of
places available NEIS is not, generally, a large source of employment for the
disadvantaged.

While NEIS businesses also make a useful contribution through the creation of
additional employment opportunities for disadvantaged job seekers, the numbers are
small when compared to the Job Network overall. Between May 1998, the
commencement date of the Job Network, and March 2000 there were 5 594
commencements in NEIS. Data on employment generated by those who are self-
employed, but not in their original NEIS business or who have not been in continuous
self-employment, have not been collected. However, assuming that they follow a
similar pattern as the surviving NEIS businesses, then there most likely would have
been around 225 jobs created by the 350 participants surveyed- 183 by surviving
businesses and 42 by the non-survivors. This equates to about 0.64 jobs for every
commencement. This suggests that secondary employment could be as high as 3 596.
On the basis that approximately 43 per cent are disadvantaged job seekers, then there
are around 1 570 jobs created for disadvantaged job seekers.

To put these numbers into perspective, for the period May 1998 to September 1999
there were 438 500 job seekers who commenced Intensive Assistance. Of these, about
82 000 were over 50 years of age, nearly 22 000 were of Aboriginal and Torres-strait
Islander decent, and over 94 000 were from a non-English speaking background. Thus
NEIS is not an alternative avenue for most disadvantaged job seekers. The role NEIS
plays in secondary employment likewise is of a fairly small magnitude.

Nonetheless, the small scale of NEIS should not detract from the assessment of its
utility as a provider of opportunity to disadvantaged job seekers. Around 87 per cent of
NEIS participants aged over 50 said that they would have found it difficult or very
difficult to find work, or that they would not have found work at all, without NEIS. This
compares to 28 per cent for 18-34 year olds and 58.6 per cent for 35-49 year olds. If the
scheme were to improve its equity focus, it may consider targeting these clients more



                                                                                      38
aggressively, although some consideration would need to be shown for the impact that
business failure can have on the prospects of mature-aged participants.

Table 5.3      How difficult to find work if NEIS had not been available?
                                       18-34       35-49        50+            Total
 Very easily                                32.3       17.3          0.0          18.4
 Quite easily                               18.5       14.4          8.7          14.3
 With some difficulty                       16.9       28.8        15.2           22.6
 With great difficulty                      16.9       26.0        54.3           29.0
 Would not have found work                   9.2        3.8        17.4             8.3
 Don’t know                                  6.2        9.6          4.3            7.4
 Total                                    100.0       100.0       100.0          100.0

Survival Rates
A simple measure of the success of the scheme is the percentage of participants who
have achieved a successful outcome. While a measure of this nature ignores many
issues, such as deadweight loss and displacement, it gives a useful summary measure of
the schemes overall performance. The data presented in Table 5.4 are for the current
status of participants and take no account of how long it has been since participants
completed NEIS support.

Table 5.4     Current employment status of NEIS completers
 Status                                                 Response             Per cent
 Non-survivor                                                202                   57.7
 Not in paid work                                             92                   26.3
 Employee                                                     76                   21.7
 Self-employed, not continuously                              21                    6.0
 Continuously self-employed, not in NEIS business             13                    3.7
 Survivor (Continuously self-employed in NEIS business)      148                   42.3
 Total                                                       350                  100.0

Respondents were also asked to indicate their labour market status at discrete intervals
after they had stopped receiving NEIS assistance. Table 5.5 shows slightly higher
success rates than indicated in Table 5.4, due to the inclusion of people who are
unemployed, but off benefits. The figures do not include those in full-time education,
although this would probably only account for a small percentage of former
participants. The percentage in full-time education at the time of the survey accounted
for less than 1 per cent of the sample.

Table 5.5     Not on benefit at selected intervals
 Interval                                         No.                   Per cent
 3 month                                                    276                    78.9
 6 month                                                    279                    79.7
 9 month                                                    273                    78.0

The evaluation of the NEIS Pilot carried out in 1984/5 showed that 69 per cent of
participants were still in self-employment 3 months after completing NEIS. 7 per cent
were in employment. The current data suggest that, at most, 73 per cent are in self-
employment and around 13 per cent are in employment (either casual, full-time or part-


                                                                                     39
time) 3 months after completing NEIS13. This compares with the 1993 evaluation of
NEIS by Johnstone (1993) showing 64 per cent still in self-employment at 3 months and
a further 9 per cent in other forms of employment. The Johnstone study also reports
outcomes for 12 months post NEIS, with 54 per cent in self-employment and 9 per cent
in paid employment. Although not directly comparable, the current evaluation shows
56.8 per cent are self-employment.

The following tables present data showing the differences in survival rates for
participants according to their reported characteristics. Table 5.6 shows that there were a
higher proportion of non-survivors with health problems, with around 21.3 per cent of
non-survivors saying they had a health problem which affected their work. Just over
10.1 per cent of survivors responded that they had a long-term health problem. These
data suggest that good health ma be an important factor in the success or failure of a
NEIS business.

Table 5.6     Whether have long term health problems by survival status
                      Health problem           None                 Total
                      No.     Per cent   No.     Per cent    No.       Per cent
 Survivor               15        10.1     133        89.9    148           100.0
 Non-survivor           43        21.3     159        78.7    202           100.0
 Total                  58        16.6     292        83.4    350           100.0

In Table 5.7 the survival rates are shown for NESB participants. Just over 70.8 per cent
of NESB participants are classified as non-survivors, compared to 56.6 per cent for
participants from an English speaking background. This contrasts with the literature on
ethnic businesses (Wooden 1990) which suggests a greater propensity to carry out
successful business among (some) NESB migrants.


Table 5.7     NESB by survivor status
                         Survivor                       Non-survivor                   Total
                      No.    Per cent                  No.    Per cent             No.     Per cent
 English speaking
 background            141        43.5                   183            56.5          324           100.0
 Non-English
 speaking                 7       29.2                    17            70.8            24          100.0
 background
 Don’t know               0        0.0                     2           100.0            2           100.0
 Total                 148        42.3                   202            57.7          350           100.0

Respondents were asked whether they needed to have any qualifications to produce
their product or service. Table 5.8 shows that non-survivors typically required no formal
qualification, with 57.4 per cent indicating no formal qualification was required. This
contrasts with 38.5 per cent for survivors. There are many and complex reasons
suggested for this. For instance, is greater intelligence as proxied by qualifications,


13
  The data for (surviving) self-employed outcomes includes participants who may not have been off
NEIS for 3 months at the time of the survey. This means that the data presented most likely will overstate
post-NEIS employment outcomes.


                                                                                                       40
more likely to result in success or are businesses differentiated from others because they
use the specific talents of educated individuals more likely to succeed.

Table 5.8      Qualifications needed to provide product or service
 Qualification                            Survivor                Non-Survivor
                                       No        Per cent      No         Per cent
 Degree or higher                          30         20.3          28          13.9
 Trade certificate                         33         22.3          34          16.8
 No formal training                        57         38.5         116          57.4
 Other qualification                       28         18.9          24          11.9
 Total                                    148        100.0         202         100.0

Table 5.9 shows actual educational attainment by survivor status. Educational
attainment is usually associated with successful labour market outcomes, with the more
educated achieving better outcomes. Other TAFE and Technical Certificate and
Diploma qualifications appear to have achieved slightly higher survival rates than other
categories of educational attainment. The Year 12 and below and Trade qualifications
display slightly lower survival rates. Apart from these there is little to distinguish the
survival rates by educational attainment. Further, there is not the usual pattern of
outcomes improving as educational attainment increases. This says nothing, however,
about the quality of the outcomes, such as levels of debt, income, hours worked and so
forth.


Table 5.9      Survival status by educational attainment
                                          Survivor     Non-survivor     Total
                                        No. Per cent No. Per cent No. Per cent
Year 10 or below                          28     41.2   40       58.8  68    100.0
Year 11 or below                          14     42.4   19       57.6  33    100.0
Year 12 or below                          15     34.1   29       65.9  44    100.0
Trade/apprenticeship/qualification        10     37.0   17       63.0  27    100.0
Other TAFE/Technical Certificate          22     51.2   21       48.8  43    100.0
Diploma                                   27     52.9   24       47.1  51    100.0
Degree                                    22     38.6   35       61.4  57    100.0
Post Graduate                              9     39.1   14       60.9  23    100.0
Other                                      1    100.0    0        0.0   1    100.0
Don't know/not answered                    0       0.0   3      100.0   3    100.0
Total                                    148     42.3  202       57.7 350    100.0

Age also plays an important part in the labour market outcomes of job seekers. Youth
and inexperience are normally associated with poorer outcomes, in terms of higher
unemployment rates. Mature-age job seekers also have a disproportionately larger share
of unemployment. However, for this sample, terms of survival rates, age does not seem
to have a great influence, with the exception of the youngest cohort in Table 5.10.
However, the results for this cohort should be treated with caution, given the very small
number involved.




                                                                                       41
Table 5.10     Age by survivor status
                       Survivor             Non-survivor                     Total
                    No.     Per cent        No.    Per cent          No.          Per cent
21 to 24 years           3       23.1           10      76.9                13         100.0
25 to 34 years          34       43.0           45      57.0                79         100.0
35 to 49 years          76       41.8          106      58.2               182         100.0
50 to 54 years          21       45.7           25      54.3                46         100.0
55 to 59 years          10       47.6           11      52.4                21         100.0
60 to 64 years           4       57.1            3      42.9                 7         100.0
(Refused)                0        0.0            2     100.0                 2         100.0
Total                  148       42.3          202      57.7               350         100.0


Start-up and continuing capital requirements of NEIS participants
The design of NEIS and the nature of the job seekers it services means that business
start-ups will mostly be small or micro businesses. The capital requirements for
businesses of this nature are also relatively small. Indeed, this is a feature of NEIS as it
allows asset poor and cash strapped job seekers to participate in business. Nonetheless,
the ability to access even small amounts of capital may constrain the ability of
participants to successfully establish a business. Table 5.11 shows the percentage of
participants who put money in to their business to get it established. The survivability of
the business does not appear to be dependent on whether the participant has raised
capital or not, with roughly equal proportions accessing capital to start their business.

Table 5.11     Whether start-up capital required by survival status, per cent
                           Non-survivors         Survivors               Total
                           No.    Per cent     No.    Per cent    No.       Per cent
 Raised capital to start      94       46.5      70        47.3      164         46.9
 None                        108       53.5      78        52.7      186         53.1
 Total                       202     100.0      148      100.0       350        100.0

Although both survivors and non-survivors accessed capital in about equal proportions
the same cannot be said for the quantity they were able to raise. Table 5.12 shows the
amount and source of capital for survivors and non-survivors. For virtually every source
of funds survivors were able to, on average, obtain substantially higher amounts of
money to start their business. Whether this is the ‘cause’ of success is open to question.
Possible factors at work are that surviving businesses were not constrained by a lack of
capital. However, it may also be that the businesses that were most likely to succeed
also required larger amounts of capital to get established. Finally, the assets available to
participants who survived may have been larger. Unfortunately the data do not allow
distinction between the various scenarios, because it only indicates what participants put
in, on average and not their potential to raise funds.




                                                                                         42
Table 5.12      Average funds raised by source and survivor status
                                           Survivor               Non-Survivor
 Source                               No.           $          No.           $
 Redundancy payment                        6        17 833          3          5 500
 Savings                                  28        35 370         39          4 345
 Sale of assets                            4        21 350          4          5 325
 Loan from bank/credit provider           18        31 294         24        13 457
 Loan from family/friend                  14          8 654        16          8 237
 Other                                     8        16 800         10        21 028
 Not stated                                -            n.a.        2            n.a.

