Labour turnover
While a measure of mobility in the labour force is essential, too much mobility is inefficient and costly. It appears that a great deal of the mobility which does take place is not of the type which leads to a more efficient distribution of the labour force. Studies of particular industrial regions have revealed that very large movements of workers into and out of certain industries are taking place while the totals employed in those industries remain relatively unchanged. Labour turnover, as this movement is called, often represents an aimless wandering from job to job — a restless movement of workers seeking a change rather than advancement to a better paid or more suitable situation. It is due in some part to the lack of job satisfaction referred to earlier although inadequate selection procedures may also be a cause. A high degree of labour turnover is costly because each time an operative leaves his job and a replacement is required the employer incurs costs in the form of (a) a fall in output, (b) the costs of training a new worker, and (c) the loss of a skilled operative's output while he trains the new entrant. The entrepreneur The most mobile of the factors of production is probably the entrepreneur. While labour tends to be trained for some special task appropriate to some particular industry, the basic functions of the entrepreneur are common to all industries. Whatever the type of economic activity there will be a need to raise capital, to organise the factors of production, and to take the fundamental decisions on where, what, and how to produce. The creation of an efficient unit of production is a task of human relations the basic features of which are common to all industries. It requires qualities of initiative, leadership, organisation, and control. The relatively few people of first-class ability who possess such qualities are able to operate effectively in almost any industry.
COOPERATIVES AND THE PUBLIC CORPORATION There are basically two forms of cooperative enterprises, one which operates on the basis of worker control and one on the basis of consumer control. The second type has been much more successful in the UK than the first type. Producer cooperatives The idea of workers establishing their own production units, raising the capital by their own efforts, electing the management from their own ranks, sharing the profits according to some agreed formula, and sharing power on the basis of one member, one vote, is quite an old one. In the UK at the turn of the century there were some 200 such worker-controlled enterprises strongly supported by the cooperative retail societies which purchased much of their output. Since that time serious decline reduced the number of this type of cooperative to about 30 in the late 1960s. Most of the survivors were in printing, clothing, and footwear. In more recent years there has been a strong revival and many new cooperatives have been formed. Some of these newer worker cooperatives differ in several respects from earlier experiments. They have sometimes been launched with government money and have been established as a result of workers' refusal (shown by 'sit-ins') to accept management's view that the firm is not a viable enterprise and should be closed down. Several of these cooperatives have been registered under the Companies Acts instead of the Industrial and Provident Societies Acts, as were the older cooperatives, in 1978 the government established a special agency to help worker cooperatives with technical advice and expertise. This type of business organisation has proved very successful in Danish agriculture and is being widely adopted in the agricultural sectors of developing countries. France has about 500 producer-cooperatives employing some 30 000 people, about half of them in the building trades. In Spain there are some 1 300 such cooperatives employing about 50 000 people. The directory of the Cooperative Development Agency indicated than, in 1986, there were some 1 500 worker or producer cooperatives in the UK. Consumer cooperatives Cooperative enterprise in the retail trade began in Rochdale in 1844, when a group of low-paid weavers opened their own very small retail shop. From these humble beginnings the movement has grown to become one of the largest retail organisations in the UK. The basic principles on which the movement was founded were: (a) the society should be owned by the customers, i.e. (b) the profits should be distributed according to the (c) the society should be democratically controlled on These principles are still the basis of the modem cooperative societies. The members of each society elect a management committee (usually part-timers) which is responsible for the general policy, but the day-to-day operations are in the hands of full-time salaried officials appointed by the management committee. In the early years, the regular payments of dividends were an important inducement to become a member of a cooperative society. Many societies, however, no longer make these payments, but their members are usually entitled to 'special offers' at frequent intervals. The membership of the retail cooperative societies has fallen from a peak of about 13 million in the 1960s to about 8 million in 1987. For many years the movement was made up of a large number of local cooperative societies. This situation has now changed, and a long series of mergers has reduced the number of societies from more than 1 000 to about 200. The cooperative societies have been forced to merge themselves into larger units in order to obtain the economies of scale which wilt enable them to compete with the very large retail organisations which have developed in recent years. The Coops have about 6 per cent of the retail trade and about 15 per cent of the grocery trade, and they supply about one-third of the country's milk. The needs of the retail societies are largely met by the Cooperative Wholesale Society which is now Britain's tenth largest business. It is collectively owned by the retail societies. The CWS is a large-scale importer and manufacturer and also operates a very large banking and insurance business. It is also Britain's largest fanner. The CWS manufacturing and other industrial operations are not run on the basis of worker ownership and control — they are controlled by the retail societies. After losing ground to the multiples, the Coops, in recent years, have adopted a much more competitive approach with large-scale