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Welfare Reform's Public-Private Partnerships

The Fraser Institute says they're a huge advance in social policy. Critics say work placement companies are growing rich but doing little.

Andrew MacLeod 13 Jul

Andrew MacLeod is the British Columbia legislative bureau chief for The Tyee. Since joining full time in 2007, his work has been referred to in the B.C. legislature, Canadian House of Commons and the Senate.

He is the author of All Together Healthy, which focuses on addressing the social determinants of health to build a more resilient Canada. His earlier book A Better Place on Earth is based on a series he wrote for The Tyee about economic inequality in B.C., and won the George Ryga Award for social awareness in literature.

He has also won a Jack Webster Award for excellence in business, industry, labour and economics reporting; and an Association of Alternative Newsweeklies award for news writing. Previously he was a staff writer for Monday Magazine in Victoria, which has been his home for more than three decades.

Find him on Twitter @A_MacLeod_Tyee, email him at or reach him by phone at (250) 885-7662.

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The Liberal government's "New Era" has ushered in the worst of times for people who depend on welfare to meet their basic needs. But life has been awfully good for the private-sector contractors running job placement services for welfare recipients.

Take Ian Ferguson. He's the president and CEO of WCG International Consultants Ltd., the company that runs JobWave, the largest of the job placement companies with which the government works.

How good has life been? WCG's status as a private business removes any obligation to make information about its finances public, even though it enjoys large taxpayer-funded contracts.

We do know that in 1999, BC Business magazine estimated WCG's annual revenue at $2.5 million. By the 2001-'02 fiscal year the province's public accounts show B.C. taxpayers paid the company $26.4 million. In 2002-03, the most recent year for which records are available, the government paid the company another $25.7 million. Ferguson said in an interview in April 2003 the company does 60 percent of its business consulting with the private sector, but didn't provide details when pressed.

By Ferguson's own estimation, he has "done well by doing good." When we spoke in April 2003 he had a home on a leafy cul-de-sac near the university and was building a new house with waterfront views nearby. He also kept a place in Los Angeles, and was racking up frequent flyer miles commuting to meetings in Victoria every couple of weeks.

He and his wife Elizabeth, also a partner in WCG, bought themselves matching Mercedes-Benz cars in recent years, although Ferguson said he mainly drives a leased 2001 Infiniti.

Ferguson used to be an IBM account manager. "It's not like selling 1,000 computers," he said of his current business. "That's nice too, but if you can help 26,000 people change their lives, that's the right thing to do."

NDP leader likes JobWave

To some, Ferguson is a hero, a social entrepreneur whose company has played a big role in helping the government move some 87,000 people off welfare and into the workforce.

The Fraser Institute's October 21, 2002 report card on B.C. welfare reform praises JobWave. "The use of private sector providers and their particular competencies in delivering welfare and welfare-related services," wrote the institute's fiscal studies director Jason Clemens, "represents an enormous step forward in social policy in Canada and should be expanded, both in British Columbia and throughout Canada."

The now defunct Report magazine, the longtime voice of western Canadian neo-conservatism, was also enthusiastic about JobWave's role in a February 3, 2003 article about the B.C. Liberals' "no-nonsense approach" to welfare. BC Business magazine identified WCG as one of the top 25 companies in B.C. to work for and as one of the top 50 "up and comers."

Even NDP leader Carole James likes JobWave. In a recent interview with The Tyee, she volunteered that the NDP government successfully used the company to reduce welfare caseloads. Asked if funding JobWave is good public policy, she said, "I think it is." However, she added the government needs to ensure such programs are accountable and effective.

Critics question value of service

But the success of JobWave and its ballooning revenues has attracted the attention of more than a few critics. They see Ferguson as an aggressive businessman, with a knack for getting government contracts, who has become rich by providing a fast-food-style service of questionable value.

The phenomenal growth of private placement services and the high taxpayer-funded revenues they enjoy are reason enough to cast a wary eye on WCG and the JobWave program, said Marge Reitsma-Street, a social work instructor at the University of Victoria.

"I think it's really problematic," she said. Reitsma-Street acknowledes that she may be "a bit old-fashioned" in thinking our "common interests" should be looked after in the public sector. However, she argued that when health care is done for profit, for example, evidence shows that quality goes down while the expense goes up.

Is JobWave an efficient way to invest taxpayers' money, given that under the old rules, most welfare recipients got off the dole anyway? With a small budget for administration, Reitsma-Street said, the same results that JobWave gets could be achieved by a public institution, like the old Manpower offices that listed jobs and helped people with job searches. With a small amount of help, she said, many JobWave clients could get jobs on their own.

The natural churn in jobs in B.C. was referred to at September 2002's open cabinet meeting by then-human resources minister Murray Coell. "There are ongoing opportunities through the 500,000 jobs that are typically changing hands in B.C. in an average year. These vacancies are created by people changing employers, retiring, going back to school or leaving work to raise a family. Because the labour market is so dynamic, it creates opportunities for British Columbians to get their first jobs or to re-enter the workforce after a time away."

Welfare has predictable cycle

Garnett Picot, author of a Statistics Canada report on welfare leavers, put it this way: "At any given time the people who exit welfare are, of course, the most employable ones." While the total number of people on welfare may not normally change much from month to month, there's a normal cycle where individuals leave welfare for jobs and new claimants arrive.