Respondents were also asked whether or not they put additional funds into the business
after it was established. Of interest were the reasons why participants did not put further
funds into the business. About two in every three participants chose not to put in
additional funds. Of these, about 11.2 per cent stated that the reason they did not put in
additional funds was because they could not raise the money from any source. The
response was slightly higher for non-survivors than for survivors.

Table 5.13    Main reasons for not putting further funds into business
 Reason                                  Survivor               Non-Survivor
                                     No.       Per cent       No.       Per cent
 Could not get loan or raise               8         8.7           18         12.9
 money from any other source

 Did not want to commit further               18         19.5            38           27.1
 funds to the business

 Other                                        56         60.9            84           60.0
 Don’t know                                   10         10.9             -              -
 Total                                        92        100.0           140          100.0

Table 5.14 shows the housing status of those who could not raise further funds for their
business. The majority (over 55 per cent) were renting, which suggests that they had
insufficient assets to borrow against. Table 5.15 shows the survival status of those who
could not obtain further funds.

Table 5.14   Housing status of participants who could not raise further funds for
NEIS business
                                                          No.         Per cent
 Rent/board                                                   20              55.6
 Mortgage                                                      7              19.4
 Own house                                                     5              13.9
 Not stated                                                    4              11.1
 Total                                                        36            100.0




                                                                                        43
Table 5.15    Survival status of participants who could not raise further funds
                                                            No.          Per cent
 Non-survivor                                                   28               77.8
 Survivor                                                         8              22.2
 Total                                                          36             100.0

Participants were asked if they would have preferred their NEIS allowance as an up-
front lump-sum payment (Table 5.16). Just over 38 per cent of non-survivors said they
would prefer their NEIS allowance to be paid in this way, compared to 24.3 per cent for
survivors. About a third of those who required start-up capital indicated that they would
have preferred the allowance as a lump-sum payment.


Table 5.16   Whether would have preferred NEIS allowance as a lump sum
payment for start-up capital used to establish business
                  Survivor               Non-survivor       Start-up capital
              No.       Per cent       No.       Per cent  No.        Per cent
 Yes               36        24.3           77        38.1     55            33.5
 No               112        75.7         125         61.9    109            66.5
 Total            148      100.00         202      100.00     164         100.00

The main reason for self-employment schemes offering an up-front payment instead of
a weekly allowance is to overcome the constraints imposed on participants with little or
no assets. It is generally accepted that capital markets are imperfect, as result, clients
who cannot put up sufficient ‘hurt money’ may find it difficult to obtain a loan for their
business, even when they have a guaranteed cash flow (through the payment of a
weekly allowance).

Table 5.17 shows participant preference for a lump-sum payment by their housing
status. A greater percentage of participants who are renting indicated that they would
prefer the allowance up-front than did those who have a mortgage or own their own
home outright. Whether payment of the allowance in this way is desirable is another
matter. Where clients default and stop running their business, they would then become
eligible for income support through the social security system. In effect this would be
double dipping and would present a substantial risk of moral hazard.

Table 5.17  Whether would have preferred NEIS allowance as a lump-sum
payment by housing status
               Rent/board          Mortgage             Own house
             No.       Per cent  No.     Per cent   No.       Per cent
 Yes             62         41.3     31       27.9      14          19.4
 No              88         58.7     80       72.1      58          80.6
 Total          150       100.00   111     100.00       72        100.00


Deadweight loss
Deadweight loss refers to the funding of an activity that most likely would have
occurred had the assistance not been provided. In the context of NEIS, deadweight loss
is when a participant would have started up a business under their own auspices,


                                                                                       44
without the NEIS allowance. The way this has been determined in other evaluations of
self-employment schemes is to ask participants whether they would have set up their
business without the government provided allowance (see, for example, Maung and
Erens 1991).

Table 5.18 shows that 73.0 per cent of survivors say that they would have started a
business without NEIS, compared to 54.0 per cent for non-survivors. Overall there were
62.0 per cent of NEIS participants who said that they would have started a business
without assistance. The difference in results may be influenced by whether participants
have had a positive experience in running their business and so should be treated with
some caution. However, the figure for non-survivors suggests that the deadweight loss
is quite high. Evaluation of self-employment schemes in the UK have put deadweight at
about 40 per cent, a figure that was considered very high (PA Cambridge Economic
Consultants 1990).

Table 5.18    Whether would have set up business straight away or later by
survival status
                          Total            Survivor          Non-survivor
                     No.    Per cent   No.    Per cent     No.    Per cent
 Yes                 217          45.2 108           73.0 109           54.0
 No                  114          51.6  29           19.6   85          42.1
 Don’t know           19           3.2  11            7.4    8            4.0
 Total               350         100.0 148          100.0 202          100.0

Table 5.19 shows the extent of deadweight by business experience. The lower the level
of business experience participants have, the less likely they are to have set up their
business without NEIS assistance. Thus, the extent of deadweight loss is less for those
with less business experience.

Table 5.19  Would have started a business without NEIS by business experience
                    Lots         Some         Little     None         Total
 Yes                     67.1       68.8           58.2     45.0           62.0
 No                      24.3       26.2           40.5     46.7           36.6
 Don’t know               8.6        5.0             1.3      8.3           5.4
 Total                 100.0       100.0         100.0     100.0          100.0

Another way of assessing the extent of deadweight loss is to ask whether participants
would have participated in the scheme if the allowance was lower. Around 60 per cent
of survivors who would have started their business if the allowance was lower,
compared to only 45.5 per cent for non-survivors. Table 5.20 shows the work history of
participants and whether they would have started a business if the NEIS allowance was
lower. Over 70 per cent of those who had previously worked part-time indicated they
would still have established their business if the allowance was lower. This is higher
than the 52.0 per cent recorded for the whole sample.

Table 5.20    Whether would participate if NEIS allowance was lower by work
history
 Current NEIS status      Yes     Per cent No Per cent Total           Per cent
 Survivor                    90       60.8     58      39.2     148        100.0
 Non-survivor                92       45.5    110      54.5     202        100.0


                                                                                    45
 Total                            182        52.0    168        48.0       350         100.0

 Work history
 Previous full-time /self
 employed                        157        51.6     147        48.4     304         100.0
 Previous part-time
 /casual                           15       71.4       6        28.6       21        100.0
 Never employed                    10       40.0      15        60.0       25        100.0
 Total                           182        52.0     168        48.0     350         100.0
Table 5.21 examines the same issue by family status. There are no major differences
when the data are examined by family status, with the exception of participants who are
sole parents. 73.1 per cent of sole parents participants indicated that they would not
have participated if the allowance paid was lower. The usual caveats apply with respect
to the small number of respondents in this category. One possible reason for such a
strong negative response is the different financial constraints faced by sole parents. The
ability to obtain adequate and affordable child-care may also be a factor.

Table 5.21     Whether would participate if NEIS allowance was lower by family
status

 Family status                  Yes     Per cent      No      Per cent    Total    Per cent
 Young single/couple no
 kids                              51        52.0       47        48.0        98       100.0
 Young family                      27        57.4       20        42.6        47       100.0
 Middle/mature family              64        56.1       50        43.9       114       100.0
 Single parent                      7        26.9       19        73.1        26       100.0
 Older couple                      16        47.1       18        52.9        34       100.0
 Older single/widowed              15        53.6       13        46.4        28       100.0
 Total                            180        51.9      167        48.1       347       100.0


Participant Outcomes

Employment status

Participants were asked what their labour force status was for the 3, 6 and 9 month
intervals after they had ceased to receive NEIS assistance. Although the primary
objective for a self-employment scheme is to place people into self-employment, other
outcomes are also important, such as being in a full-time job. However, given that some
participants most likely would have found employment quite easily without NEIS,
finding employment suggests that there has been some deadweight loss. Tables 6.22 to
6.27 show the outcomes for 3, 6 and 9 months after cessation of NEIS by educational
attainment and by age. The employed category includes self-employment. The observed
pattern of employment status by educational attainment is pretty much as expected- the
higher educational attainment levels have higher employment levels. Although it is
difficult to say the three time intervals from these data, it may be that success after three
months is a good indicator of likely success at six or nine months.




                                                                                          46
Table 5.22    Employment status 3 months after completing NEIS by educational
attainment
                                    Year 11 or   Year 12   Trade/     Degree/
                                      below                TAFE       Diploma
 Employed                                 50.0      65.5       54.1        70.4
 Unemployed, on benefit                   27.6      17.2       27.0        15.5
 Unemployed, off benefit                   1.7       0.0        8.1         2.8
 Waiting to start a new job                1.7       6.9        2.7         1.4
 Other                                    19.0      10.3        8.1         9.9
 Total                                 100.00      100.0     100.00     100.00


Table 5.23    Employment status 6 months after completing NEIS by educational
attainment
                                    Year 11 or   Year 12   Trade/     Degree/
                                      below                TAFE       Diploma
 Employed                                 55.2      65.5      54.1         73.2
 Unemployed, on benefit                   20.7      20.7      27.0         14.1
 Unemployed, off benefit                   1.7       0.0       8.1          1.4
 Waiting to start a new job                1.7       3.4       2.7          0.0
 Other                                    20.7      10.3      10.8         11.3
 Total                                 100.00      100.0    100.00       100.00


Table 5.24    Employment status 9 months after completing NEIS by educational
attainment
                                    Year 11 or   Year 12   Trade/     Degree/
                                      below                TAFE       Diploma
 Employed                                 51.7      58.6      59.5         67.6
 Unemployed, on benefit                   22.4      27.6      21.6         18.3
 Unemployed, off benefit                   0.0       0.0       5.4          2.8
 Waiting to start a new job                1.7       3.4       2.7          0.0
 Other                                    24.1      10.3      10.8         11.3
 Total                                 100.00      100.0    100.00       100.00


Table 5.25     Employment status 3 months after completing NEIS by age
                                      18-24       25-34     35-49      50+
 Employed                                 70.0       60.0      61.3       56.4
 Unemployed, on benefit                   10.0       24.4      20.8       23.1
 Unemployed, off benefit                   0.0        0.0       5.7        0.0
 Waiting to start a new job               10.0        0.0       2.8        2.6
 Other                                    10.0       15.6       9.4       17.9
 Total                                  100.00     100.0    100.00      100.00




                                                                            47
Table 5.26     Employment status 6 months after completing NEIS by age
                                      18-24        25-34     35-49             50+
 Employed                                 50.0         66.7     60.4              53.8
 Unemployed, on benefit                   20.0         22.2     19.8              25.6
 Unemployed, off benefit                   0.0          0.0      3.8               0.0
 Waiting to start a new job               30.0          0.0      1.9               2.6
 Other                                    10.0         11.1     14.2              17.9
 Total                                  100.00       100.0    100.00            100.00


Table 5.27     Employment status 9 months after completing NEIS by age
                                      18-24        25-34     35-49             50+
 Employed                                 50.0         66.7     60.4              53.8
 Unemployed, on benefit                   20.0         22.2     19.8              25.6
 Unemployed, off benefit                   0.0          0.0      3.8               0.0
 Waiting to start a new job                0.0          0.0      1.9               2.6
 Other                                    30.0         11.1     14.2              17.9
 Total                                  100.00       100.0    100.00            100.00


Hours worked

The number of hours worked by participants, on average is around 42 per week. The
greater proportion of all categories work between 30 and 50 hours, as expected. Those
with the highest level of educational attainment also have the greatest percentage
working very long hours. Figure 6.1 shows the hours worked by participants within
each educational attainment level expressed as a percentage of each level. About 17 per
cent of those with a degree/diploma are working 41-50 hours and a further 17 per cent
are working 51-60 hours.

