With full employment looming in the Republic, the Government's next budget should tackle the tax burden on middle income earners by increasing the entry point into the higher tax bracket and reducing the rates of the Universal Social Charge (USC), the National Recruitment Federation (NRF) has said.
In its pre-budget submission, the representative body for the Republic’s recruitment industry called for an increase in the entry point to the 40 per cent rate of income tax by €1,250 to keep ahead of wage growth – costing the exchequer around €210 million.
It also recommended a 0.25 per cent reduction in the main USC rate to 4.5 per cent and the same reduction in the lower rate to 1.75 per cent.
The effective reduction in income taxes is required, it said, to control wage inflation and support competitiveness.
That competitiveness is also threatened by the fact the Republic is reaching full employment, a fact that means women need to be supported to return to the workforce.
The NRF said the rapid decline in unemployment poses “significant challenges for the economy”, and the low participation rates of women over the age of 35 therefore needs to be addressed.
"Childcare, essentially its provision and cost, and aspects of the social welfare system that discourage jobseekers from taking up part-time work, are the main issues to address if women are to be supported in going back to work," said Frank Farrelly, president of the NRF.
Working parents
The submission flagged that childcare costs in Ireland are among the highest in the 36 OECD countries. The needs of working parents have to be taken into account, it said, calling for investment in out-of-school hours care for children.
The lobby group argued the so-called “granny grant” – an initiative to offer €1,000 to grandparents who help with childcare – is an inadequate response for an issue requiring “serious investment”.
If someone has to sign off the live register for a full day, they can be worse off financially as a consequence
“Gains in employment and incomes remain the key drivers of growth, and yet, ironically, the serious labour supply pressures now emerging are threatening Ireland’s productivity and competitiveness,” Mr Farrelly noted.
“Proper investment in a structured childcare solution is needed, and, in terms of the cost of subsidised childcare, this is expenditure that Government can’t afford not to make, if we are to resource our labour market needs and drive economic progress.”
Suite of measures
While incentives to return to work are part of a suite of measures that need to be addressed, the NRF said the social welfare system discourages jobseekers from taking up part-time work.
“If someone has to sign off the live register for a full day, they can be worse off financially as a consequence, and many therefore decide not to take up a part-time job. This is an issue in sectors like food services, retail, care, security and cleaning, all of which offer flexible part-time work that will often appeal to jobseekers, and women in particular, who want to work around their family.”
It said higher employment levels have a positive impact across the economy and each additional job where a person is recruited off the live register saves the State around €20,000 per year in social welfare costs, the NRF noted.
