INTERMEDIATE LABOUR MARKET COMPANIES

Info Briefs

ILMs create a bridge to the open labour market for individuals experiencing long-term unemployment.

What are they?

Intermediate Labour Market Companies (ILMCs) are businesses that create a bridge to the open labour market for individuals experiencing long term unemployment and other significant disadvantage in the labour market.

ILMCs provide participants with fixed term jobs (typically 12 months) in real work settings where they receive high quality accredited training and personal support. The integration of the job, training and personal support components of the ILMC help to address the barriers that have kept the participant out of mainstream employment. Towards the end of the 12 month traineeship, participants are supported to obtain work in the open labour market.

ILMCs operate across a range of industries and need to be commercially focused in their activity. Because of their focus on both pathways to work and commercial returns, they are best suited to industries with the following characteristics:

labour intensive;
quick skills acquisition;
skill shortages and clear pathways to employment; and
high ratio of trainees to each skilled operator.

Why do we need these?

Despite a period of economic prosperity between 2003 and 2008 there was no significant reduction in the number of long term unemployed people in Australia⁽¹⁾. The Commonwealth Job Network model, utilised until June 2009, failed to effectively service the needs of those disadvantaged in the labour market.

The ILMC approach is a response to the failings of Job Network to effectively support these groups into mainstream employment. By delivering a tailored model for the long term unemployed and other groups disadvantaged in the labour market, the ILMC has been very successful in providing pathways for participants into mainstream employment (albeit in small numbers). Central to the ILMC approach is a job, through which a 12 month work readiness program is delivered.

What outcomes do they achieve?

International and local research into ILMCs has identified that this form of social enterprise is consistently able to transition 60-80% of trainees into the open labour market. Research undertaken by the Brotherhood of St Laurence (BSL) indicated that 70% of participants in the ILMCs run by BSL in 2005 and 2006 obtained employment in the open labour market ^(1). The research also found that for every dollar of investment in ILMCs by supporters there was a return of between $8 and $22.

How do they perform financially?

An ILMC should earn the majority of its income from trading activity, by producing goods and services at commercial rates. There are few examples of ILMCs in Australia that run an operating profit through commercial revenue alone. Where they do exist, they have:

developed in service industries which are not productivity driven;
successfully accessed government funds available to all employers targeted at supporting training and employment for those people distant from the labour market; and
developed in protected environments, through joint ventures, social procurement and other beneficial arrangements.

Most ILMCs cannot be entirely sustainable through their commercial activity. By employing unskilled and disadvantaged labour these businesses have lower productivity rates compared with commercial businesses. By providing support, training and encouraging employees to leave when they are at their most productive, these businesses incur higher costs. Most researchers and commentators acknowledge that ILMCs typically face operating costs of 10-50% more than commercial businesses, depending on the complexity of the participating group and the industry they operate in.

Prominence in Australia and overseas

The ILMC model is quite prominent in the UK and Europe and is commonly referred to as the Work Integration Social Enterprise (WISE) model. In the US it is referred to as the Transitional Employment Program (TEP). There are also a number of ILM programs around the world that are fully funded labour market programs and are not social enterprises. In the UK, Europe and the US there are a number of ILMCs that operate strong independent businesses, however most ILMCs receive some government funding to cover the cost of the social service they provide. The development of ILMCs in Australia has been restricted by the challenges of developing sustainable businesses and the lack of a government funding available to support this approach.

Examples in Australia

There are many organisations in Australia operating ILMCs, including:

Mission Australia, UREEP – Landscaping and minor construction
Brotherhood of St Laurence – Community Contact Service - www.bsl.org.au
Boystown - Work preparation, training, and placement - www.boystown.com.au
Fifteen – Up-market restaurant - www.fifteenfoundation.org.au

References, research and resources

Investing in People: ILMs as Pathways to Employment, by Kemran Mestan and Rosanna Scutella with the Allen Consulting Group. Published by the Brotherhood of St Laurence http://www.bsl.org.au/pdfs/Investing_in_people_ILMs_summary.pdf

Working for Renewal, published by Mission Australia http://www.missionaustralia.com.au/document-downloads/cat_view/34-social-policy-reports