Figure 5.1     Hours worked by educational attainment, per cent




                                                                                    48
Earnings

As discussed in the literature review European studies have shown self-employment to
result in low income for many participants. The following sets out the findings from this
survey and examines the distribution of net earnings. Further details of the distribution
of costs, earnings and net earnings can be found in Appendix B.

Surviving participants were asked to indicate what gross weekly earnings and costs
were. From this the net costs were calculated. Given that the sample includes a wide
range of NEIS completion dates, then the relative maturity of the individual businesses
will vary considerably. This is likely to influence the dispersion of net earnings, as
newer businesses will generally have lower turnover. Non-surviving participants were
asked a similar question, except here they are being asked to recall what turnover was
when they ceased their business. There are a number of factors that will affect the
dispersion of earnings of non-surviving businesses in this scenario. It could be expected
that non-surviving businesses would not have extreme outliers on the positive side,
since it would be unusual for participants to have very high earnings and then not
continue in the business (unless they sell the business). The other factor that may affect
non-survivor responses is fallible recall, given that their last week of trading may have
been a considerable time ago.

The total number of responses from which net earnings could be calculated came to
233. Three positive outliers were removed, two of which were clearly not valid
responses. The third was extremely high and not considered representative of the
sample, this resulted in 230 responses from which to calculate average net earnings. For
all participants, average net earnings were $438, the median was $120 and 75 per cent
of observations had net earnings below $450 per week. For survivors median net
earnings were $250 per week and the average was $780 (2 outliers removed). Non-
survivors had average net earnings (1 outlier removed) of just $179 and a median of
$25.


Figure 5.2      Net earnings by survivor status
Figure 5.2 shows the distribution of earnings for survivors and non-survivors. It is clear
that the net earnings of non-survivors are concentrated in the lower end of the earnings
distribution. The other area for concern is the percentage of survivors who have very
low earnings. There were about 73 per cent of non-survivors earning $300 or less just
before they ceased trading. Around 52 per cent of survivors are currently earning less
than this.

The low level of net earnings for many of the survivors dampens the optimism with
which survival rates are received.


Debt levels

One of the potential downsides of self-employment programmes is the potential for
participants to end up in debt as a result of business failure. Non-survivors were asked
whether they ended up financially worse of than when they started the business. Table
5.28 shows that just less than half of non-survivors ended up with less than they put into


                                                                                       49
    the business. There is some difference between the outcome depending on whether the
    participants had to put money in to start the business. About 63 per cent of those who
    put start-up capital into the business ended up with less than they put in compared to
    34.3 per cent for participants who did not put in start-up capital.

    Table 5.28    Breakeven status by start-up capital raised for non-survivors
                             Start-up capital          None                 Total
                                required
                             No.      Per cent    No.     Per cent    No.      Per cent
     More money than
     you put into the              9        9.6      10         9.3      19          9.4
     business
     Less than you put in        59        62.8      37        34.3      96         47.5
     About the same as
     you put in                  22        23.4      47        43.5      69         34.2
     Don’t know                    4        4.3      14        13.0      18          8.9
     Total                       94      100.0      108      100.0      202        100.0

    Non-survivors were also asked whether they were in debt as a result of having run their
    NEIS business. There were 23 per cent who indicated that they were now in debt. The
    worst affected appear to be those with young families and sole parents. The distribution
    of debt by level is shown in Figure 5.3.

    Table 5.29      Debt by family status, per cent
                        Young        Young Middle        Single   Older     Older        Total
                     single/couple family mature         parent   couple    single/
                        no kids               family                       widowed
In debt                       16.7     35.7     23.1       44.4      0.0         22.2       23.0
Not in debt                   81.5     64.3     75.4       55.6     94.1         77.8       75.5
Haven’t finalised
                               1.9         0.0     1.5      0.0      5.9          0.0           1.5
settlement
Total                        100.0   100.0       100.0    100.0   100.0         100.0      100.0

    Figure 5.3      Distribution of debt

    As much as being in debt as a result of having started a business with NEIS assistance is
    not a desirable outcome, it must not be considered in isolation. Many participants
    indicated that they would have started a business without the assistance provided by
    NEIS. There are 54 per cent of non-survivors who said they would have started a
    business without NEIS assistance with about a quarter of these now in debt. Arguably
    NEIS may have still resulted in them performing better than they would have otherwise.
    As Table 5.30 shows, about half of the participants who are now in debt would have
    started a business without NEIS. The main concern is the group who would not have
    started their own enterprise without assistance. Not only have they not had a positive
    outcome, they also have a debt to pay off.

    Table 5.30      Debt by whether would have started business without NEIS
                          Would have started Would not have started       Total
                        business without NEIS business without NEIS
                           No.       Per cent   No.        Per cent   No.    Per cent


                                                                                          50
In debt                     23        48.9          24         51.1       47        100.0
No debt                     83        54.6          69         45.4      152        100.0
Haven't finalised            3       100.0           0          0.0        3        100.0
the settlement yet
Total                      109         54.0         93         46.0      202        100.0


Displacement effects
As discussed in the literature review, the methodology used for this evaluation is not
able to provide an accurate and reliable indicator of displacement effects. Where there
have been studies undertaken to determine the extent of displacement effects it has been
found to be quite small. Survey questions do shed some light on possible displacement.

Participants were asked whether there were other businesses offering similar products or
services in the area where they operate and how many there were. Just under 40 per cent
of survivors said that there were competing businesses. About half the survivor sample
said that there were competing businesses. The presence of competing businesses
suggests that there may have been at least some displacement. However, not too much
should be read into the fact that a higher percentage of surviving businesses face
competition in their area of operation. This may just be an indication that surviving
businesses are more aware of competition. Indeed, their awareness of competition may
be one factor contributing to their success. The other factor that may contribute to the
difference is fallible recall of non-survivors.

Table 5.31     Existence of competitors by survival status
                    Non-survivors           Survivors                    Total
                    No.     Per cent     No.       Per cent        No.       Per cent
Yes                     80       39.6          73       49.3          153           43.7
No                     116       57.4          73       49.3          189           54.0
Don't know               6        3.0           2        1.4            8             2.3
Total                  202     100.0         148       100.0          350          100.0


Employment Creation
One of the benefits of NEIS that is commonly regarded as an important component of
the overall success of the scheme is the additional employment it creates. In the
stakeholder interviews it was suggested that employment creation should be included as
a component of the key performance indicators (KPI). The following sets out the
additional employment created by NEIS businesses.

Survivors were asked how many full-time, part-time and casual staff they have. These
are shown in Table 5.32. Most of the employment created is casual in nature. In all there
are 183 people working for the surviving businesses. The hours worked are not known
exactly but can be established. The data presented in Table 5.32 include any
employment generated by businesses that are still in operation. That is, it concludes
self-employed participants who are no longer operating their NEIS business. Assuming
that these employ people in much the same proportions as the surviving businesses, then
there would be a further 42 employees not accounted for in Table 5.32- 6 full-time, 5
part-time and 31 casual.


                                                                                      51
The data above suggests that there are about 0.52 jobs created for every NEIS
participant, or 0.64 if all businesses still agreeably are included. As Table 5.32 shows
though, very few employers actually have paid staff. About 75 per cent of employment
is created by just under 18 per cent of businesses still operating. Put another way, as few
as 7.4 per cent of NEIS participants account for 75 per cent of employment. The
regional distribution of the employment is not known, but given the small number of
businesses that are creating the extra employment it is doubtful that it is widespread.

Extrapolating from the survey data, and given that there were 5 594 participants that
completed NEIS between May 1998 and March 2000, then there have been around 5
600 additional jobs created by NEIS. However, it depends on the extent of displacement
as to what the net employment created is.

Table 5.32 also shows the level of family employment in surviving NEIS businesses. Of
the 27 full-time employees Table 5.34 were family members of NEIS participants.

Table 5.32     Employees by employment status
                 No.        Per cent    Average               Employers       Family
 Full-time            27         14.7         .18                     16                9
 Part-time            21         11.5         .14                     15                5
 Casual              135         73.8         .91                     26              >12
 Total               183        100.0           -                       -               -


Table 5.33    Employees by various characteristics
                                        No.               Per cent (of total employed)
 Age <19                                      18                                    9.8
 Age >45                                      33                                   18.0
 NESB                                         19                                   10.4
 ATSI                                           9                                   4.9
 Total                                        79                                   43.1
N.B. total employed is 183

Table 5.34 shows the hiring intentions of surviving NEIS participants. A further 89
employees are expected to be employed over the next six months. About 44 per cent of
these are casual, 31 per cent full-time and 25 per cent part-time. This could be a
reflection of newer businesses maturing.

Table 5.34     Employment intentions of surviving NEIS businesses over the next 6
months
                                                        No.                 Average
 Full-time                                                       28                     .19
 Part-time                                                       22                     .15
 Casual                                                          39                     .26
 Total                                                           89                       -




                                                                                        52
Participant satisfaction with NEIS services
Participants were asked to indicate how satisfied they were with the various aspects of
NEIS. Results are largely as expected, in the sense that a larger percentage of survivors
are very satisfied with the services provided and a larger percentage of non-survivors
are very dissatisfied with the various services provided. The most striking feature of the
data in Table 5.35 is the general satisfaction with the Small Business Training provided
under NEIS, with over 80 per cent of non-survivors and nearly 90 per cent of survivors
saying they were satisfied or very satisfied with the course.




                                                                                       53
 Table 5.35    Level of satisfaction with NEIS services by service type, percentage
 of participants
                    Very Satisfied   Satisfied      Dissatisfied    Very Dissatisfied
Service           Survivor Non- Survivor Non- Survivor Non- Survivor Non-
                           survivor       survivor        survivor           survivor
Small business        43.2      36.5 46.6      43.8   9.5      17.2      0.7      2.5
management
training
Advice       from     37.8      35.6 35.8      33.7  16.2      17.3    10.1      13.4
your business
mentor
Support given         33.8      34.2 42.6      34.2  12.2      20.3    11.5      11.4
to you by your
NEIS provider
Assistance            29.1      24.3 44.6      46.5  16.2      19.3    10.1       9.9
tailored to your
individual needs
Overall quality       40.5      30.2 46.6      50.5   9.5      14.4      3.4      5.0
of     assistance
and service




                                                                                 54
6. SURVEY OF PROVIDERS

Providers were asked questions in relation to the operation of NEIS and whether they
thought various aspects of it were problematic. In all there are 44 providers of NEIS
Australia-wide. Given the very small number of providers, only a small selection of
cross-tabulated information is provided here.

Providers were asked whether they thought the participant and business eligibility
criteria were appropriate. Only two providers thought the participant eligibility criteria
were too loose and one provider thought the business eligibility criteria were too loose.
The majority felt that participant eligibility were about right. There was less consensus
on business eligibility criteria, with 17 out of 44 providers saying the criteria were too
tight. This is not unexpected, since the more lax the criteria the lower the administrative
burden to obtain a commencement.

Table 6.1    Whether participant eligibility criteria are appropriate
 Too tight                                                  10
 Too loose                                                   2
 About right                                                31
 Don’t know/not answered                                     1
 Total                                                      44


Table 6.2    Whether business eligibility criteria are appropriate
 Too tight                                                 17
 Too loose                                                  1
 About right                                               26
 Total                                                     44

Stakeholder interviews revealed that there is an excess demand for the very limited
places on offer for NEIS. However, just over half of providers said they had no
difficulty meeting the demand for NEIS places. This suggests that there may be popular
support for NEIS in some areas and not others. It may also lend support to the
argument that NEIS is inadequately promoted, or that there are inadequate referrals
from Centrelink. There were nine out of the 44 providers having difficulty meeting
their quota of places. This may be due to referrals, or, it may also be a result of
unfavourable economic conditions in the relevant regions. Alternatively, it may be due
to the ability of the provider to market its services. The extent to which this is driven by
costly provision to remote and rural areas needs to be considered. Providers may have
underestimated the costs of adequately servicing these areas.


