There have been a number of studies and working groups over the past number of years that have examined the possible impact of employer PRSI reductions on employment.
Generally, there is broad agreement in the available research and among business and industry representatives and commentators that a reduction in employers' PRSI would probably have a positive impact on employment, although it is difficult to quantify the impact. Given that employers' PRSI has a proportionally greater cost impact on lower paid employments, reductions in employers' PRSI are likely to have a proportionally greater beneficial impact on lower paid employments.
In its 1993 report on a strategy for competitiveness, growth and employment, the NESC looked into the issue of PRSI and stated that, viewed as a tax, there were a number of aspects to PRSI which were unsatisfactory and which merited attention in an employment strategy. Broadly speaking the NESC conclusions in regard to employers PRSI contributions could be summarised as follows:
(a) The structure of PRSI means that it is regressive, increasing the cost of low paid labour more than high paid labour. This has, according to the NESC, a distinct disadvantage from an unemployment viewpoint as workers classified as unskilled are over represented on the live register, and, secondly, firms which employ low paid labour generally compete primarily on cost.
(b) The base for PRSI is limited. This implies that it strengthens the incentive to substitute capital for labour, it is a greater burden on firms in labour intensive sectors and by directly increasing the cost of labour it has an adverse impact on competitiveness.