When Mark Lanyon applied for the dole four years ago, he was sent to his nearest job centre, at Leongatha, about 40 minutes drive from his home. He lives in public housing in the Victorian town of Foster, population 1,200. Luckily his car was working at the time because there are “only three buses out and four buses in” each day.

“There are no jobs in Gippsland unless you have experience milking a cow or you are under the age of 18,” Lanyon says. “I am 54 years old.”

He’s not milked a cow, but he has worked in the mining and transport industries, and as a carpenter. Most recently, he had gotten warehousing jobs through labour hire. Eventually, they dried up. “They just keep bringing fresh people in.”

Lanyon is among the 400,000 unemployed Australians who must engage with Jobactive, the government’s main employment services program, in order to keep their welfare payments.

Since the late 1990s, Australia has paid private companies and non-profits to run the 1,800 job centres around the country. They are tasked with getting people like Lanyon into work. The problem is that, on the whole, they’re not.

“The system is failing to help the people who need the most help, and that is the long-term and very long-term unemployed,” says Peter Defteros, a policy adviser at Jobs Australia, which represents non-profit providers.

For people like Lanyon, the consequence of that failure is poverty. “I haven’t had a nutritious meal in I don’t know how long,” he says. “I don’t cook because I do not want to turn the stove on. I watch TV without lights on at night. I don’t want to have a electricity bill that I cannot pay.”

***

“Welfare-to-work” is now a billion-dollar industry. Providers compete for the lucrative contracts, worth $7.6bn to the taxpayer over five years when the last round was signed in 2015.

Proponents for the privatised system argue the model is much cheaper and boasts a better cost-to-outcome ratio.

But myriad reports – including recent findings from a Senate committee and a government-appointed panel – have found the most disadvantaged jobseekers are being left behind.

In 2002, a Productivity Commission report that was largely supportive of the then-new privatised model still warned “many disadvantaged job seekers receive little assistance … so-called ‘parking’”. That practice still occurs under this name today, according to employment consultants who spoke to Guardian Australia for this story.

When a person applies for Newstart, they are assigned a Jobactive provider and placed into one of three categories ordered by the level of assistance they might need: streams A, B and C.

The outlook for the most-disadvantaged jobseekers is bleak: only a quarter will find work each year. Overall, 40% of those receiving payments will still be on welfare in two years. While Jobactive has recorded 1.1 million “placements” since 2015, one in five people have been in the system for more than five years.

New data provided to Guardian Australia by the Department of Jobs and Small Business shows about 1.9 million people have participated in Jobactive between July 2015 and 31 January 2019. In that time, 350,000 – or 18% – have been recorded gaining employment and getting off income support for longer than 26 weeks.

Mark Lanyon has been unable to access funding for training courses he wants to do and had no help on his resume. Photograph: Chris Hopkins/The Guardian

And of those 350,000, only 35,852 – or 10% – had been classified as disadvantaged in Stream C.

Since Lanyon was placed on Jobactive, he’s had eight job interviews and sent in about 150 applications. Eighteen months ago he says he slept in his car and showered at a homeless shelter after finding work close enough to take but too far away for a daily commute.

He knows his chances of getting back into work diminish each day he’s out of the workforce.

Lanyon’s first job centre wanted him to come back to Leongatha twice a week to spend three to four hours on the centre’s computers looking for work. He was also going to have to send off 20 job applications a month.

It would have been a mean feat for someone without reliable transport living in a town of about 1,000 people. If he didn’t meet the requirements, his benefits would be cut. Lanyon refused to sign.

“Rather than negotiate with me she told me she was just going to cut me off,” he says. “I was going back home and the truth is I was contemplating suicide, I was thinking of driving in front of a truck. I pulled over a few minutes later and went back to the Salvation Army.”

Lanyon’s next experience was at the other end of the spectrum. His current consultant is much more “understanding” and he is yet to have his payments suspended for breaching the rules. (Of the 400,000 Jobactive participants at 31 December, about 175,000 had been penalised by their provider and had their payments temporarily cut.)

