THE Irish Small and Medium Enterprises Association (ISME) has criticised the Department of Social Welfare's claim that an employers' PRSI reduction will not create jobs.

It said last night it was concerned at "the contradictory reports emanating from the different departments". The claim by the Department of Social Welfare "is a direct contradiction" to the Department of Enterprise and Employment, which argues in a strategic paper on the labour market, Growing and Sharing Our Employment, that employers PRSI has to be reduced to help create employment, said ISME.

The association contends that the Social Welfare document is, in fact, trying to conceal the real problem with the social welfare system and job creation.

Noting that the average industrial wage is £14,500 per annum, ISME argues that to protect those in unemployment and those below the proverbial poverty line, the Department of Social Welfare and other departments have put in place a range of benefits which ensure that a married man with two children has no incentive to take employment in a job paying less than £13,000.

"What the policy makers forget when they chose to introduce supplementary benefits totalling £13,000 was (and is) that typical wages in SME's range from £8,500 to £11,500, are well below the poverty line," it says.

ISME claims that social welfare band supplementary benefits are being pitched at a level far in excess of the typical real wages in competitive SME businesses.

It says employers PSI acts as a payroll tax and stunts employment growth by raising the total cost of labour to employers.

PRSI also jeopardises competitiveness, ISME says. "To employers, payroll taxes are another cost that must be recovered through their selling prices."

ISME concludes that it is, therefore, "almost unbelievable" that the Social Welfare document implies that there is no link between employers high rates of PRSI and the prospect of reducing high unemployment levels.