Why does an increase in employers' national insurance decrease demand for labour?

Unless i'm confused by who pays national insurance, why would an increase in the insurance paid by employers lower firm's demand for these same employers? The only reason I can think of is workers will demand a higher wage to increase their disposable income since national insurance costs will lower their income.

Original post by dont know it

Unless i'm confused by who pays national insurance, why would an increase in the insurance paid by employers lower firm's demand for these same employers? The only reason I can think of is workers will demand a higher wage to increase their disposable income since national insurance costs will lower their income.

There are two parts to NI, one paid by the employee and one paid by the employer. So while your reason is indirectly valid, a rise in NI directly impacts the employer's costs of employment.

Reply 2

Good bloke

19

Original post by dont know it

Unless i'm confused by who pays national insurance, why would an increase in the insurance paid by employers lower firm's demand for these same employers? The only reason I can think of is workers will demand a higher wage to increase their disposable income since national insurance costs will lower their income.

The employer pays the employer's contribution. The employee pays the employee's contribution. The employer employs the employee who does the work.

Therefore, a rise in the employer's contribution is a direct tax on the employer, not the employee whose pay (gross or net) is unaffected by a rise in the employer's contribution.

Reply 3

dont know it

OP

9

Original post by threeportdrift

There are two parts to NI, one paid by the employee and one paid by the employer. So while your reason is indirectly valid, a rise in NI directly impacts the employer's costs of employment.