Maximus: Maximising Profits at the Expense of the Poor

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The Federal Government wants out of the “welfare business.” John Howard thinks that “the family” is the best provider of welfare. He would love to dump the entire responsibility for raising children and caring for the sick, the elderly and people with disabilities squarely onto the unpaid shoulders of women — if only he could get away with it. And the bits, which can’t be privatised by being palmed off onto women, the New Right ideologues in Canberra want flogged off to big business.

We’ve already witnessed the wholesale destruction of the Commonwealth Employment Service and its replacement with the system of private job network providers, keen to profit from the most lucrative categories of unemployed people while doing little for the rest.

When Centrelink was established five-and-a-half years ago, the organisation was explicitly set up on a purchaser/provider model to deliver services in line with policy set by government departments. Centrelink competes for their business, both Federal and State. These departments — the purchasers — are the clients Centrelink must serve as the provider. This system is already designed to facilitate the further privatisation of welfare delivery. Other organisations are already able to compete for the work currently performed by public sector workers employed by Centrelink.

Maximus buys into Australia. In May last year, the U.S. company Maximus purchased Australia’s biggest job network provider, the Brisbane-based Leonie Green and Associates. The CEO of Maximus, David Mastran, states proudly that the purchase is designed to “help the company establish a foothold in the Pacific rim.” Just what might this company’s plans be?

Patrick McClure, the CEO of Mission Australia, who headed the Australian Government’s welfare reform enquiry in 2000, told the Sydney Morning Herald that the arrival of a major global player in the welfare market “could change the landscape.” Leonie Green commented, “long term, Maximus’s future is very much driven by government direction in outsourcing. Ultimately, if Centrelink is privatised, Maximus would be very well suited to help.”

Established in 1975, Maximus was the first U.S. company to benefit from a privatised welfare system — Los Angeles County in the late 1980s. Now the biggest private profit social service corporation in that country, it has 5,300 employees and operates in every state. The purchase of Leonie Green and Associates adds 70 more offices to its overseas operations.

The warm and fuzzy slogan used by Maximus is “Helping Government Serve the People.” A better slogan might be “Helping the private sector line its pockets at the expense of the people.” (See “A Welfare Warrior speaks out,” page 31.)

Profiteering from the poor. In 1996 Bill Clinton signed the Personal Responsibility and Work Opportunity Act into law. Commonly referred to simply as “welfare reform,” even Time magazine characterised the new law as setting off a “welfare management gold rush.”

Clinton’s law is harsh. The existing program, Aid to Families with Dependent Children, was replaced with a new scheme, Temporary Assistance for Needy Families. Aid to families is stopped after two years, even if the household head has no job. Recipients are forced into low-paid, non-union jobs, destroying tens of thousands of unionised positions in the past six years. The new system also gave responsibility for the system to individual states, which are allowed to contract welfare out to private companies. Ill-prepared for this new responsibility, many did. The corporations reaped the profits.

Maximus was well placed to cash in. In 1995 it had a $50 million turnover. After welfare “reform,” this jumped to $105 million. By 1999 it was $319.5 million, holding a 30% share of the privatised welfare market. Today it is a $1 billion operation.

Profiteering from poor service. Maximus may be good at turning a profit, but it is fast developing a reputation for misuse of funds, poor service and discrimination.

The web page of AFSCME — a union representing many public sector employees — documents numerous examples of poor performance. In Connecticut, Maximus won a contract after claiming it could process payments to childcare providers at half the cost of other bidders. A state audit found almost 10% of payments were incorrect and more than 10,000 of the 17,000 bills submitted were over a month late. To fix the mess, the state agreed to a 50% fee increase. It threatened to fire the company but retreated because there was no back-up plan. In Florida, Maximus and another company, Lockheed Martin, took on a contract to collect child support. The companies were paid $4.5 million to collect $104 million in child support. They collected just $207,000!

In Arizona the state set up a privatised pilot program run by Maximus, called Arizona Works. Independent consultants were employed to compare the performance of the Maximus program with the public sector program. The consultants found that the private program did not perform better and that it cost more.

Both Maximus employees and welfare recipients placed in jobs have complained of widespread discrimination. The company’s own Human Resource Office has received more than a dozen internal complaints alleging unfair promotion practices. The national working women’s organisation, 9 to 5, is also campaigning to expose sexist discrimination by Maximus, alleging that the company funnels women into super low-paid jobs to get their placement fee.

Warriors want Maximus out of Wisconsin. Campaign group, Welfare Warriors, publicises specific cases to highlight the discriminatory practices. In Wisconsin, three single mothers — Tracy Jones, Alfreda Parks and Ethel Scott — were denied assistance to tide them over between jobs. The women were instead referred to the company’s own temp agency, Max Staff. Max Staff sent them to part-time temporary factory work in a nearby town. They charged them $20 a week for transport to get them from Maximus to the factory, where women were paid $7.01 an hour for doing the same job as men who were paid $1.13 more. Says Welfare Warriors, “by refusing to provide cash to these struggling families Maximus profited in four ways — temp job profit, transport profit, discrimination profit and unspent funds.”

Questions were raised in Wisconsin about company accounting standards. Maximus now admits to “inappropriately” billing the state $411,000, and an audit found that a further $1.6 million was not well documented.

Welfare Warriors has mobilised to force the state to terminate the contracts of Maximus and Goodwill, the two largest welfare agencies in the city of Milwaukee. Their campaign — focusing on publicly exposing the misappropriation of funds, discrimination and poor treatment of welfare recipients — has brought some results. In December 2001 Goodwill gave up its contract, citing “community dissatisfaction” as the reason. The Welfare Warriors now have Maximus — which they dub “the mother muggers” — in their sights. They are now campaigning to have the District Attorney prosecute Maximus for its blatant misuse of state funds.

The impact of welfare privatisation has been horrific. Companies receive performance bonuses for “case reduction” achieved by terminating welfare support for families.

Vigilance needed. Without a doubt, Canberra’s privatisation fetishists would be most interested in Leonie Green’s claim that Maximus “would be very well suited to help.” But we can stop them in their tracks. It’s time for welfare recipients, the trade union movement and public sector workers to make common cause in defence of a publicly administered welfare system which provides income support for everyone in need.

Already, many impoverished people — recent immigrants, young people excluded by the parental income tests, unemployed people “breached” for making a mistake and those excluded by a partner’s income — are denied welfare. The gradual implementation of the new “Australians Working Together” program, with its extended mutual obligation, will result in larger numbers of welfare recipients having their benefits suspended if they fail to jump through the appropriate hoops.

The privatisation of welfare delivery must be vigorously resisted. Private welfare delivery corporations make their profits off the hides of the poor, receiving bonus payments for reducing the government’s welfare bill by terminating poor people’s benefits. Profit-making welfare management corporations judge their success by the ability to make money for shareholders, not their ability to improve the lives of the poor.

Resisting further privatisation of welfare is just the first step.

Needed now is a union and community campaign for:

  • A guaranteed income for all at a living union wage!
  • An end to mutual obligation! Immediate cessation of work for the dole and other forced work and training schemes!
  • Equal access to education and training programs! Abolish HECS!
  • Free quality 24-hour childcare!
  • Increase Centrelink staffing levels and reduce the massive workload!
  • Re-nationalise the Job Network!
  • Massive job creation! Full employment at a living union wage! A 30-hour work week with no loss of pay!
  • Fund welfare, education and childcare through taxing big business!
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