Even the human resources ministry's research says it is normal for two out of three welfare cases to leave within six months. It's also true that of those who leave, two out of three are back on welfare within two years. This raises the question of whether WCG is often just a middleman, turning a tidy profit from the normal process of people cycling between welfare and work.

WCG managers, however, remain proud of what they do. "We so appreciate [the human resources] ministry because they've been a solid partner in our pilot and we've all worked together for the betterment of the people under Murray [Coell]'s care," said WCG vice-president and partner Darlene Bailey.

A communications consultant from Artemis PR and Design sat in on our February 2003 interview, in Bailey's office overlooking the oaks and tombstones of Victoria's Pioneer Square. "I think that's what sustains us in this work. We feel like we're making a difference," Bailey said.

'It's profitable'

Asked how much money the company makes, Bailey said: "The bottom line is we really are proud of what we do." When pushed to answer, she said: "It's profitable, and thank heavens it is."

In 2001, the company had a goal of placing 3,500 people, but Bailey said they actually placed 7,000. Her numbers raised several questions. How could a company help twice as many people as it was paid for and still turn a profit? How many people was JobWave actually paid for? "We did a lot of it for free," said Bailey. "We just exceeded it."

More answers were not forthcoming. It's a competitive business, said the PR guy. The company doesn't want to show its hand to the competition.

Neither the government nor the company wanted to provide a copy of the JobWave contracts. The first arrived on my desk in a brown envelope. Later I received all the contracts for JobWave and Destinations, the other major placement firm in B.C., through a freedom of information request. The December 1999 JobWave contract, which was signed by the NDP government and continued until July 31, 2003, gives some indication of how the company reaps its rewards.

The contract defines "placement" as "an action that causes a Participant to become independent of Income Assistance, including commencement of employment with a suitable employer who can provide a Participant with sufficient hours of work and income such that the Participant is no longer eligible to receive Income Assistance."

The broad meaning of 'placed'

By this definition, a person who moves to Alberta would be deemed to be "placed," because they would no longer be receiving income assistance in B.C. So would a person who went back to the welfare office and didn't meet eligibility requirements, ended up homeless, or even died. Ferguson said they can track clients "24 hours a day, seven days a week," but in practice the only thing they really know is whether the person is back on welfare. As long as they aren't drawing the dole, WCG gets paid.

Might the company be paid for clients who slip through the social safety net? "There's a full range of circumstances in people not being back on income assistance in B.C.," Ferguson replied. He insisted, however, that "the vast majority are back at work."

Yet the government's own exit surveys of people who have left welfare consistently show that after six months the phone numbers for nearly half the people they seek to interview are out of service. Only 1,013 of the 4,762 people in the February 2003 survey actually told the surveyors they had work. Of those, it's unclear from the report how many hours they were working.

In addition, in 2003 Statistics Canada released a national study based on income tax information. It showed that for people who left welfare in the '90s one out of three had earnings two years later that were lower than what they'd received on welfare.

The money flows quickly

Besides the loose definition of "placement" in the contract, WCG benefits from a generous payment schedule. For each person "placed," the old contract specified that the government pay WCG a maximum of $4,865. While the company didn't get paid in full until the participant has been off income assistance for 19 months, WCG received $3,500 -- or 72 percent of the total -- in three instalments after just seven months. The seventh and final payment, made at 19 months, was a mere $185.

The contract also set a target for the ministry to send 28,000 welfare recipients to the program over two years, yet the contractor endeavoured to find placements for 7,000 -- or just 25 percent. It also allowed for advance payments of $900,000, and at least one ministry employee was seconded to the company at the government's expense.

The most recent contract is a little bit tighter, according to information provided by the human resources ministry, offering the company "approximately $3,400" per placement. The company still gets 25 percent of the total amount after the person is off welfare for just one month, and collects 70 percent of the sum after nine months. (One key difference between the 1999 and 2002 contracts is that under the new contract welfare referrals can no longer be released from the program at their request.)

Would the company get paid for everyone it placed if it exceeded the targets? "Traditionally the answer was if there was money in the government's budget you did," said Ferguson. "If there wasn't you didn't."

Ferguson added that "overplacing" was part of JobWave's strategy. "To take the cycles out of the business…. We will always to the best of our ability place as many as we can."

'A price tag on everyone'

Seth Klein, the director of the B.C. branch of the Canadian Centre for Policy Alternatives, said the government's big bill with JobWave makes little sense. "People are always leaving and finding jobs. There's nothing new in this."

At the same time, the government has radically altered the job coaching industry, he said, by rewarding volume and requiring all job training agencies to move to performance-based funding where payment depends on people finding jobs. It creates an incentive to work with only the easiest to employ, Klein said, and abandon anyone who might have a hard time finding a job.

Tina Griffiths, an instructor-counsellor with Workstreams, a non-profit job training agency, confirmed that the industry has shifted, and that many of the people who've worked in it a long time find the change difficult. "We're in the business of social services, not capitalizing on people finding work," she said. The new payment model might suit JobWave fine, she added, but she didn't like it. "Basically there's a price tag on everyone who comes through here."

This is PART 3 of a series.

PART 1 Welfare's New Era: Survival of the Fittest PART 2 Where Did All the Welfare Cases Go? PART 4 Shut Out at the Entrance

Andrew MacLeod has covered welfare reform regularly as a staff writer for Victoria's Monday Magazine. Tomorrow, the final instalment of The Tyee's four-part series on welfare examines what's happened to some people who've left the welfare rolls.  [Tyee]

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