Almost half of all unemployed people assisted by outsourced jobseeker services are still without a job after two years or more, and the most disadvantaged are waiting five years on average to exit the system.

Those insights are contained in a jobs department discussion paper on government-funded employment services, which has been released as a harsh new penalty system for welfare recipients comes into force and amid concerns that a website outage has prevented jobseekers reporting their efforts to find work.

The discussion paper paints a rosy picture of the Jobactive model, in which the government pays private companies to match employers with jobseekers, who undertake compulsory activities such as searching for work and attending job interviews to continue receiving welfare.

It cited the fact jobseekers had found “more than 1 million” placements since Jobactive began in 2015.

“The labour market is strong, with over 12.5 million Australians in work, the highest on record,” it said. “The proportion of the working age population receiving a welfare payment is now 15%, the lowest proportion it has been for at least 25 years.”

But the paper reveals that two-thirds of jobseekers receiving employment services are long-term unemployed who have been in the system for more than 12 months.

“Almost half of the people in Jobactive have remained in the service for two years or more,” it said. “Among the most disadvantaged jobseekers, the average length of time on the caseload is five years.”

The discussion paper blames the fact Jobactive employment service consultants have an average caseload of 148 jobseekers each.

With a turnover rate for consultants “almost three times the national average”, it was “difficult to provide high-quality, tailored services to disadvantaged jobseekers”, the paper said.

“Similarly, employers may not always have access to the right incentives or support to hire these jobseekers.”

The discussion paper suggested technology such as a better website and digital applications would help “more efficient and targeted employment services”. This would “free up more time for providers to spend servicing clients with higher needs and meeting the needs of employers”.

The paper suggested more “automated compliance reporting”. This week the Jobactive website has had outages preventing jobseekers from reporting their search activities.

One jobseeker, Kevin Searle, told Guardian Australia the website had been “down for days” and “appears to be a total failure” because it did not display any activity reported since 6 April.

The help desk has advised him to manually report his activity to his Jobactive provider.

Labor’s employment spokesman, Ed Husic, said jobseekers “should not be made to pay for another digital stuff-up by the government”.

“The government have been talking up the investment it is making in IT systems and it claims it is ready to release an online assessment tool for jobseekers, yet at the same its major site has crashed and has been out for days without adequate explanation,” he said.

A jobs department spokesman said a “planned shutdown” had occurred from Friday to Sunday for an IT upgrade to support changes that came into effect on 1 July.

“A system issue has been identified which impacts how a jobseeker’s job search effort indicator and job search effort periods are displayed on the dashboard and on the job search effort screen,” he said. “In some circumstances it is preventing jobseekers from reporting their job search activity.”

The spokesman said that no data had been lost, jobseekers would not be required to re-enter their activities and would not be penalised.

On Wednesday the Australian Unemployed Workers Union launched its Dump Your Demerits campaign in Sydney, lobbying against changes on 1 July that granted job agencies new powers to punish Newstart recipients for failing to perform compulsory activities.

Under the new demerit point system, agencies can suspend payments if they believe jobseekers are behaving inappropriately, or failing to attend appointments and activities such as Work for the Dole without a “reasonable excuse”.

Jobseekers can no longer use drug or alcohol-related illnesses as a reasonable excuse and the job agencies’ decision cannot be reviewed until the fifth demerit point is accrued.

Senator Lee Rhiannon told the launch the Greens supported scrapping Work for the Dole and the demerit point system, which “demonises people who are unemployed, people who are on benefits”.

Rhiannon said that private companies could “dish out demerit points” resulting in jobseekers losing their entitlements, which would help the government by “driving people off welfare”.

Husic told Guardian Australia Labor was “very concerned there will be overzealous people more interested in pushing people off income support instead of tackling some of the serious and heavy social issues that might be preventing people reengaging in employment”.