Economic benefits of the forestry industry in Georgia: 2005 final report

Economic Benefits of the Forestry Industry in Georgia: 2005
Final Report
Prepared for Georgia Forestry Commission Macon, Georgia
Prepared by Community Policy and Research Services Enterprise Innovation Institute 760 Spring Street, NW Atlanta, Georgia 30332
Author B. William Riall, Ph.D.
October 2006
Copyright 2006 All Rights Reserved Georgia Tech Research Corporation Atlanta, Georgia 30332

Table of Contents
Executive Summary ............................................................................................................ 1 Forestry Dependent Communities .............................................................................. 4
Section 1.............................................................................................................................. 8 Introduction......................................................................................................................... 8 Section 2.............................................................................................................................. 9 Definition of the Forestry Industry in Georgia ................................................................... 9 Section 3............................................................................................................................ 14 Economic Benefits ............................................................................................................ 14
Results....................................................................................................................... 15 Comparison of the Forestry Industry with Other Industry Sectors........................... 18 Section 4............................................................................................................................ 20 Economic Dependence...................................................................................................... 20 What Is Economic Dependence? .............................................................................. 20 Approach................................................................................................................... 20 References......................................................................................................................... 28

Executive Summary

Georgia's forestry industry has many components, which interact with all other sectors of the economy in complex ways. The purpose of this analysis is to: (1) quantify the level of economic activity conducted by the components of the forestry industry, (2) estimate economic activity supported in all Georgia sectors by the industry's activities, (3) compare the level of activity in the forestry industry with other industries, and (4) assess the degree of forestry dependence of Georgia's counties.
The forestry industry components, and the level of economic activity represented by them, are shown in Table E-1 for 2005. Economic activity is measured by output (similar to sales revenue), employment, and compensation (defined as wages and salaries including benefits plus proprietor income). These measures are traditionally used in this type of analysis.
Table E-1 shows the forestry industry employed 67,694 in all industry sectors combined, paid an annual compensation of over $3.4 billion, and had estimated total revenue of over $16.1 billion.
The activities in the sectors shown in Table E-1 bring dollars into the state, which recirculate in a process called the "multiplier effect." The recirculation touches all major industry sectors as goods and services are bought and sold to meet increased demands by businesses and households resulting from the new resources brought into the state by the forestry industry. The result of the multiplier effect, given by total impacts (which includes the direct impacts), is also measured by output, employment, and income (Table E-2).
Economic activity, including the multiplier effect and federal payments to landowners of about $12.2 million, supported by the forestry industry in Georgia is almost $26 billion. This activity employs 154,147 people whose compensation is over $6.8 billion.
Another way to examine the forestry industry in Georgia is to compare it with other manufacturing sectors. Table E-3 lists the income and employment totals for each major industry sector sorted by total income for 2005. These data show that forestry ranks second in total income generated, and third in total employment. Food processing ranks first in income and second in employment; textiles (dominated by carpet) ranks first in employment and third in income. Forestry's second rank in income is very close to firstranked food processing in income, reflecting forestry's relatively higher average wages.
Of particular importance to Georgia's state government is how the forestry industry affects its annual budget. This is investigated by estimating the revenues associated with the forestry industry's economic activity and subtracting the costs associated with providing state services to Georgia's households and companies. Revenues include individual and corporate income tax, sales and use taxes, highway taxes, fees, and miscellaneous revenues. Costs estimated include education, public health, safety and