Table 6.3    Whether experiencing difficulty meeting the demand for places
 Yes                                                      20
 No                                                       23
 Don’t know/not answered                                   1
 Total                                                    44




                                                                                         55
Table 6.4    Whether provider has trouble meeting quota for places under the
NEIS contract
 Yes                                                     9
 No                                                     35
 Total                                                  44

Although there was some concern expressed about the quality of NEISACs in the
stakeholder interviews, the survey of providers does not seem to support this. Only two
of the 44 providers said NEISACs adversely affected the outcomes of participant
proposals. This is not to suggest that there is no issue with regard to NEISAC quality
and consistency. But it does suggest that a radical overhaul of the current arrangements
with NEISACs is not required. Rather, some fine tuning would be more appropriate.


Table 6.5      Whether NEISACs adversely affect outcomes
 Yes                                                            2
 No                                                            42
 Total                                                         44

As discussed in the participants and stakeholder sections, there is some interest in
whether the scheme is targeted at the right participants. There were 15 of the 44
providers who felt that it was not. Interestingly, most of those who thought it was not
appropriately targeted gave reasons that suggested NEIS eligibility should be widened.
That is, the concern is not whether disadvantage clients are adequately represented.

Table 6.6      Whether NEIS is targeted at the appropriate groups
 Yes                                                       29
 No                                                        15
 Total                                                     44

Providers are also able to offer their services to non-NEIS participants for a fee, many
do. There are 29 of the 44 providers doing this for a fee, a further 11 do so as a
community service.


Table 6.7       Whether provides services related to business establishment to non-
NEIS clients
 Yes, for a fee                                              29
 Yes, as a community service                                 11
 No                                                            4
 Total                                                       44

The structure of payments can also affect the viability of providers. The frequency,
timeliness and weighting of payments (for commencements and outcomes) can all have
some bearing on provider finances. Over half of the providers thought the structure of
payments were inappropriate. There was no clear consensus as to what aspect of the
payment structure needed addressing. However, nine of the 24 who thought the
structure of payments was inappropriate responded that they should get payment for
preparing applicants prior to the NEIS programme. Given the level of payments that
providers receive at the start of each year against contracted milestones, this claim may


                                                                                      56
seem difficult to justify. However, in the first ESC providers were paid 40 per cent of
the total contract value at the start of the contract period. Under the current ESC
providers are only paid 10 per cent of the contract value up-front.


Table 6.8     Whether structure of payments is appropriate
 Yes                                                     20
 No                                                      24
 Total                                                   44




                                                                                    57
7. STAKEHOLDER INTERVIEWS

Issues Identified by Stakeholders
As part of the evaluation of NEIS, various stakeholders were interviewed to obtain their
opinions on the operation of NEIS. The following is a summary of the main points.


Is NEIS targeted at the right people?
Viewpoints on this issue were mixed. One view is that the main criterion for NEIS
should turn solely on employment and output created and the concomitant net gains
achieved in terms of budget outlays (decreased welfare transfers and increased tax
receipts). Thus, the appropriate targets are not the disadvantaged, but rather those who
are most likely to successfully operate a business. Most of the stakeholders felt that the
disadvantaged were adequately represented in NEIS.


It was a commonly held view by stakeholders that the main objective of NEIS was to
put unemployed people into self-employment and get them off government support. As
one provider put it, we “...see our role as converting people from beneficiaries to
taxpayers”. To this end it was argued that the clients targeted should rightly be the
unemployed who are most likely to succeed. It is open to question as to whether this
would, in practice, most likely be the disadvantaged job seeker.



Eligibility Criteria
Generally, stakeholders seemed comfortable with the participant and business eligibility
criteria and their application. One suggestion was that DEWRSB provide rulings on
eligibility prior to participants being offered a place on a training course. This already
takes place in some States and helps avoid the cost and disappointment of a rejected
application.



Self-Employment Development Scheme (SEDS)
Of some interest is the difference in eligibility criteria between the SEDS programme
and NEIS. It was thought that the difference in eligibility criteria between the two
schemes was difficult to justify. It was suggested that the participant eligibility criteria
of one day on benefits for NEIS should also apply for SEDS participants, especially for
those who have just been retrenched. The rationale was that it would be of enormous
benefit to “... get them while they have good stocks of motivation and capital”, as this
would be beneficial for their long-term outcome.




                                                                                         58
Integrated Employment System (IES)
The Integrated Employment System (IES) is used to determine whether job seekers
meet participant eligibility criteria by both DEWRSB contract managers and providers.
Some considered the timeliness of data that are available on the IES to be an issue. This
has, on occasion, led to participants being rejected late in the process, due to them not
being picked up in the first instance by the IES as being ineligible. Some stakeholders
considered that if participants are less than forthright in disclosure of their details, then
the system may not identify their eligibility correctly. It was also noted that some
aspects of the IES present difficulties for providers working across multiple sites. This
creates unnecessary paper work for providers and is onerous.



NEIS Advisory Committees (NEISACs)
One of the key components of the NEIS scheme is the evaluation of participant
proposals by NEISACs. The NEISACs are convened by NEIS providers when they
have proposals to submit. The NEISACs are comprised of people nominated by the
provider as well as a representative nominated by the local Area Consultative
Committee (ACC). Concern was expressed over variation in the quality and
consistency of NEISACs.
Under the current arrangements DEWRSB contract managers have less information to
work with when making their assessments of business proposals. Although summary
information is supplied, arguably it is insufficient. The issue, though, is one of
DEWRSB deciding to what extent it needs to be involved in evaluation of proposals.
The role it plays in the new competitive framework is that of administrator. To this end
there, perhaps, should be more reliance placed on provider assessments. If this approach
were adopted more emphasis on incentives for outcomes would be required.
An alternative approach suggested to overcome the quality and consistency problems
with NEISACs is to run workshops with ACC nominees. Another initiative undertaken
by the Victorian South East Development Area Consultative Committee in conjunction
with DEWRSB has been the development of a nationally accredited course, the NEIS
Mentor And Advisory Committee Course.



Mentors
A common complaint among stakeholders was that some mentors do not have
appropriate or adequate business skills to fulfill their roles. Although there is no hard
evidence that the quality of mentoring is suspect, there is anecdotal evidence that some
people are not being properly serviced. However, it is difficult to gauge the extent of
the problem.
Another alternative to DEWRSB monitoring is to require mentors to undertake the
NEIS Mentor And Advisory Committee Course or a similar programme. Requiring
mentors to complete a course of this nature has merit, but it may come at a cost. For
instance it may deter experienced business people from contributing their expertise to
NEIS. Whether DEWRSB should be responsible for this, or whether it should be left to
the provider’s discretion is open to question.


                                                                                          59
Rural and Remote Issues
There is some concern about whether clients in remote areas are adequately serviced.
There is a tendency for providers to concentrate their efforts in the regional centres
where they are located. In the words of one stakeholder: “There are some good business
opportunities in these areas and in many ways in an area with a small labour market
self-employment may be the only viable alternative to staying on benefits.”


One of the issues identified in regional areas is that there is a strong element of
‘seasonality’ in their economic activity. Tourism and agriculture are obvious examples
of this. Seasonal activity results in periods where cash flow is as “dead as a door nail”.
Thus, it does not help the survivability of a business start-up to be starting at a period of
foreseeable low demand. However, providers have to be mindful of performance against
milestones (as well as other performance measures). One solution would be to allow
milestones to be concentrated around turning out participants to coincide with high
seasonal activity.


It was suggested that there was a lack of coverage of NEIS in the marketing of Job
Network services, and that this impacted on the ability to recruit clients in some areas.
Although at the aggregate level there may be an excess of applicants for the available
places at certain sites and regions there are quotas not being filled.



Centrelink
The role of Centrelink in the referral of clients to NEIS providers came in for strong
criticism from most stakeholders. Centrelink is the front-end of the various Job Network
services and, as a consequence, is critical to the success of services like NEIS. Its role in
the process is to direct ‘clients’ to services that match their circumstances and that will
provide the most appropriate ‘intervention’. Stakeholders suggested that this is not
happening satisfactorily for some potential NEIS participants. The main criticism is that
Centrelink is “under-informed” about NEIS. It was claimed that this is a “cultural
problem” within Centrelink. Centrelink was criticised for not referring enough
participants.



Key Performance Indicators (KPI)
Key performance indicators provide a summary measure of how a given provider is
performing. The indicators that are used are specified in a contractual agreement
between the Department and individual providers. There are four such indicators
covering different aspects of provider performance, all of which relate to specific
participant outcomes.
There was some concern raised about the value of the various KPIs and the problems
that they raised in relation to the operation of the scheme, particularly in
regional/remote locations. Stakeholders were asked whether they thought there were


                                                                                          60
viable alternatives or additional measures that could be used to monitor provider
performance. Additional employment created was seen as a very important benefit from
the scheme. Viewpoints varied as to whether this could be easily incorporated into
existing measures of performance.



Lump Sum Payments-Low Interest Loans
All stakeholders were asked whether they thought that the NEIS allowance would be
beneficial if it were paid as an ‘up-front payment’, rather than on a fortnightly basis as
is currently the case. The basis for doing so is that it helps overcome the inability of
some clients to obtain finance, due to their lack of security. All rejected this on the
grounds that it would be difficult for participants to manage their cash flow.
The consensus view was that if the participant’s business plan was well prepared and
the requirement for start-up capital well founded, then the participant should be able to
raise the capital through normal lending channels under commercial conditions.




                                                                                       61
8. ANALYSIS OF FINDINGS AGAINST TERMS OF REFERENCE

In this section the findings are presented against the terms of reference. Additional
issues identified in the process of the evaluation are also discussed.


Effectiveness of NEIS
Terms of Reference
   1. Determine the effectiveness of NEIS in achieving the objectives set for the
       programme:

       - Assess the cost-effectiveness of NEIS and identify the associated costs and
       savings to the Commonwealth;

       - Provide an assessment of the proportion of NEIS Participants still in business
       after they cease to receive support from the scheme at 3 month, 6 month and 12
       month intervals.


Cost effectiveness and savings to Commonwealth

The conclusion regarding the cost effectiveness of the NEIS scheme depends very much
on the position taken on what the deadweight loss associated with the scheme is. This,
in turn, rests on one’s view as to what the scheme’s objectives are. Evaluating NEIS in
the same terms as most other forms of intervention — that is, whether or not
participation in the scheme increases the likelihood that the participants are employed as
opposed to unemployed — then the conclusion is unambiguous. NEIS is an expensive
way of assisting one particular group of unemployed persons out of unemployment and
off benefits.

Given the NEIS client group, a high proportion of participants could be expected to
make the transition out of unemployment in the absence of the service. Even if the
secondary employment outcomes are added to those achieved by the participants
themselves, the cost per net employment outcome would have to be considered high
relative to other forms of intervention and relative to previous labour market
programmes, except those brokered employment programmes such as JobSkills and
New Work Opportunities that were targeted to the most hard-to-place job seekers.

