The jump means that 64% of new jobs in Scotland during the period were created by the state and that almost one in three Scots workers has a taxpayer-funded job.
Research by Manchester University shows the total figure climbed from 603,773 in 1998 to 772,048 in 2007.
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The sharp growth can be explained by the researchers combining the number of people directly employed in the public sector with the number indirectly employed in the “para state” sector where private employers depend on state support.
The “para state” includes everything from consultants working for private companies to people involved in rubbish collection, healthcare and nursery education and other jobs where the funding is dependent on the Government.
The report claims the UK has an “undisclosed business model of using publicly supported employment to cover the continuing failure of the private sector to generate welfare through job creation”.
It adds: “The business model was never deliberately hidden but equally never articulated or explicit as New Labour and our political classes presided over a distribution of welfare through job creation in ways which were not the subject of public discussion and criticism.”
The figures also show that while the state and “para state” created 64% of new jobs in Scotland, in the Midlands the proportion was even greater, at 73%. The north of England and Wales were at the same level as
Scotland, while in London it was 38% and in the south of England 44%.
Across the UK, state and “para state” together accounted for 7.5 million employees out of a workforce total of 26.6 million.
The report warned that cuts in public expenditure proposed by all the main political parties would have a devastating effect on most regions of the UK except the south-east.
Its lead author, Dr Sukhdev Johal, said: “The UK relies on the state to generate employment outside London and the south east.
“The private sector has more or less completely failed to create jobs in the old industrial regions.
“Consequently, moves to reduce the size of the public sector will be very damaging. So the question for the election campaign is not only about whether public expenditure cuts will compromise service delivery.
“We also need to carefully examine the implications of public expenditure cuts on employment – especially on employment for women and in the ex-industrial regions.”
The weak response of the private sector, say the researchers, can be attributed to the way the economy developed in and after the Thatcherite boom of the 1980s.
Tory MSP Gavin Brown said the report showed the Scottish economy was over-reliant on state-dependent jobs.
He claimed: “We need to encourage enterprise and innovation. It is the private sector which can lead Scotland out of Labour’s recession.”
A Scottish Government spokesman said: “Scotland’s public sector expenditure as a share of Gross Domestic Product, is lower than that in the rest of the UK – 40% in Scotland compared to 41% UK-wide.
“The most recent public sector employment statistics show that total public sector employment has decreased, with a welcome rise in frontline NHS staff and police personnel.
“The Scottish Government has reduced the number of public bodies from 199 to 161, with that number set to fall to 120 by 2011.”
A study last year by the Centre for Cities think-tank showed that between 1998 and 2007 the number of private sector jobs in Glasgow and Edinburgh increased by 9% compared to an increase of 50% in public sector jobs. It also revealed Dundee was the Scottish city most dependent on the state, with 37% of its workforce employed in public administration, education and health.
The number of workers employed in the public sector in Scotland rose by almost 170,000 over the past decade.