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5.3 Wood products sectors

5.3.1 Changes in wood products sectors over time

Between 1987 and 1997, the South's share of U.S. manufacturing jobs increased from 30.8 to 31.4 percent. At the same time, the South's share of wood products sector jobs increased from 36.5 to 39.3 percent (Figure 7). Southern jobs in both the lumber and wood products (SIC 24) and pulp and paper (SIC 26) sectors have increased faster than for all manufacturing, while the percentage of all furniture jobs in the South decreased between 1992 and 1997. This increase in the percentage of the industry located in the South is in contrast to the percentage of southern jobs in the wood products industry. More of U.S. production of wood products is occurring in the South, but wood products are a smaller percentage of southern jobs. The same is true of income and value added. The percentages of southern income and value added deriving from wood products have declined, while the percentages of U. S. wood products income and value added that are in the South have increased.

The 13 Southern States vary widely in the percentage of jobs that are in wood products sectors (Figure 8). Wood products sectors here include all of SIC 24, 25 and 26 (mobile homes were not excluded). For 1998, proportions ranged from 0.5 percent in Oklahoma to more than 5 percent in Mississippi. Trends for all States were generally downward, though the lowest point was in 1982, coincident with a low point for wood products output in the United States. These peaks and valleys are consistent with trends for the general U.S. economy.

The trends in percentage of income from wood products sectors are very similar to the trends in percentage of jobs (Figure 9). They are generally downward, but with wide variation among States. Note, however, that the percentage of income from wood products was nearly double the percentage of jobs. For example, in 1998, 8 percent of Mississippi income derived from wood products, while only 5 percent of jobs derived from wood products. This result implies that wood products jobs have higher than average wages. Note, too, that the 1982 percentage drop is more dramatic for income than for jobs. This most likely represents a decline in hours of work per job.

The percentages of all southern jobs and income coming from wood products are declining. This decline does not necessarily imply that the industry is declining in importance. Output from the industry is rising, but the amount of labor used (and thus wages paid) per unit of output is smaller. The substitution between inputs in the production of lumber has been examined specifically for sawmills (Abt and others 1994). This study found that increases in labor productivity (3-4 percent per year) were higher than for other inputs, which may result from increased use of capital in production. Thus, less labor could be used to produce the same amount of lumber. In Georgia, for example, while wood products wages represented 15.7 percent of the value of wood products shipments in 1982, wages were only 13.2 percent of the value of shipments in 1997.

5.3.2 Impact analysis for 1997

In 1997 the wood products sectors contributed over 770,000 direct jobs to the southern economy, $120 billion in total industry output, and over $40 billion in gross regional product (Table 1). Table 1 also shows the aggregated sector subset we used to simplify the discussion below. The direct impacts are shown for private timber production, logging, sawmills, wood furniture, and pulp and paper. This table also includes the proportion of wood processing accounted for by each individual sector, as well as the direct employment, income, value added, total industry output, and GRP for each individual sector.

To calculate the indirect (what producers buy) and induced (what consumers buy) effects of the wood products industry, we used the IMPLAN input-output model to develop response coefficients, such as the number of jobs per million dollars of final demand. Response coefficients were also developed for public timber harvests by using the expenditures made by the national forests in the South to proxy for the production relationships of public timber producers. Public timber production coefficients were determined from the National Forest System accounting as reported for each forest at the USDA National Finance Center. Expenditures by the national forests were classified into a program area, and all of the timber classifications were bridged to IMPLAN sectors. This procedure results in expenditures in each sector for the production of national forest timber.

The response coefficients show the total impacts on the economy from each $1 million increase in final demand for that industry's output. Special care was taken to eliminate double counting by eliminating local purchases between modeled sectors. A different set of response coefficients would be needed to measure the effect of, for example, adding a mill to a local economy and counting all backward linkages from the mill to logging to timber production.

Table 2 shows the direct impacts of the five aggregated wood products sectors (not including the public timber sector, whose jobs and income are included in the government sectors of the input-output database). Also included in this table is the percentage of the southern economy in timber production and wood processing as well as the percentage in agriculture, including both farming and food processing. Thus, timber production and subsequent wood processing (most of SIC 24, 25 and 26) directly constitute about 2 percent of the southern economy. More of total industry output (3.53 percent) than jobs (1.93 percent) derives from wood processing, implying that returns to capital are higher than average. Farming, the counterpart to timber production, is 3 percent of employment but only 1.7 percent of total industrial output. The contributions of farming are greater than those of the other major rural land use, timber, which constituted only 0.22 percent of jobs and 0.38 percent of total industrial output. The wood processing sectors are similar to the food processing sectors (SIC 20 and 21), which constitute a slightly larger percentage of the southern economy.

In 1997, public timber harvests had a value of $478 million, $96 million of which was from national forests, while private harvests had a value of $5,138 million. These numbers do not include harvests from federal lands other than national forests. Tracking the forward-linkage (downstream processing) effects of both public and private harvests through the economy resulted in 2.2 million jobs and $104.6 billion of GRP (table 3), amounting to approximately 5.5 percent of jobs and 6.0 percent of GRP in the South. Public timber harvests constituted 8.5 percent of the value of all timber harvests, with only 1.7 percent from national forests.

Although the national forests contribute only a small amount to the total harvest value in the South, in some communities and counties the national forests play a large role in the wood processing sector and in the local economy. The national forests spend more than $76 million on the timber program in the South, approximately one third of the southern regional budget for 1996. This program is small, however, relative to the private harvests in the region. Table 4 shows 14 southern counties where the National Forests manage more than 25 percent of the forestland and where the proportion of employment in wood products sectors is greater than 4 percent, approximately twice the southwide average. Also included in this table are the county level per-capita income, removal rate on all land, and removal rate on private land. In future analyses, particular attention should be given to these and surrounding counties in determining how changes in national forest harvest levels might influence local economic structure and well-being.

Future impacts of the wood processing sectors on the southern economy are expected to continue at about the same level. The total wood products workforce has stayed fairly constant over the last 30 years, indicating that increases in production have been offset by increases in labor productivity. Using the increased harvest numbers from Chapter TIMBR-1 in the IMPLAN input-output model requires an assumption that technology does not change, which is unrealistic over the 40-year projection period. Thus, we conclude that wood products will continue to be important contributors to the economy, and that labor use might not change. Given the projected shifts in harvest location from Chapter TIMBR-1, we would expect jobs to shift to areas of increasing harvest intensity and away from areas of decreasing harvest intensity. The degree of this shift will depend on the relative costs of industrial relocation versus raw materials transportation.