Assuming the objective of NEIS is to generate new employment opportunities, or even
to specifically generate self-employment opportunities as opposed to any employment,
then the cost effectiveness of the scheme may be seen in a more favourable light. It is
not possible to place an exact figure on it, but undoubtedly the proportion of participants
who would have been in self-employment in the absence of the scheme would be lower.
Although surveys can be used to try to assess what proportion of clients may have set
up their own business in the absence of NEIS, there is still the question of whether or
not these would have survived without the financial and other assistance provided by
the scheme. Further, jobs generated through NEIS may be less likely to have come at
the expense of jobs for other workers than is the case for most other forms of assistance,
as the businesses are supposed to be in areas of identified need or and pass a


                                                                                        62
competition test, in order to minimise displacement. However, 44 per cent of all
participants surveyed said that customers could have easily obtained the product or
service they were selling elsewhere. This suggests that displacement is relatively high
and further erodes the cost effectiveness of NEIS.

Assessment of costs in comparative terms is further complicated, as few other forms of
assistance are evaluated against the number of “new” jobs created. Leaving aside the
fact that at least some jobs generated by NEIS businesses are not “new”, additional
business and income tax revenues and savings in social security through the secondary
employment also need to be offset against costs. Taking high deadweight losses and
apparent displacement effects into account, it is fair to say that NEIS remains expensive
in terms of the cost per positive outcome for the client group. The aggregate effect on
employment improves cost effectiveness, but the magnitude is difficult to determine.


Post-NEIS outcomes
Analysis of the Departmental data shows that around 66 per cent of NEIS participants
were still in self-employment three months after the cessation of assistance, and just
over 80 per cent in any form of employment. For almost all those self-employed the
business was mainly or partly the original NEIS business. This suggests a survival rate
of NEIS businesses lower than for similar schemes overseas (see Chapter 3) but a very
high proportion of positive outcomes relative to other forms of intervention for the
unemployed. No Departmental data are available for self-employment outcomes
beyond the three month point, but the proportion of participants who were off-benefits
after three months was estimated to be 71 per cent rising marginally to 72 per cent after
six months.

Participant survey results for the current evaluation show suggest around 73 per cent of
participants continued for 3 months or more in self-employment after cessation of their
NEIS allowance. About 63 per cent of participants continued in self-employment for 9
months or more after cessation of their NEIS allowance, with 57 per cent continuing
beyond 12 months. The survey results also suggest that self-employment continues to
decline beyond the 12 month period.

An AGB: McNair report conducted in 1990 found that as many as 82 per cent of
participants in NEIS were still in self employment after 12 months. However, the
sample size was extremely small and arguably too biased to provide a reliable result. A
more comprehensive evaluation was conducted by Johnstone (1993b) involving a
sample of 4 800 participants. The Johnstone (1993b) results from this evaluation
showed 64 per cent of participants were still in self-employment 3 months after
cessation of NEIS assistance and 54 per cent 12 months after cessation.



Term of Reference 2
Performance monitoring

   2. Examine the existing NEIS performance monitoring methods and performance
      benchmarks, that is, the Key Performance Indicators (KPIs):



                                                                                      63
       - Advise whether the Department’s NEIS performance monitoring methods are
       appropriate and whether the KPIs are applicable as benchmarks.

       - Suggest benchmark and performance monitoring methodology improvements
       or alternative approaches as appropriate.


The Department undertakes Post Programme Monitoring surveys to gauge the outcomes
of participants 3 months and 12 months after cessation of NEIS assistance.

The only KPI to be reported on at this stage is the first of the KPIs, KPI 1. This
performance measure is based on the actual number of commencements against the
contracted milestones. The current contract stipulates that if commencements fall below
25 per cent of a contract milestone, then DEWRSB may reduce the contracted number
of placements and distribute them to better performing providers. DEWRSB currently
arbitrarily divide the contracted places into six equal amounts. As discussed in the
stakeholder section, this places regions with highly seasonal economic activity at some
disadvantage. One approach that has already been tried is to allow for contracts to be
varied to take the seasonal nature of commencements into account. The tender process
should allow for submissions to specify the milestones in the first place.

It is rare for providers to test the 25 per cent lower limit on commencements, which
raises the question of why bother with changing the performance measure? Even though
the 25 per cent tolerance accommodates seasonal variation in commencements, no
allowance is made when assessing provider performance. Providers may be within the
25 per cent lower limit, but they can still be assessed as performing poorly against their
contracted milestone under the current regime. This anomaly can be rectified by
adjusting the milestones to reflect the seasonality in commencement patterns.


Recommendation 1
    Tender submissions for each Employment Service Contract period should allow
     for variable milestones to take account of seasonal factors. The preferred option
     is for providers to specify the milestones in their tenders.
    An alternative approach would be to examine previous commencement patterns
     for each of the labour market regions where NEIS services are provided. This
     could then be reflected in the milestones set by the Department. This would
     overcome the issue of providers who are tendering for NEIS places for the first
     time not being placed at a disadvantage.

Another major concern for all of the measures is how regional variations in economic
circumstances are to be taken into account when applying the KPIs to rank providers.
To accurately differentiate between providers’ performance requires a number of factors
to be taken into account including the different economic circumstances of the regions
they service and the pool of applicants they draw from.
Regional variations in economic conditions should be taken into account when applying
the KPIs. This could be achieved by using outcomes for other JN services for the same
region (as a proportion of the national average) and/or regional
unemployment/employment rates. Regional-metropolitan splits may also be applicable.



                                                                                       64
Socio-economic indexes of disadvantage published by the Australian Bureau of
Statistics (the SEIFA indexes) could also be utilised.


Recommendation 2
    Provider performance against the all KPI measures to be weighted by regional
     specific factors.

The attitudes of providers toward serving a wide range of clients (equity objectives)
versus achieving the highest success rates (profit motives) will impact on provider
performance. Those providers who go out of their way to pursue equity objectives
potentially will be penalised by existing performance measures. The incentives are there
to target participants most likely to succeed. This may be at the expense of
disadvantaged job seekers.

The objectives of the scheme need to be stated more clearly. In the first instance, the
scheme is directed toward placing unemployed job seekers into self-employment.
However, the eligibility criteria only require the job seekers to be unemployed for one
day. This potentially exposes the scheme to rorting, although this evaluation did not
attempt to, and was not designed to, uncover any occurrences of rorting. Nonetheless, as
the scheme is structured it lends itself to creaming. Analysis of Departmental data for
this evaluation showed 63.5 per cent of participants had completed year 12, TAFE or
had a tertiary qualification. NEIS participants are more likely to be short-term
unemployed, well educated and less likely to be indigenous Australians or have a
disability than the Job Network eligible population (DEWRSB 2000). This contributes
to a significant deadweight loss from the scheme.

The stated objectives, participant criteria and KPIs are inconsistent with equity
objectives and the Departments’ stated position on monitoring commencements of
special groups, such as ATSI, NESB and sole parent clients. For the KPI to be
consistent, targets should be specified so as to not disadvantage providers who place
greater emphasis on equity criteria.



Recommendation 3
    For KPIs to be consistently and equitably applied across providers, quotas
     should be applied for specific target groups based on the populations of these
     groups within the specified contract region or area. An equivalent measure to
     KPI 1 to be used to assess provider performance (i.e. commencements) against
     their quota of places for disadvantaged clients. This KPI could be applied
     (monitored) less frequently, at yearly or 18 month intervals.

KPI 2 has two components- the percentage of participants off benefits at 3 months and
12 months. This is then broken down into those still operating their business and those
in employment or training. What is not clear is the weighting that is given to each
category and how the measures are to be interpreted. This should be spelt out in the
contracts.




                                                                                     65
It is doubtful that providers have sufficient control over the performance and activity of
their clients after cessation of NEIS to warrant monitoring their performance against
participant outcomes 12 months after assistance ends. Self-employment is a much more
complicated process than just turning up for work. Thus, the value of monitoring the
performance of providers on the basis of participant outcomes 12 months after cessation
of the providers’ obligation to service the client is questionable. However, given the low
incomes of many survivors and non-survivors there may be some argument to reduce
the number of places available and increase the duration of NEIS allowance and the
length of time providers are required to provide assistance for. This would be consistent
with the recommendation made in the Nelson Report that the frequency of mentoring be
increased (see below, Nelson Report Recommendation #3). This would involve greater
payments to the providers. To be revenue neutral, this would require a reduction in the
number of places available. Potential benefits would be an improvement not only in
survival rates, but also the ‘quality of outcomes’ (such as higher net incomes for
participants). The reduction in the number of places would be compensated by the
improved targeting of NEIS.


Recommendation 4
    KPI 2 to only consider 3 month outcomes.
       OR
      Increase the length of time providers are required to provide support, with
       mentoring being extended for 12 months after the NEIS allowance finishes and
       retain 12 month outcomes as a measure of provider performance.




Term of Reference 3
McClure and Nelson Reports, NEIS recommendations

   3. Consider and comment on the recommendations on NEIS in the Nelson Report,
      Age counts: An inquiry into issues specific to mature-age workers and the
      McClure Report, Participation Support for a More Equitable Society.


McClure Report

Among the recommendations made in the McClure Report were that funding for NEIS
and other programmes that support micro business development should be expanded.
The reasoning was that micro businesses provide a source of employment opportunities
for people who are marginalised in the work force. Data presented in Chapter 6 lend
support to this claim. There appears to be good representation of disadvantage clients in
commencements and also in secondary employment (extra employment created).
However, it needs to be acknowledged that NEIS in its current format caters mostly to
people who do not face barriers to mainstream employment. It is also widely
acknowledged that there is no shortage of applicants for NEIS. Any additional funding
for NEIS should only be on the proviso that eligibility is determined by known barriers
to mainstream employment. This would maximise the benefits of the scheme for these
job seekers.


                                                                                       66
As far as secondary employment is concerned, it is only a minority of NEIS businesses
that create additional employment. If the objective is to create secondary employment,
then putting money into business commencements may not be the most efficient way of
doing this. A large proportion of NEIS start-ups ultimately fail. Only 57 per cent are
still operating 12 months after the allowance finishes, this continues to decline beyond
12 months. This is not peculiar to NEIS, small business failure rates are high generally,
especially for start-ups.

Any steps taken toward expanding assistance to small business crosses the boundaries
of an employment portfolio and would more appropriately be placed in an industry or
small business portfolio.

Given that around half of NEIS businesses fail, then it is questionable that NEIS is the
appropriate programme to contribute toward the aim of small business development.
Also, the evidence suggests that a significant number of the start-ups under NEIS would
have taken place anyway. If the recommendations of McClure et al. are to be taken
seriously, then the most appropriate way to do this would be to make entry into NEIS
more restrictive. That is, the scheme should specifically target clients on the basis of
well established equity criteria, such as sole parents, ATSI, NESB. This would
minimise the problem of resources being wasted on people who most likely would have
found employment without any assistance (deadweight loss).



Recommendation 5
    Entry into NEIS should specifically target disadvantaged clients.


Nelson Report
There are number of issues discussed in the Nelson Report that came to surface in the
process of this evaluation. First, the Nelson Report points out that small business is a
very high-risk option. The results from this evaluation show that a significant number of
participants who cease operating their businesses either end up with less money than
they put in, or in debt. This is not a desirable outcome, even less so when it is
considered that the people it is supposed to be serving should at the very least, not be
any worse off for the experience. The community would expect this of every other Job
Network service.

Second, although the numbers are not large, there were some participants who were
unable to access capital to keep their business continuing. It also appears that surviving
businesses, on average, put in substantially higher amounts of start-up capital.

Third, the role of training and mentors was considered to be very important. Without a
doubt, the training component was considered to be invaluable by the various
stakeholders, participants and providers who participated in this evaluation. It does
suggest, however, that this component has wide applicability outside the NEIS arena.
However, there is some issue over their consistency and quality training and mentoring.




