Digitimes (28 July, 2009) reported that China Karaoke operators are buying LCD TV subsidy rights from farmers. To the farmers, LCD TV probably is not a necessity, and even with the subsidy, they still need to fork out a handsome sum of money. Therefore, trading the rights for some cash seems to be a good option. In other words, the benefit of the subsidy has been shared by the Karaoke operators and the farmers. Fair? Well, that's not the government intention. The government hopes to see improvement in the farmers' living standard. However, that's how market works, when 2 parties see different values on the item, in this case the subsidy, they can trade.
Closer to us, we also see recently a few employers were charged for hiring phantom employees to enjoy job credits from government. The intent of job credit, according to the government, is to save jobs by lowering cost of doing business here. Job credit is also a form of subsidy. In general, from economics point of view, wage subsidy is not good, as it may lead to various problems, including sustainability, effectiveness, and exploitation concerns. As job credit is a short-term measure, sustainability is not an issue. Effectiveness is a question mark. Will companies agree to cough out $100 in order to get back $12? We will probably never know the real answer, but that may not be important after all. In a deep crisis, confidence and hope have its value. Finally, we can see that exploitation does happen. The ones caught represent probably the tip of iceberg.
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