Still, Lanyon has been unable to access funding for the training courses he wants to do. Remarkably, he’s also had no help putting together his resume. “I was given Windows Word access and told to go for it,” he says in an email. (He also sends across an earlier version that was created in Notepad.)

It appears Lanyon has been “parked”.

***

In 2015, the government overhauled what was known as Job Services Australia to create Jobactive. New contracts were aimed at incentivising providers to help get the long-term unemployed “job ready” and place them into work.

The number of providers was slashed from 79 to 44 and the share of for-profit operators increased from about a third to nearly half.

The government also decided to change the way it pays providers. Where once only about a third of payments were tied to job placements, now about half are.

Jobs Australia’s Defteros acknowledges that providers get larger fees for getting the most disadvantaged jobseekers into work. Still, the results have been “perverse”.

“Consultants can spend a lot of time working with people who are a long way from being able to get work, but they’re just not rewarded for it necessarily,” he says. “They are forced to direct their efforts into where they get a financial return.”

Indeed, it seems many have. Since the Jobactive contracts began in July 2015, about 120,000 jobseekers had three or more “placements” recorded, while about 6,000 job seekers had received six placements. Each placement triggers a payment to their provider, which critics say encourages providers to “churn” workers through insecure work.

“It is really all about profit, it is not about helping people anymore,” says Kylie Wright, who works as an employment consultant in St Helens, on Tasmania’s east coast. “The only way I have met my KPIs is by people finding their own employment. My employer still gets paid for that. It is all about outcomes, it is not about putting them into jobs that actually suit them.”

***

If you ask advocates for the unemployed what’s wrong with Jobactive, two words come up a lot: “punishment” and “trust”.

“The current system punishes people for not being able to get jobs that don’t exist,” says Owen Bennett of the Australian Unemployed Workers Union (AUWU).

Critics argue it is cruel to punish the unemployed for not meeting their “mutual obligations”, citing data that shows there are eight unemployed and under-employed people for every job vacancy in Australia.

Mark Lanyon at home in Gippsland. Advocates argue it is cruel to punish the unemployed for not meeting their ‘mutual obligations’. Photograph: Chris Hopkins/The Guardian

“The system treats people who are out of work as if they are responsible for the lack of jobs,” says Emma Dawson, of the left-leaning thinktank Per Capita. “And they are still being expected to apply for jobs when they are very unlikely to get them.”

Mutual obligations were introduced by Paul Keating in the early 90s and are now a fundamental tenet of the welfare system. Social service groups were outraged last year when the Coalition handed more responsibility for penalties to private employment consultants instead of Centrelink staff.

The most disadvantaged have been the most affected. While they’re the least likely to find jobs, they’re most likely to be punished: more than half had their payments temporarily cut by their provider in the last six months of 2018.

“If somebody misses an appointment, I call them and ask what happened,” Wright says. “Nine times out of 10 they have either forgotten it or they have no fuel or no phone credit.

“But I have been told I am no longer allowed to do that. I have to cut them off their payment. I just don’t think that is very fair.”

Aside from the poverty, Lanyon can’t stand applying for jobs he knows he can’t do. About 18 months ago, he lost his licence. He was on medication at the time and fell asleep at the wheel.

Living in Foster, there was no way he could accept jobs in other Gippsland towns without a car.

“I had a bit of a turn,” he says. “For 12 months I did not have a driver’s licence and I still needed to apply for work. I used to say, ‘If any of these come up, what’s the plan?’ There was no plan.”

Employers have continually complained about being flooded with these sorts of applications. Only 4% of businesses now advertise with government-funded providers, compared with 18% in 2007.

“It’s pretty damning,” says Jenny Lambert of the Australian Chamber of Commerce and Industry. “I don’t think it’s realistic to suggest a majority of vacancies would be listed in the government-funded system, but if you could double that amount that would make a huge difference.”

Lambert doesn’t think the system is “broken”, just that it can be “vastly improved”.

“A flexible approach to mutual obligation recognises that activities are more than just putting in an application,” says Lambert. “You have got to incentivise people to think seriously about what value they can add to the employer, and to turn up to an interview and present as good a case as possible.”