                                                                                       67
Finally, Nelson (2000) suggests that there is some confusion in the community about
how to access small business programmes. Providers and participants made reference to
this issue in the stakeholder interviews for this evaluation. Even though there are
substantially more applicants than places available for NEIS, the issue is more to do
with equality of access. The fact remains that everyone who is eligible for a particular
labour market programme should be made aware of it.

The Nelson Report made eight specific recommendations relevant to NEIS. These are
set out below. Some of these recommendations have already been dealt with to some
extent by DEWRSB.


#1     DEWRSB should develop an information package for Centrelink to distribute to
employees facing retrenchment which should draw attention to the risks involved in
small business and highlight the need for training and financial advice.

Any steps taken by DEWRSB toward establishing an extended small/micro business
programme would need to consider the right medium for information of this nature. If a
programme is to be developed that has a wide eligibility, then information may need to
be distributed through other forums, in addition to Centrelink.


#2     Centrelink officers should inform potential participants of the importance of
obtaining financial advice.

The concern of some stakeholders was that Centrelink are not sufficiently well informed
about NEIS. It should not be the role of Centrelink to provide financial advice or
counselling, rather, they should just direct the clients to the appropriate source of
information. This would either be to a NEIS provider, or whatever organisation would
be responsible for the delivery of a business start-up programme (in the event that one
were to be established in addition to NEIS). There may also be a role for credit
providers on this issue.


#3     NEIS mentors should visit participants more often – perhaps monthly;

and

#4     NEIS providers should ensure that mentors are adequately trained in their role.

About 26 per cent of survivors and 31 per cent of non-survivors were either dissatisfied
or very dissatisfied with the quality of advice provided by their mentor. However, this
level of dissatisfaction doesn’t set mentors apart from other aspects of NEIS.
Nonetheless, this a high level of dissatisfaction and needs to be addressed.

To what extent quality is being compromised by the infrequency of visits or is purely a
result of poor quality mentors is difficult to say. Knowing the cause of the problem is
important, because it results in two distinctly different solutions. If quality is being
affected by the frequency and duration of visits, then the only way to overcome this is to



                                                                                       68
provide greater funding for mentoring. If the problem is due to poor quality mentors,
then the solution is to either screen mentors, or provide mentor training.

There have already been steps taken to provide mentor training, with a course being
developed and accredited in Victoria. Whether it successfully addresses the problem and
whether it improves participant outcomes cannot be known in advance. It would appear,
though, that this would be a cost effective way of ensuring mentor quality. Any steps
taken toward this end should subsequently be subjected to a thorough independent
assessment of the outcome and cost effectiveness.

An alternative approach would be to screen mentors. Although this would lead to a
drain on the Departments resources, it would be less onerous for mentors than
undertaking training. However, the current framework for delivery of services, this
responsibility has been devolved to providers. It is up to providers to ensure they
maintain an adequate quality of service.


#5    DEWRSB should monitor progress of NEIS businesses at 3, 6, 12 and 24
months intervals to better assess outcomes.

The Department has undertaken steps toward this end. However, the longer the lapse
between cessation of NEIS and the survey period, the more difficult client contact is,
especially for non-survivors. What purpose monitoring serves after 3, 6 or 12 months is
difficult to say. Providers are fairly powerless to influence outcomes after even 3
months post-allowance. Certainly they are not funded to follow up clients after
cessation of NEIS, except to the extent that they receive outcome payments for clients
staying off benefits for 3 months after cessation of NEIS allowance. Monitoring clients
after 3 months may be useful for programme evaluation, but is unlikely to of value in
differentiating between providers’ performance.


#6      DEWRSB should investigate why mature-age NEIS participants have lower
positive outcomes than younger participants.

The analysis of existing Departmental data for this evaluation showed that participants
aged 55 and over have substantially poorer outcomes than other cohorts, even when
controlling for other personal characteristics such as education and prior unemployment
history. This is hardly a surprising result. Mature-age cohorts have higher
unemployment rates than other cohorts, high long-term unemployment and so forth.
Whatever is driving the result for other labour market states for this cohort is probably
the same influence at work for NEIS outcomes.

While it seems unlikely that age discrimination would be an issue confronting
participants following a self-employment option, it is possible that participants are
finding access to start-up and ongoing finance a problem, due to their age.
Unfortunately the sample size for this evaluation does not permit an analysis of this
particular issue to be carried out.

It is difficult to ‘disentangle’ retirement decisions from labour force separation for older
job seekers. Again, the sample size of the participant survey does not allow for a


                                                                                         69
definitive statement on this issue. However, there were only three responses for the over
50 age-cohort (and none for other age groups) indicating that retirement was the reason
for not continuing in their NEIS business. The vast majority of participants aged over 50
years had their reason for not continuing in the business being due to not making
enough money (19 out of 39 responses). Thus, the most likely explanation for poorer
outcomes for the mature-aged participants is that the returns for ‘sticking it out’ are
relatively low, the time they have to recoup any investment made is shorter (so putting
in additional funds is far riskier) and the prospects for mainstream channels of
employment are relatively poor.


#7     The Minister should examine whether the scheme should be expanded to include
those buying franchises or an existing business.

There are several benefits that arise from allowing NEIS participants to enter a franchise
arrangement.       Franchises already have an established business model, brand
recognition, marketing information etc. However, expansion of NEIS business
eligibility criteria to include franchises would create numerous difficulties for
DEWRSB. If franchises were to fail, the Department would encounter considerable
criticism. The requirements placed on franchisees can also be onerous; it is doubtful
whether NEIS in its current format could adequately prepare participants for an
undertaking of that kind. Finally, the administrative requirements and risk exposure for
the Department would be considerable. In the first instance, the Department would have
to sign off on businesses that have already operated. This would require the Department
to undertake a full due diligence of the existing business. Second, if the business were to
fail there may be some issue over the legal position of the Department, given that they
will have approved of the business purchase. Finally, displacement effects will be
higher. This drives up the cost of net employment outcomes for NEIS and further
diminishes its appeal as a cost-effective strategy for getting the unemployed off
benefits.


#8     DEWRSB should ensure that comprehensive information about NEIS is easily
available.

This issue, as already noted, was raised by stakeholders. NEIS eligibility, in its current
format, means that potential clients are going to encounter Centrelink at some stage,
most probably prior to becoming aware of the existence of NEIS. It is important as far
as equality of access is concerned that Centrelink inform all participants of their
eligibility.



Term of Reference 4
Continuing need for NEIS

   4. Examine the continuing need for the NEIS employment services market
      programme;




                                                                                        70
       - Investigate whether the policy drivers for the NEIS programme continue to be
       valid in today’s employment services market, including in relation to the Nelson
       and McClure reports;

       - Investigate whether NEIS recipients would have started their own business
       without NEIS support.


Policy drivers

Whether the policy drivers for NEIS continue to be relevant turns on whether NEIS is
seen as an alternative for job seekers who face barriers to employment through
mainstream channels, or as an employment creation scheme. The way the scheme is
currently targeted mitigates directly against its role in providing disadvantaged job
seekers an avenue into employment, as a significant share of places go to job seekers
who are anything but disadvantaged. In terms of secondary employment the scheme
does provide employment opportunities for disadvantaged clients, but at a cost. Whether
it is the most cost effective way of doing this is arguable.


Deadweight loss

A substantial number of participants in this survey said that they would have started a
business without NEIS assistance- 73 per cent of survivors and 54 per cent of non-
survivors or 62 per cent overall. If businesses would have formed without the payment
of the NEIS allowance, then there is clearly an issue with the eligibility criteria. The
motivation for a labour market programme should be to overcome a barrier to
employment. In the case of NEIS the motivation should be to overcome barriers to
mainstream employment. Thus, it is job seekers who face discrimination, cannot
maintain the routines required for mainstream employment due to health or parenting
obligations and, so forth, that are of primary interest.

If job seekers fully intend to start a business without financial support from the
government, then why provide it? The same outcomes might be achieved by just
providing mentor support and business training. This could be done at a fraction of the
cost that is currently spent on providing a place under NEIS. It seems inconsistent to
take some of the best credentialed job seekers, over half of which would have started a
business anyway, and provide them with their unemployment benefit for 12 months
even though they can earn an income from their business. Other programmes delivered
by Job Network service providers might also achieve better outcomes if participants
were allowed to continue to draw unemployment entitlements while in paid
employment.


Term of Reference 5
Small business start-up programme

   5. Analyse whether there should be a small business start-up programme similar to
      the NEIS programme;



                                                                                     71
       - Identify any similar programmes at the Commonwealth or State level and their
       success and/or reasons for abolition;

       - Identify what policy issues would need to be addressed in relation to a small
       business start-up programme similar to NEIS; and

       - Determine what cost such a programme might have for the Commonwealth.


Similar programmes

Programmes run at both the State, Territory and Commonwealth levels were identified
and are reported in Appendix C. No studies evaluating these programmes have been
identified, and so no analysis of their success or reasons for abolition are presented here.
Nonetheless, there is some overlap between other programmes and NEIS. Most States
and Territories offer some training and mentoring for applicants with charges being
non-existent or relatively minor.

The ACT has the most comprehensive programmes for small and micro-business start-
ups. One of these targets NEIS applicants aged between 18 and 28 years. It offers
additional mentoring and access to grant and loan funding for successful applicants. It
also requires participants to complete a 10 page business plan in addition to the one
completed for NEIS. ATSIC provides additional funding to indigenous NEIS
participants but, like the ACT programme, does not accept the NEIS business proposal.

Another ACT programme targets applicants over the age of 40 and who have just been
retrenched or made redundant. The programme is essentially the same as NEIS, offering
mentor support and training (same course as for NEIS). It charges around $2 000 for
general applicants and is free for unemployed people. An evaluation of this scheme
would provide an invaluable comparison to the outcomes obtained under NEIS. The
criteria for entry are also of interest, as they distinguish between need in the way that it
charges.


Policy issues for small business start-up programme
The support of micro businesses more generally should probably not fall within the
ambit of a labour market programme, but reside with an industry or small business
portfolio. At the broadest level, there must be a perception that there is in some sense a
failure by the market with regard to the establishment of new ventures, particularly
small and micro-businesses.

The essential elements of NEIS, that is, small business training and mentor support, are
ideally suited to addressing deficiencies in the planning and business management skills
of new business start-ups. They could also be delivered to a much wider clientele than
NEIS currently does and at a fraction of the cost (per commencement), since an
allowance would no longer be part of the funding arrangement.

Although there is near universal provision by States/Territories of small business start-
up assistance in the form of training, mentoring and general guidance through
regulations and other assistance, the scale of funding and the reach of the programmes


                                                                                         72
in most instances is very small when compared to NEIS. The other major deficiency of
these programmes is that they have not had the continuity and length of operation that
NEIS has- NEIS is a programme that has developed a significant and robust
infrastructure and community based expertise familiar with regional economic
circumstances. There has been considerable effort put into the development of social
and business networks. These are resources that could be usefully exploited in any
extension of a small business programme.

It is questionable whether the Commonwealth should be interested in simply duplicating
the services currently operated by the States/Territories. If the Commonwealth is to run
a small business programme, it should seek to find a niche where it may complement or
extend existing State/Territory services, rather than just duplicate them.

One approach would be for the Commonwealth to take full responsibility for the
delivery of small business programmes. Arguments supporting this approach include the
need, or desire, to offer universal access to a uniform service of this nature. The
States/Territories could participate in the delivery of these services, given that they
already contribute funding for these services and have some infrastructure in place to
deliver them. An avenue available to the Commonwealth, then, would be to provide a
given level of core funding for States to provide a minimum level of services and
places. States are then free to offer more extensive levels of service and alternate
programmes as they see fit. Existing NEIS providers would be ideally placed to bid for
the provision of these services. This would alleviate duplication of resources and obtain
maximum benefit from the expertise that has been developed through NEIS since 1985.


