This paper presents a simple game theoretic approach to the Government
's decision to subsidize in order to safeguard employment. Central to
the analysis is the notion that a government's commitment to subsidize
will affect worker wage setting behaviour, and encourage rent seeking
. A number of variants of the basic game are developed. Rules are addu
ced to predict government and worker behaviour, and some numerical sim
ulation is performed on stylized data. A key result is that whilst in
many of the one-shot games the worker can force subsidization, when re
peated games are analysed, these generally favour the Government takin
g a tougher stance.