national advertising, the development of hypermarkets, the replacement of a multiplicity of brand names with the single Coop label, and the appointment of high quality management staff. The merger movement in bringing about larger and more efficient units has undoubtedly been successful, but the movement appears to be finding it difficult to reconcile the objective of efficient larger-scale operation with the traditional image of a local retail democracy. Cooperative societies started as working class movements and the loyalty of the working class was a very important feature of their early success. To the lower paid, the Coop dividend was a useful form of saving and this too played its part in establishing a loyal clientele. These things may not be so important nowadays as the cooperative societies seek to widen their markets, but the movement still retains important social and political objectives. It seeks the extension of worker and consumer control both through its own activities and in supporting political movements which advocate these principles. The public corporation In recent years whenever the state has decided to transfer the ownership of an industry from the private sector to the public sector, the public corporation has been the type of business organisation adopted for the purpose of running the industry. Some of these public corporations have been in existence for many years. The Port of London Authority was set up in 1909 to run the London docks, and the British Broadcasting Corporation was established in 1927. Most of the larger public corporations, however, date from the period of the Labour government, 1945 — 51, when several important industries were nationalised. We shall discuss the question of nationalisation later; here we are only concerned with the type of business organisation which has been adopted to control and organise nationalised industries. The public corporation is a separate legal identity like the company, but there are no private shareholders. The government owns the capital and appoints the members of the controlling Board who have functions very similar to directors except that they are answerable to the government and not to shareholders. In general, the policy to be pursued by a public corporation is determined by the government and a Minister of the Crown is usually given the responsibility for seeing that the corporation is acting within the broad policy requirements laid down by Parliament. In its day-to-day management, however, the controlling board is given wide freedom of action. When commercial enterprises were brought under public ownership it was felt that the direct control by Parliament, as is the case with government departments such as health, education, pensions and so on, was not appropriate for enterprises where uncertainty and risk-taking called for quick decisions of a strictly commercial nature. The public corporation, therefore, is an attempt to obtain a satisfactory compromise between public responsibility and commercial efficiency. Parliament does not interfere in the day-to-day management of the public corporation. The main purpose of the public corporation is to provide an efficient public service at a reasonable price. It does not aim to maximise its profits, but it is charged with the duty of paying its way. Any profits made by a public corporation must be used for capital investment, the lowering of prices, the raising of wages, or transferred to the Exchequer. Such losses as have been made by public corporations have been financed by government loans. In contrasting the joint stock company and the public corporation the following features should be noted, 1. Control. The joint stock company is controlled by a 2. Ownership. A joint stock company is owned by the 3. Finance. A joint stock company raises its capital by 4. Motives. While the joint stock company exists pri THE LOCATION OF INDUSTRY Natural Advantages One of the fundamental decisions to be taken by entrepreneurs concerns the geographical location of their enterprises. They have not only to decide 'How to produce' and 'What to produce' but 'Where to produce'. We must now consider the various influences which bear upon this decision. The great importance of this particular aspect of economic activity is evidenced by the fact that the distribution of industry has now become a major feature of government economic policy. From the entrepreneur's viewpoint the major determinant of location will be the private costs associated with different locations. There are usually several locations where it would be possible for the firm to operate and the entrepreneur will tend to choose that which minimises the cost of production. Even so the firm, in deciding where to produce, will generally be faced with a rather difficult problem for its needs as a producer might conflict with its needs as a seller. One location might provide an excellent site in relation to the source of raw materials but another might be much more favourable in relation to the firm's markets. The final decision will rest upon some calculation of the maximum net advantages of alternative sites. Transport costs In the early days of industrialisation the great localising factors were the proximities to raw materials and power. The first factories were dependent upon water power and were sited on the banks of fast/lowing streams. Arkwright built his mill on the banks of such a stream at Cromford. The introduction of steam power moved industrial activity to the coalfields. Coal became the prime source of energy and since, in these early years, transport facilities were primitive /52
