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COMMENTARY 1

Title: Ferry operators ask for Subsidy

Source: The Jakarta Post

Date of publication: 06th February 2009

Section of the syllabus: Microeconomics

Word Count: 711

The article talks about the Ferry operators in Indonesia asking for subsidy from the government due to several reasons.

27.5% of Ferry fare income was on fuel costs thus, the government decided to cut the fuel cost by 3.5% and expected a fare cut. However, the operators have other reasons to this; the cut in fuel simultaneously increased other costs such as maintenance and minimum wage hike. "If these four costs are added together, ferry fares should have not been cut by 3.5 percent but raised by 9.8 percent."

If the government doesn't concede the ferry operators demand then they would be left with two options:

1) Cut in wages cost:

Ferry operators would have to reduce working hours from two 12-hour shifts a day to two 8-hour shifts which will result in a decrease in wage costs. Otherwise some workers will have to be laid off due to cost cuts causing unemployment. The other aspect to this is that some people