Recommendation 6
    In any extension of the current small business start-up programmes, the
     feasibility of utilising components of existing NEIS infrastructure, such as
     providers and contract management should be examined.


Costs of a small business start-up programme

The costs of any similar programme will depend on the scope and nature of the services
provided. Assuming the retention of the training and mentoring agreement, the cost is
likely to fall in the range of $2 000 - $3 400 per participant. It is already known that the
existing NEIS services are provided at an average cost of just under $3 100 per
participant. A government funded service by one of the State/Territory governments
provides the equivalent for around $2 000. However, it is not known to what extent it is
subsidised. Some States/Territories programmes also provide capital assistance in the
form of a guarantee on loans. This is difficult to cost since it depends on the size of the
loan and the risk of default.

The main finding of the evaluation is that NEIS is not a cost effective way of assisting
unemployed people into paid employment, particularly given the characteristics of a
large proportion of NEIS participants. Small business programmes are already run by
the States/Territories in various guises, it would be costly to replicate these. Therefore:




                                                                                         73
   NEIS needs to be better targeted. The existing participant eligibility criteria are
    too wide and this leads to excessive deadweight loss.
   The performance monitoring measures need refining, taking into account data
    limitations, new objectives for the scheme, seasonal variations in
    commencements and the purpose of the measures, namely- to rank the relative
    performance of service providers.
   In any extension of the current small business start-up programmes, the
    feasibility of utilising components of existing NEIS infrastructure, such as
    providers and contract management should be examined. This would help avoid
    duplication and better utilise some of the existing NEIS resources.




                                                                                    74
REFERENCES

Access Economics (1999) Monitor. May 1999.

Auditor-General, (1994-95) Audit Report No 5 1994-95. Australian National Audit
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Auditor-General, Audit Report No 39 1991-92. Australian National Audit Office.

Benus, J. (1995) ‘The US self-employment experiment: findings of the final evaluation
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       Proceedings from a joint US Department of Labor/OECD Conference, OECD,
       Paris 1995 pp.28-30.

Brummelaar, J T. and Gatenby, P. (1992) NEIS Evaluation: Intergovernment
     Components of NEIS, EMB Working Paper 2/92, DEET, Canberra.

DEET (1988) An Evaluation of the Pilot Phase of the NEIS. DEET, Canberra, 1988

Department of Employment Education, Training and Youth Affairs (DEETYA)(1997),
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Department of Employment Education, Training and Youth Affairs (DEETYA) (1996),
      Working Nation: Evaluation of the employment, education and training
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DEWRSB (2000) Job Network Evaluation: Stage One: implementation and market
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Department of Industry Science and Resources, 2001, Commonwealth and State
      government      programs        supporting      innovation in  firms,
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Dockery, A. M. and Stromback, T. and (2000a), Labour market programs,
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       — (2000b), “Evaluation of labour market programs: an assessment”, paper
       presented to the 29thAnnual Conference of Economists, 3-6 July, Gold Coast.

Elias, P. and Whitfield, K. (1987) The Economic Impact of the Enterprise allowance
        Scheme: Theory and Measurement of Displacement Effects. Report to MSC,
        Institute for Employment Research, University of Warwick, Coventry UK.

Friedman, R E. “From pilot to practice, the next steps for self-employment programmes
      for unemployed workers in the United States’, In Self Employment Programmes
      for the Unemployed, Papers and Proceedings from a joint US Department of
      Labor/OECD Conference, OECD Paris 1995.


                                                                                     75
Johnstone, H. (1993a) Evaluation of NEIS – Managing Agents – Administrative
       Arrangements and Issues. EMB Working paper 1/93. DEET, Canberra.

Johnstone, H. (1993b) Evaluation of the NEIS, EMB Report 10/93, DEET, Canberra.

Martin, J. (2000) What Works Among Active Labour Market Policies: Evidence From
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McLure, P et al (2000) Participation Support for a More Equitable Society, Canberra,
      Family and Community Services. July.

Meager, N. (1996) ‘From Unemployment to Self-Employment: Labour Market Policies
      for Business Start-up’, in [eds.] Schmidt, D., O’Reilly, J. and Schomann, K.
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Meager, N.. (1993) Self-Employment and Labour Market Policy in the European
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Metcalf, H. (1998) Self-Employment for the Unemployed: The Role of Public Policy.
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Nelson Report (2000) Age Counts: An inquiry into issues specific to mature-age
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Owens, A. (1989) Enterprise Allowance Scheme Evaluation: Sixth 6-month national
      survey. Sheffield, Employment Service, Research and Evaluation Brabch. UK.

PA Cambridge Economic Consultants (1990) Evaluation of Jobclubs and the Enterprise
     Allowance Scheme in Great Britain, Cambridge.

Rosdahl and Maerkdahl (1987) Uddannelses og ivoerksoetterydelsen til langtidsledige.
      Copenhagen, Socialforskningsinstituttet.

Snowden, W. ‘Australia’ in Self Employment Programmes for the Unemployed, Papers
     and Proceedings from a joint US Department of Labor/OECD Conference,
     OECD Paris 1995 pp. 42- 55.




                                                                                  76
APPENDIX A

Terms of Reference

   1. Determine the effectiveness of NEIS in achieving the objectives set for the
      programme;
          a. The department currently measures performance based on participant
             outcomes after NEIS assistance has ceased and job seeker satisfaction
             with service provision. Data of this kind will be supplied to the
             successful respondent;
          b. Provide an assessment of the cost-effectiveness of the NEIS scheme,
             identifying the associated costs and savings to the Commonwealth;
          c. Provide an assessment of the proportion of NEIS Participants still in
             business after they cease to receive support from the scheme at 3 month,
             6 month and 12 month intervals;
          d. Respondents who wish to use alternate measures of effectiveness are
             asked to include details of these measures as part of their submission;
   2. Examine the existing NEIS performance monitoring methods and performance
      benchmarks (ie, Key Performance Indicators (KPIs)) as set out in the General
      Information and Service Requirements book from the Employment Services
      RFT 1999. Advise whether the Department’s NEIS performance monitoring
      methods are appropriate and whether the KPIs are applicable as benchmarks.
      Suggest benchmark and performance monitoring methodology improvements or
      alternative approaches as appropriate.
   3. Consider and comment on the recommendations on NEIS in the Nelson Report,
      Age counts: An inquiry into issues specific to mature-age workers and the
      McClure Report, Participation Support for a More Equitable Society.
   4. Examine the continuing need for the NEIS employment services market
      programme;
          a. Investigate whether the policy drivers for the NEIS programme continue
             to be valid in today’s employment services market, including in relation
             to the Nelson and McClure reports;
          b. Investigate whether NEIS recipients would have started their own
             business without NEIS support;
   5. Analyse whether there should be a small business start-up programme similar to
      the NEIS programme;
          a. Identify any similar programme which has previously or currently exists
             at the Commonwealth or State level and, if so, its success and/or reasons
             for abolition;
          b. Identify what policy issues would need to be addressed in relation to a
             small business start-up programme similar to NEIS; and
          c. Determine what cost such a programme might have for the
             Commonwealth.



                                                                                       77
 APPENDIX B

 Participant earnings
                                         earnings               costs             net earnings
                                               earnings             costs       net earnings
all participants    maximum                               25000        14000              11000
N=230               minimum                                   0             0             -1496
 3 outliers removed average                                 852           414               438
                    standard deviation                     2213         1097               1280
                    median                                  250           150               107

non-survivors       max                                    6000         3000              3000
N=132               min                                       0            0             -1000
1 outlier removed   av                                      397          218               179
                    sd                                      775          391               557
                    median                                  150          100                20

survivors          max                                    25000        14000             11000
N=99               min                                        0            0             -1496
2 outliers removed av                                      1454          673               780
                   sd                                      3163         1578              1791
                   median                                   500          250               250




                                                                                             78
APPENDIX C


Enterprise Start-Up Programs In Addition To NEIS

Examples of some other self-employment start-up programs, including some which
provide only information or workshop-type training, additional to NEIS are:

Commonwealth:

   DEWRSB Self-Employment Development [SED];
   DEWRSB Small Business Enterprise Culture Programme
   ATSIC Indigenous Small Business Fund;
   ATSIC Business Development Programme

States and Territories:

   Canberra Business Advisory Service;
   ACT Small Business Growth Programme;
   Canberra Business Centres;
   Southern Business Services;
   Creating Youth Business Initiatives;
   WA Small Business Development Corporation;
   Victoria, Business Services Training
   NSW Business Migrant Information and Referral Service;
   NSW Women in Business Mentor Programme;
   Business Tasmania.
   Queensland Small Business Seminars and Workshops
   Queensland International Women’s Day Business Grant Scheme
   Northern Territory Workshops and Seminars
   Victorian Small Business Advisory Service
   Victorian Pre-Business Workshop



SUMMARY OF SELECTED PROGRAMS:

COMMONWEALTH

Agency: Department of Employment, Workplace Relations and Small Business
Type of Programme (and/or Name): Self-Employment Development (SED) -
Eligibility Criteria: Applicants must:
 Have been receiving Newstart or Youth Allowance for six months immediately
    prior to applying for SED
 Have no Mutual Obligations activities to undertake
The proposed SED activity/s must be assessed as likely to be commercially viable
within 12 months.
Duration:


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Other Features: Applications to undertake SED are assessed by New Enterprise
Incentive Scheme (NEIS) Providers. SED is only available to assist in the research and
development of a business idea. Commercial operation of a business is not allowable
under SED.
Web Site: http://www.nbis.gov.au/documents/dir13/doc6413.htm


Agency: Department of Employment, Workplace Relations and Small Business
Type of Programme (and/or Name): Small Business Enterprise Culture Programme
Other Features: Includes business skills development and mentoring.


Agency: Department of Employment Workplace Relations and Small Business
Type Of Programme (And Or Name): Indigenous Small Business Fund
Eligibility Criteria: Projects that foster the development of businesses owned, operated
and managed by Indigenous people and promote sustained indigenous employment
opportunities. Funding is also available to individuals. There is no unemployment
criterion - for the individuals it is possibly aimed at those with an employment history.
Duration: Seed funding of up to 12 months however funding may be provided for as
long as 3 years
Other Features: Funding in range of $5000 - $100000
Web Site: Indigenous Small Business Fund Home Page

Agency: Aboriginal and Torres Strait Islander Commission
Type Of Programme (And or Name): Business Development Programme. This
programme offers advice, support and finance to help Aboriginal people and Torres
Strait Island people to establish and build on successful businesses.
Eligibility Criteria: Aboriginality - has a evaluation criteria under which each
Aboriginal application is assessed.
Duration: Loans repaid according to terms given. Fast track loans need to be repaid in
under 5 years.
Other Features: Its primary purpose is to provide or help people to obtain the
necessary ingredients for business success. It is a combined loans and grants programme
incorporating many of the key elements of the schemes that it replaces, namely, the
Business Funding Scheme (BFS) and the Indigenous Business Incentive Programme
(IBIP). The BDP is fundamentally a commercial programme for economic
development. The funding criteria are founded on the critical importance of commercial
viability for businesses receiving finance under the programme.
Web Site: bdp policy


Agency: Aboriginal and Torres Strait Islander Commission
Type of Programme (and/or Name): Business Development Programme
Other Features: Offers loans, grants, guarantees, or combination of these.




