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5.3 Linkages between forest dependency and economic structure

Table 3 shows the correlation analysis of the degree of concentration in forest-related sectors and other economic sectors. Increasing concentration of the pulp and paper industry is positively correlated with the agricultural sector. This is not surprising, as many of the pine forests in the South are found where agricultural fields were abandoned. Also, the processes of planting, fertilizing, vegetation control and harvesting used to manage pine plantations are similar to common agricultural practices. Thus, pine plantations are probably more in conformance with what local people consider acceptable cultural practice in agricultural areas than they would be in many nonagricultural areas.

Increasing concentration in the pulp and paper industry is negatively correlated with a number of economic sectors, including manufacturing, wholesale, retail and finance, insurance, and real estate. The generally rural location of the pulp and paper sector probably explains the relative scarcity of the wholesale and retail sectors. The relative scarcity of the finance, insurance, and real estate sector also probably reflects the lower level of economic development in areas where the pulp and paper sector is concentrated.

Two factors that are sought in locating pulp and paper plants are an available water supply (used in processing) and good access to transportation networks so that wood fiber can be procured efficiently and products can be readily shipped to market. Because the manufacturing sector also relies on good market access, it is perhaps surprising that a negative correlation was found between the pulp and paper sector and the manufacturing sector. However, this result may reflect a situation where, in locations that are close to a suitable supply of wood fiber, the pulp and paper industry is more competitive in the labor market than are other manufacturing sectors. Average income per job in the pulp and paper sector is considerably higher than average income for the "typical" job in areas where that sector is located (Table 4). Large amounts of industrial capital are invested in the pulp and paper sector, increasing labor productivity.

The results in Table 3 show that the degree of industrial concentration in the primary wood products sector is positively correlated with concentration in the agricultural sector. Again, this correlation probably reflects the historical conversion of old fields to pine forests and cultural practices that are in keeping with the values of local residents. The negative correlation with wholesale and retail sectors probably reflects the rural location of this sector. The negative correlation with the finance, insurance and real estate sector and with the construction sector reflects the relatively low level of economic development in areas where the primary wood products sector is found. Because the primary wood products sector supplies inputs to the pulp and paper sector, a positive correlation between the two industries is not surprising.

Similar to the pulp and paper sector, the negative correlation of the primary wood products sector with the manufacturing sector may indicate that this sector is more competitive in the market for labor. However, as shown in Table 4, average income per job in the primary processing sector is only slightly higher than average income for the "typical" job in areas where the primary processing sector is located. However, many firms that comprise this industry such as logging contractors and sawmills are relatively small. The relative independence and way of life afforded by working in this sector may be particularly appealing to members of the workforce in these rural areas.

It is important to highlight the negative correlation between the pulp and paper and primary wood products sectors and the manufacturing sector. This finding suggests that the forest products industry contributes in a very significant way to the economic base and economic vitality of those areas. In the South as a whole, manufacturing comprises the largest sector in the economic base. The substitution of forest products sectors for manufacturing suggests that, in areas with concentrated employment in those forest products industries, local economies are highly reliant on the income and employment generated by the harvest and processing of timber and timber products.

Industrial concentration in the secondary wood products sector is negatively correlated with the wholesale and retail sectors, reflecting the relatively low population density in those areas. Relatively low levels of economic development in areas of concentrated employment in the secondary wood products sector are reflected in the negative correlations with the finance, insurance and real estate sector and with the construction sector. Because the secondary wood products sector uses inputs supplied by the primary wood products sector, it is not surprising to find a positive correlation between these two sectors.

The positive correlation between the forest-related recreation and tourism industry and the presence of upland hardwood forests that are older and under relatively less harvest pressure suggests that a negative correlation between this sector and the primary wood products sector would exist. This is what was found. Likewise, the concentration of the forest related recreation and tourism industry in these types of forests suggests a negative correlation with agriculture, which was also found. The higher level of economic development associated with this industry was reflected in the positive correlations with the finance, insurance and real estate sector and the construction sector. Further, the outputs of this industry are consumed directly by consumers. The positive correlation with the retail and wholesale sectors reflects complementary consumption within those sectors and the forest-related recreation and tourism sector.

Income per job in the forest related recreation and tourism sector was quite a bit less than income per "typical" job in the areas where that sector was found (Table 4). This finding may reflect the seasonality or part-time nature of some jobs in this sector. Also, we note that some people are willing to accept lower monetary compensation to work in an industry that is located in an area where the natural amenities supply other forms of compensation contributing to "real income".