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welfare costs, highways, administration, and miscellaneous costs. Table E-4 provides these estimates for both direct and total impacts. The forestry industry generates an estimated $591 million per year in revenues for the state budget. When the costs of providing services to the employees (such as educating their children) of the forestry industry, and the economic activity supported by the forestry industry, are deducted from these revenues, the net annual fiscal benefit from the forestry industry is over $176 million per year.
Table E-5 extracts information from several tables to present a comparison of the overall results obtained in 2003, 2004 and 2005. All measures show growth between 2003 and 2004 and between 2004 and 2005. The highest growth rates were in industry output which grew between 12 and 14 percent depending on the year and whether it is being calculated for forestry industry activity or total activity. Compensation also increased. In the 2003 to 2004 period, forestry industry compensation increased by 10 percent and total compensation increased by about 12 percent without considering inflation. In the more recent period (2004 to 2005), the rate of increase was somewhat lower by 4 percent for the forestry industry and 9 percent for total benefits. Employment increases are more modest with increases of 3 percent and 7 percent (for forestry industry and total benefits, respectively) in the 2003 to 2004 period, and although total benefits employment grew an estimated 6 percent between 2004 and 2005, forestry industry employment was essentially flat.

Table E-1: Georgia Forestry Industry Economic Activity 2005

Sector
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total

Output
$1,447,089,632 $1,811,062,188 $1,290,298,688
$561,314,328 $8,808,187,803
$53,197,020 $1,065,724,056
$405,603,168 $532,826,960 $175,123,334 $16,150,427,177

Employment
6,133 8,839 7,110 4,531 23,150
319 8,867 2,446 4,788 1,511 67,694

Compensation
$254,133,792 $384,895,901 $340,977,212 $164,212,402 $1,594,677,218
$20,414,041 $323,074,793 $104,375,704 $169,143,160 $65,672,843 $3,421,577,066

Source: Georgia Department of Labor (ES202) and Georgia Tech's Enterprise Innovation Institute.

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Table E-2: Total Benefits by Major Industry Sector 2005

Sector Forestry, Fishing and Hunting Mining Utilities Construction Manufacturing Wholesale Trade Transportation and Warehousing Retail Trade Information Finance and Insurance Real Estate and Rental Professional, Technical, and Scientific Services Management of Companies Administrative and Waste Services Educational Services Health and Social Services Arts, Entertainment and Recreation Accommodation and Food Services Other Services Government and Non-NAICS Industries
Total

Output $1,784,738,944
$9,394,378 $533,866,176
$99,402,200 $15,910,316,032
$1,289,656,448 $852,411,392 $588,485,056 $303,962,496 $697,990,720 $474,355,360 $598,519,744 $380,044,384 $241,766,112 $61,162,432 $523,545,248 $80,402,360 $345,511,904 $531,631,808 $664,610,176
$25,972,228,986

Employment 14,232 38 781 1,080 65,910 8,622 7,936 10,678 988 3,911 2,792 4,497 2,365 4,223 1,226 6,895 1,591 7,203 8,282 897
154,147

Compensation $434,053,728 $2,995,445 $106,254,760 $42,347,132
$3,407,663,872 $549,861,504 $340,051,072 $273,429,504 $81,761,304 $240,504,544 $87,963,824 $251,611,200 $174,653,744 $115,325,168 $34,649,672 $288,163,648 $35,431,024 $119,162,568 $198,512,976 $42,128,308
$6,826,524,997

Source: Georgia Tech's Enterprise Innovation Institute

Table E-3: Comparison of Georgia Industries 2005

Sector

Employment

Food Processing

72,612

Forestry Industry

67,694

Textiles

75,255

Transportation Equipment

46,228

Chemicals

21,067

Machinery

24,457

Printing

20,791

Computers and Electronic Products

13,260

Apparel
Source: Georgia Department of Labor (ES202)

7,743

Wages & Salaries
$2,783,868,279 $2,673,104,764 $2,443,653,242 $2,398,616,545 $1,149,183,174
$998,240,612 $876,206,298 $840,675,611 $203,440,262

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Table E-4: Fiscal Impact Analysis 2005

Annual State Government Revenues Annual State Government Costs Net Annual Revenues

