Job generation in Scottish manufacturing industry

Hamilton, Douglas and Moar, Lyle and Orton, Ian (1981) Job generation in Scottish manufacturing industry. Quarterly Economic Commentary, 6 (3). pp. 37-44. ISSN 0306-7866

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Small firms are currently much in vogue. Indeed all the main political parties see them playing an important role in the future regeneration of the UK economy. From virtually total neglect as far as policy is concerned, small firms have recently come to be regarded as an important vehicle both for the rejuvenation of our industrial structure and more importantly for the generation of new jobs. However the basis for this belief has not always been very clear. Prior to the Bolton Report (1971) small firms were thought to have no significant role to play in the management and control of economic activity in the economy. Since then however, a small firm revival of sorts has taken place, possibly identified most by Schumacher's "Small is Beautiful" (1974). With the publication of the Birch Report (1979) the job generation potential of small firms appeared to have been established at least for the US. During the period 1960-1976 firms employing 20 employees or less across all sectors were found to have generated 66? of all net new jobs in the US. It was tempting to transfer these results to the UK. However a subsequent study carried out in the UK (Fothergill and Gudgin (1979)) found that small firms, at least in the manufacturing sector, did not hold quite the same job creating potential. They also pointed out that Birch's findings for the manufacturing sector in the US were in fact very similar to their own. It was the service sector in the US, in which the small firm predominates, that had created the vast majority of jobs. This article attempts to further this area of research by looking at the employment contribution of small manufacturing establishments in Scotland over the period 1954-1974. Using data from the Scottish Manufacturing Establishments Record (SCOMER) a components of change analysis by different size bands of establishments is carried out. It is important to note that we are talking here of small units or establishments as opposed to small firms as such. Where a firm has several distinct manufacturing establishments each of these is seen and recorded in SCOMER as a separate unit. So although not definitionally accurate, the terms firms, units and establishments are used synonomously.