***

While Australia spends less than most OECD nations on employment services, it’s still the largest government procurement outside of defence.

Some companies make big money. The winner from the 2015 Jobactive contract shake-up was Max Solutions, which now has about 40% of all Jobactive participants on its books. Max Solutions’ five-year Jobactive contract with the government is worth $1.2bn, according to tender documents, and its US-based, publicly listed parent company Maximus told shareholders last year that 10% of its revenue came from the Australian government.

But overall, Jobs Australia argues the most recent model reduced funding to providers by 10%-15%.

With less upfront funding and more compliance work to do, providers have slashed staff costs. Wright, who is the only consultant in her office, looks after 87 jobseekers in a town of 2,200.

Lanyon says he is among 96 jobseekers on his consultant’s caseload. Overall, the average is 148, according to one report. In 2008 it was 94. Yearly consultant turnover, meanwhile, is 42%, while the average pay for a consultant is $50,000.

The 2015 overhaul was designed to stamp out fraud. But it has meant consultants cannot offer their clients as much of their time or as many services.

Portrait of Mark Lanyon at his home in Foster, Victoria. Photograph: Chris Hopkins/The Guardian

And there are still allegations of rorting. Providers have been accused of offering jobseekers cash and petrol to lie about their employment status to help falsely claim payments.

Speaking to Guardian Australia, one former employment consultant confirms the second practice. He says under-pressure staff would doctor forms so jobseekers who were not working sufficient hours for the provider to claim an outcome payment could do so.

“Say someone has started work, but they were doing less than 25 hours per week,” he says. “There is a verification form that they can sign and the hours would be changed in there.”

The former Sydney-based consultant, who worked for two years at a major for-profit provider, also alleges potential rorting of training programs.

The provider ran a workplace motivation course with the premise: “How to think like an employer.”

When some jobseekers had not done the course, employees “would get a spreadsheet for anyone leftover, asking us why these people haven’t done it”.

And where the company offered a relevant training course, “we would be told to refer people to that program, so there was no leakage of money out of the company,” says the former consultant, who did not want to be named citing a non-disclosure clause in his contract.

***

There is at least a consensus that the system needs to change. The Coalition has promised a “radical overhaul” of Jobactive, though it has extended the existing contracts from 2020 to 2022 so it can trial a new model. The idea is that this frees up providers to spend more time with those who need the most help.

It plans to scrap the 20-jobs-a-month requirement, but jobseekers will still have to meet their obligations under a points-based system. The changes will also result in a $60m cut from government spending on employment services.

Labor also proposes scrapping the 20-jobs-a-month requirement while promising that jobseekers will have a “tailored” plan. The opposition wants to introduce new standards that reward providers for getting jobseekers into long-term employment. They’ll also be encouraged financially to work with local labour markets.

Wright will be watching closely. She says she used to meet with local employers outside of work hours because the only way to place people into jobs was to “go out and find jobs to place them in”. “I was going out in my own time but I realised this was just crazy.”

“It’s really hard to keep people focused when they just keep getting knocked back on the few jobs that are there,” Wright adds. “The big problem, especially in small towns like mine, is that we have four Jobactive providers, limited jobs in the town, and we all have our own clients.

“I might have the perfect placement sitting on my wall and there are three perfect clients for that job at the other Jobactive providers. But they’re never going to meet.”

As for Lanyon, he has been trying to get his provider to fund the courses he wants to do. “They said the way that the system is set up now … they cannot provide assistance to do the training unless I have an offer in writing,” he says.

“Somebody my age needs training. I requested the cost of getting my truck driving licence and a bus licence because I would have more luck. I have a good driving record except for that one thing I mentioned 18 months ago.

“I understand there’s a bus network in Dandenong that is always hiring. I’d love to have a go at that.”

In Australia, the crisis support service Lifeline is 13 11 14. Other international suicide helplines can be found at www.befrienders.org

Reporting in this series is supported by VivCourt through the Guardian Civic Journalism Trust