A few days ago, the government of Daxing district, Beijing municipality, handsomely rewarded four entrepreneurs for their employment of local workers.
But the price of their rewards seems too large.
A Beijing-based newspaper reported last Friday that the local government presented four Audi sedans to the entrepreneurs. One of them won an Audi A8 worth 3.16 million yuan ($464,706) and three others were granted Audi A6, each of which is worth 860,000 yuan ($126,471). The authorities said the move was aimed at encouraging other enterprises to hire more local laborers.
According to the newspaper, the top prize winner's company employs 1,625 workers, 90 percent of whom are local residents. The company plans to recruit 100 or 200 more workers this year and has promised not to cut the payroll.
It is reasonable that a local government spends a certain sum of money to reward entrepreneurs in gratitude for their contribution to local employment. The question is how valuable that reward should be and what form it should take.
Let's do some calculation. The total amount of money the Daxing government spent on awarding the four entrepreneurs was 5.74 million yuan ($844,118). The budget the administration plans for this year's employment subsidy in the district, according to the local newspaper, is 50 million yuan ($7.35 million). The money paid to the four people amounts to about one ninth of the yearly employment subsidy for the whole district. This is obviously too high.
Rewards for such good deeds should be more based on honor than financial reward. Do the four entrepreneurs really merit such a huge reward?
Entrepreneurs are not philanthropists. They employ workers because they need them to generate profits. If they decide to recruit more workers, that's because they want to expand production for greater earnings. They would not hire an extra worker only for the purpose of increasing local employment rates. Would they put up with surplus labor in gratitude to a possible reward from the government? The scenario is unlikely, because it goes against the market.
Even if it is necessary to award the entrepreneurs so handsomely, the prize should be something more meaningful than a luxurious car.
For instance, the government can designate the prize it awards to the enterprise to be used for technical innovation exclusively. That will benefit the enterprise, the nation and the employees.
Small and medium-sized enterprises (SME) are the main employers of Chinese workers. The entrepreneurs are usually content with the situation where they can make handsome profits from turning out low-tech products by exploiting cheap labor.
These entrepreneurs are in dire need of government guidance in their management philosophy.
Granting awards acknowledging their contribution to the nation's economic development is just a good opportunity to give them such guidance. Subsidizing them in their scientific and technological research and innovation is definitely more beneficial than giving them extravagant cars.
Technical advancement in SMEs will help upgrade products and generate bigger profits, which in turn makes it possible for enterprises to raise workers' pay. As well as improving China's manufacturing industry, it will also improve the quality of Chinese workers.
Governments at all levels have the responsibility to educate entrepreneurs about this philosophy of managing their companies.
Awarding entrepreneurs with luxury cars is a foolish method.