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STATES

AUSTRALIAN CAPITAL TERRITORY

Agency: Canberra Business Advisory Service
Type of Programme (and/or Name):
 Provides small and micro-businesses support in the establishment, operation and
    development of their business in the Canberra Region
 Provides general and/or specific business information and advice by expert business
    facilitators
 Directs clients to additional business services such as mentoring, training providers,
    networks and industry bodies as required
 Free advisory and referral service (fees may apply to other specialist services)
 Supports indigenous business in its provision of business guidance and mentoring
Eligibility Criteria: For people intending to start a business, or existing businesses with
specific business development needs.
Duration:
Other Features:
Web Site: http://www.business.gateway.act.gov.au/documents/dir62/doc501062.html

Agency: ACT government
 Type of Programme (and/or Name): ACT Small Business Growth Programme
    – Provides small business loans to assist eligible people gain access to financing
    through low interest, government guaranteed loans from the CPS Credit Union
    (maximum of $20,000).
 Provides subsidy for strategic development services offered by professional
    consultants. The actual level of subsidy (typically up to a maximum of 50% or
    $7,500) is negotiated on a case by case basis. The types of services likely to be
    funded include Business Planning; E-Commerce and web site development;
Market planning; Improvement through people; and Mentoring.
Eligibility Criteria: People who are either starting a new small business or have been
operating a small business for less than five years
Duration:
Other Features: Strategic Support - Offers limited financial grants in exceptional
circumstances (maximum of $20,000) to non-profit organisations that provide strategic,
value-added services to the broader ACT business community.
Web Site:
http://www.business.gateway.act.gov.au/documents/dir80/doc500980.html#STARTING

Agency: Canberra Business Centres (CBC)
Type of Programme (and/or Name): Operate "business incubators", which offer a
supported step into the commercial leasing environment and helping people with all
aspects of managing and growing a business, provide a package of business
accommodation and business support services including accommodation on month-by-
month terms, access to comprehensive office and reception services, on-site business
assistance and counselling, referral to business professionals, mentors and volunteer
consultants, support for the business operator and business networking opportunities
with on-site tenants.
Eligibility Criteria: For those intending to establish a business, or operate a small
business (possibly home-based) in a business growth stage


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Duration: Most businesses stay an average of three years before becoming fully
established, profitable and growing out of the office accommodation available into
larger commercial premises.
Other Features: Costs are comparable to commercial rates.

Agency: Southern Business Services (Marketing) Pty Ltd
Type of Programme (and/or Name): New Future in Small Business programme -
Assesses the feasibility of a business idea
 Gets a business off the ground if it is feasible
 Helps one understand what is needed to succeed in one’s own business.
 Involves a five-week full-time course which covers subjects like business planning,
    financial planning, taxation, marketing, small business law, small business insurance
    and record keeping.
 On completion of the five-week course, participants receive 12 months mentoring
    support, which includes both individual and group mentoring sessions.
Eligibility Criteria: Unemployed residents of the ACT and region who are generally
aged 40 years and over. Priority is given to those who have recently been made
redundant or retrenched and are considering establishing a small business.
The programme is free to prospective participants who are unemployed people, and
costs $1980 for people who are employed.
Duration: Five-week full time course, followed by 12 months of mentoring support
Other Features: Participants will also receive at Certificate IV in Small Business
Management, which is a nationally recognised qualification.
Web Site: http://www.business.gateway.act.gov.au/documents/dir54/doc501054.html

Agency: Creating Youth Business Initiatives (CYBI) - a non-profit organisation of
volunteers from business, private, public and community sector in association with the
ACT Government, Foundation for Young Achievement Australians and the Business
Skills Centre Inc.
Type of Programme (and/or Name): Creating Youth Business Initiatives (CYBI) -
provides access to grant and/or loan funding and one to one business mentoring to
eligible applicants intending to develop their business venture.
Assists young entrepreneurs to establish successful sustainable businesses, achieve
personal and financial independence, encourage overall personal development, and
enhance their role and contribution to society.
Eligibility Criteria: Young entrepreneurs of the ACT and region
 Between 18-28 years of age
 Have completed and received a certificate in Small Business Management (NEIS)
 Receiving income support NEIS Allowance
 Produce a 10-page business plan to CYBI criteria
Duration: Accept a nominated mentor, one to one, for 24 months, undertake to spend a
minimum of 20 hours per week working in the business
Other Features: This programme is delivered in conjunction with the New Enterprise
Incentive Scheme (NEIS).
Web Site: http://www.business.gateway.act.gov.au/documents/dir71/doc501071.htm

Agency: ACT Library & Information Services
Type of Programme (and/or Name): ACT Business Reference Service - Provides
information services to the small business sector in the ACT region. Assistance



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provided by professional staff in locating and retrieving resources relevant to business
information needs.
Eligibility Criteria: For clients who are either developing a small business or wish to
improve or diversify their business.
Duration: N/A
Other Features: The information provided is of a non-regulatory nature.
Web Site: http://www.business.gateway.act.gov.au/documents/dir86/doc502786.html


WESTERN AUSTRALIA

Agency: Small Business Development Corporation
Type of Programme (and/or Name): Provides free information, advice and referral
services for those in the planning and establishment phases of a small business venture.
Services provided are relevant information and referrals, free confidential services from
experienced personnel, publications covering all aspects of small business operation and
management.
Eligibility Criteria:
Duration:
Other Features:
Web Site: http://www.sbdc.com.au

Agency: Business Enterprise Centre
Type of Programme (and/or Name): Offers free assistance and support to new and
existing businesses through free practical business assistance, referral to specialist
advisers (accountants, lawyers, etc.), assistance through the maze of government
departments and regulations, business workshops, business information, problem
solving
Eligibility Criteria: Those who want to expand existing businesses or explore new
business ideas
Duration: N/A
Other Features: A management committee with representatives from business, private
sector organisations and local government, support a manager who will work with you
to achieve your goals
Web Site: http://www.sbdc.com.au/default.cfm?section=business/index.htm

Agency: Women's Economic Development Organisation (WA Department of
Training)
Type Of Programme (And Or Name): Being in Business Workshop - a three day
workshop to help people consider the adoption of self-employment. It covers subjects
such as suitability, business idea development, confidence building, government and
legal requirements, a personal financial drawings budget and the New Enterprise
Incentive Scheme. $100 for employed but is offered free to unemployed.
Eligibility Criteria: For free access need to be unemployed
Duration: Three-day training course
Other Features: The course covers topics such as effective market research, the
structure of small business, goal setting and the benefits of planning.
Web Site:13.2 Women's Economic Development Organisation (WEDO) Inc




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Agency: Women's Economic Development Organisation (WA Department of
Training)
Type Of Programme (And Or Name): SED - Self Employment Development,
WEDO as a NEIS provider has a business assessor who by appointment assesses clients
from Centrelink who wish to develop their business idea and be exempt from job
seeking for 3 months.
Eligibility Criteria: Unemployed
Duration: Three-months
Other Features: Is part of the NEIS scheme
Web Site:13.2 Women's Economic Development Organisation (WEDO) Inc

Agency: Western Australian Department of Training
Type Of Programme (And Or Name): Business Works - Business ownership support
for 15 -24 year olds. Offers training support and finance
Eligibility Criteria: 15-24
Duration: Four-day training course
Other Features:
Web Site: http://accessallareas.westone.wa.gov.au/frames.asp?Content=business



SOUTH AUSTRALIA
Agency: The Business Centre
Type Of Programme (And Or Name): "Starting Your Own Business" workshop
Eligibility Criteria: Free to anyone who is interested in starting a business
Duration: Three-hour workshop
Other Features:
Web Site: Starting Your Own Business Workshop



NEW SOUTH WALES

Agency: NSW Department of State and Regional Development
Type of Programme (and/or Name): Business Migrant Information and Referral
Service –
 Provides prospective business settlers with access to literature and advice on
    establishing and operating a business in the State.
 Provides information and assistance free of charge to migrants by a new arrivals
    contact service, bilingual business information, individual counselling and advice,
    referral to sources of advice and information which suit individual needs, and
    networking information sessions to provide a better understanding of NSW business
    culture and to explore business opportunities.
Eligibility Criteria: Business migrants with successful professional backgrounds,
excellent business skills and valuable overseas contacts, but limited exposure to how
business is conducted in this country.
Duration: N/A
Other Features:
Web Site: http://www.business.nsw.gov.au/smallbus/small_biz_assistance.asp#migrant



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Agency:
Type of Programme (and/or Name): Women in Business Mentor Programme -
 Promotes the professional development of female entrepreneurs through improving
    their access to assistance, networks and training.
 Enhances the growth and viability of businesses owned by NSW women and
    establish a pool of role models for other businesswomen.
 Offers 20 hours of one-on-one mentoring, monthly business skills sessions,
    networking and group problem solving opportunities.
Eligibility Criteria: Female small business owners who have been in business for two
years or less.
Duration: 20 hours of one-on-one mentoring and monthly business skills sessions.
Other Features:
Web Site: http://www.business.nsw.gov.au/smallbus/small_biz_assistance.asp#women


NORTHERN TERRITORY
Agency: Department of Industries and Business
Type of Programme (and/or Name): Getting Started –A Business Assistance Scheme
for Youth
Other Features: Provides start-up capital as well as 15 hours of Introduction to
Business modules free of charge. The scheme also provides ongoing support and access
to Department services.


TASMANIA

Agency: Business Tasmania
Type of Programme (and/or Name): Enterprise Centre Programme – Plays key role in
the creation of new businesses in regional areas, provides free information, support and
referral services to existing and intending small and micro business owners and
operators.
Eligibility Criteria: Existing and intending small and micro business owners and
operators
Duration: N/A
Other Features: Centres are independent, non-profit community-based organisations
partly funded by the Department of State Development.
Web Site: http://www.bt.tas.gov.au/dsd/dsdr4.nsf/W/Headings/NGOY-
4KF2ZC/?Open#NGOY-4KF357

Agency: Business Tasmania
Type of Programme (and/or Name): Information and Referral Services -
 Provides quality counselling on key management issues (e.g. financial management;
   intellectual property; business planning; marketing; employment; and purchasing a
   business) to small business operators and people intending to start a small business
 Offers services to assist the day-to-day operations of those determined to succeed in
   small business.
 Provides referral to specialist advice from other government agencies; private and
   professional organisations; consultants; and industry specialists.
   Introduction provided to sources of equity capital along with advice on how to
   approach investors.


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   Provides access to the services of a visiting patent attorney to provide specialist
    advice for inventors and innovators on intellectual property protection issues.
 Business Tasmania provides links to other strategic services, such as the Industrial
    Supplies Office; AusIndustry; and the Business Entry Point.
Information and referral services are provided free of charge.

Web Site: http://www.bt.tas.gov.au/dsd/dsdr4.nsf/W/Headings/NGOY-
4KF2ZC/?Open#NGOY-4KF354


Agency: Department of State Development
Type of Programme (and/or Name): Mentor Resources
Other Features: Develops small business through use of successful business people
acting as mentors.

Agency: Department of State Development
Type of Programme (and/or Name): Business Development Programme
Other Features: Offers loans, grants, guarantees, or combination of these.



QUEENSLAND

Agency: Department of State Development
Type of Programme (and/or Name): International Women’s Day Business Grant
Scheme
Other Features: Grants to women starting a business and for small business
programmes designed to develop business skills. Emphasis is on rural-regional issues.


Agency: Department of State Development
Type of Programme (and/or Name): Small Business Seminars and Workshops
Other Features: Aim is to promote growth of small businesses.


VICTORIA
Agency: Department of State and Regional Development
Type of Programme (and/or Name): Small Business Counselling Service
Other Features: Provides counselling and mentoring to small and micro-businesses.


Agency: Department of State and Regional Development
Type of Programme (and/or Name): Pre-Business Workshops
Other Features: Covers aspects of starting a business.




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