and costly, any locations other than coalfield sites were hopelessly uneconomic. All the basic industries in Britain — cotton, wool, iron, and steel — became established on or near coalfields. Iron and coal were found in close proximity in many areas, as were clay and coal. Hence, the iron and steel industry, the pottery industry, and brick-making all came to be established on coalfields. Industries highly dependent upon imported raw materials tended to be located on coastal sites, especially where coal was also available (e.g. South Wales, North West England, and North East England.) The sources of raw materials and power no longer exert such a strong geographical pull on industry. The electricity grid and the gas and oil pipe lines have made the newer sources of power available in all parts of the country. In addition great improvements in transport have cheapened the movement of raw materials and finished products. Nevertheless the location of raw materials where they happen to be particularly bulky still has some influence on industrial location. Where the industrial process is bulk reducing there is a strong incentive to carry out the processing at the source of the basic material. The iron and steel industry built plants on the Lincolnshire and Northamptonshire ore deposits. This was because British ore has a very low iron content, and technical progress, in this industry, has led to great economies in the fuels used for heating purposes. The sugar beet processing plants are located on or near the beet fields, since the yield of sugar is very low in relation to the weight and volume of the beet. Chemical plants are located on the salt beds of Cheshire and South Lancashire for similar reasons. Markets When the process is bulk increasing the pull of the market will be very strong since transport costs will be much less for locations near to the market. Thus, we find much of the furniture industry and the manufacture of domestic appliances such as refrigerators and washing machines located near to the great centres of population in the South East and the Midlands. Brewers and bakers produce commodities which are of low value in relation to their bulk so that these activities tend to be carried out fairly close to their markets. Proximity to the market may also be an important consideration where the product is durable and requires an efficient after-sales service. The significance of these arguments depends upon the ratio of transport costs to total costs. Generally speaking this ratio has tended to decline in the UK. The industrial structure has been changing and a much greater proportion of total output is now made up of lighter, easily transportable products, while the role of the heavy industries where transport costs are relatively high has been declining. Added to this we have the facts that the UK is a small country and there have been major improvements in transport. For many industries it seems that transport costs may no longer be an important determinant of location. Labour The availability of labour is an essential requirement for economic activity, and when an industry is dependent upon particular labour skills, local supplies of such skills will exert a great influence upon the location decision. More important though is the general availability of labour since, for many modern industries, the bulk of the labour force can be quickly trained. Where there is a high national level of employment but significant variations as between regions, those areas with surplus labour will tend to attract firms which are unable to expand in areas where there are labour shortages. Since we are concerned with the relative costs of operating in different locations any regional variations in labour costs will also influence location decisions. In a small country like the UK where there are strong trade unions, one would not expect to find any very great differences in regional wage rates, but, in areas of labour shortage, firms may be obliged to pay well above the agreed minimum wage rates. Physical features and accessibility For some industries the physical features of the site are of prime importance in deciding location. Industries producing steel, rayon, paper, and chemicals require very large quantities of water and tend to be found near rivers. The atomic power stations are all located on estuaries because of the vast quantities of water required for cooling purposes. Certain industries have serious problems of waste disposal, especially the chemical-based industries, and, again, they are usually located on river-bank sites. The problem of dust control has made it necessary to site cement works in fairly remote locations. The accessibility of the site is an important factor. Before the development of efficient road transport, proximity to the railway network was an essential requirement for any large-scale enterprise. This is no longer the case since the overwhelming proportion of passenger and freight traffic now uses the road network and proximity to the new motorways has become an important localising factor. The economic factors which have a bearing on location decisions do not provide a comprehensive explanation for the sitting of a great deal of British industry. A general survey of the causes which have influenced location in the past gives the impression that their operation was frequently unknown or imperfectly understood by the original producers. In fact, many decisions on location seem to be haphazard or based purely on personal considerations. An important factor has been the local ties of the entrepreneur. He has tended to set up business where he is known and has useful local contacts and where he is more likely to raise finance from associates and local banks. Lord Nuffield established a motor car industry in his native Oxford; the Rowntree factory in York, and Pilkington's glassworks at St Helens are other examples of large industrial developments in the home towns of their founders. Nevertheless we cannot dismiss the economic factors. The success of such enterprises indicates that the locations must have had some favourable features. There is also the point that transport and labour costs have become relatively less important as far as many industries are concerned, or they do not vary significantly as between different regions, so that entrepreneurs are able to give more weight to personal preferences. Acquired advantages Once an industry has become localised the economic advantages of the situation in relation to other areas tend to increase. It is these acquired advantages of existing centres of industry which tend to exert the greatest influence on location decisions. These economies of concentration, as they are sometimes called, gradually develop and persist long after the initial localising factors have disappeared from the scene. The availability of local clays and coal was a major factor in the establishment of a pottery industry in Stoke-on-Trent, but this industry has for a long time been completely dependent on clay transported from Cornwall and the industrial heating is now supplied by gas and electricity. The industry, however, remains very heavily concentrated in the same area, because of the very important external economies of scale available to pottery firms.
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