$590,558,427 $414,483,229 $176,075,198

Source: Georgia Tech's Enterprise Innovation Institute

Table E-5: Comparison of Results 2003 to 2005

Industry Economic Activity Output Employment Compensation

2003
$12,679,309,984 65,706
$3,007,249,626

2004
$14,162,671,796 67,633
$3,299,211,578

2005
$16,150,427,177 67,694
$3,421,577,066

Total Benefits Output Employment Compensation

2003
$20,199,375,517 136,022
$5,600,491,974

2004
$22,729,379,114 144,944
$6,276,217,393

2005
$25,972,228,986 154,147
$6,826,524,997

Fiscal Impact

2003

State Revenues

$514,089,031

State Costs

$367,579,485

Net Revenues

$146,509,546

Source: Georgia Tech's Enterprise Innovation Institute

2004
$546,361,719 $391,523,592 $154,838,126

2005
$590,558,427 $414,483,229 $176,075,198

Forestry Dependent Communities
The economies of Georgia's counties are all dependent upon their ability to bring resources into their areas. There is no clear definition of "dependence" so two measures were developed. The first is based on employment where "critically dependent" counties have more than 10 percent of their total private-sector employment (according to ES202 data) in the forestry industry. "Very dependent" counties have between 6 percent and 10 percent of their employment in forestry industries and "moderately dependent", "somewhat dependent" and "not dependent" have between 4 percent and 5.9 percent, 1.6 percent and 3.9 percent, and less than 1.6 percent of their employment in forestry industries, respectively. Figure E-1 depicts the degree of economic dependence on forestry, as measured by its proportion of total employment.

Another measure of dependence is provided by wages and salaries. For this measure, counties are considered "critically dependent" if more than 15 percent of total privatesector wages and salaries are from forestry-related industries. "Very dependent" counties have between 10 percent and 15 percent of their employment in forestry industries and "moderately dependent", "somewhat dependent" and "not dependent" have between 5

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percent and 10 percent, 2 percent and 5 percent, and less than 2 percent of their wages and salaries from forestry industries, respectively. Figure E-2 depicts the degree of economic dependence on forestry, as measured by its proportion of total wages and salaries.

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Figure E-1

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Figure E-2

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SECTION 1
Introduction
Georgia's forestry industry contains many components and supports a significant proportion of the state's economic activity. This analysis quantifies that activity in terms of economic output, employment, and household income where economic output is defined as business revenues and household compensation is defined as wages, salaries (including benefits), and proprietor income. Additional factors considered include how the manufacturing components in the forestry industry compare to other manufacturing sectors, and how the industry affects state government costs and revenues.
The first step in this process is to define the limits of what constitutes the "forestry industry." This is not as simple a task as it may appear because the borders of one industry overlap those of other industries. How this was done and its results appear in Section 2, which also contains estimates of how much economic activity is occurring in each component of the forestry industry.
After the industry was defined and activities quantified, the total economic activity supported by the forestry industry was estimated. Total activity is generally referred to as the "multiplier effect." This effect occurs whenever dollars are brought into the state's economy and recirculated before leaking out. Section 3 explains the methodology used to estimate total economic activity and provides perspective on how important these activities are in the overall Georgia economy.
Section 4 examines how important the forestry components are to the existing industry base in each of Georgia's counties and divides counties into four categories according to their degree of dependence on forestry.

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SECTION 2
Definition of the Forestry Industry in Georgia

The forestry industry in Georgia has many diverse components. A general definition would include all service and manufacturing activity related to the growth, harvesting, and use of forest materials that would not exist in Georgia without the presence of extensive forests or forest industries. For example, the papermaking industry would be a part of the forestry industry definition, but retail sales of that paper would not. States without commercial forests still sell paper within their borders.
Therefore, the forestry industry definition used in this analysis includes these broad sectors: forestry, logging, wood products (such as dimension lumber), paper products, manufactured housing, furniture, other miscellaneous wood products, and woodworking and papermaking machinery. The coding system follows the North American Industrial Classification System (NAICS) that replaced the Standard Industrial Classification (SIC) system in 1997. The NAICS codes and descriptions comprising the detailed definition appear in Table 2-1.
The organization of the industries on this list resembles the SIC system in that the number of digits of the NAICS codes increases as the level of detail increases. The highest level of detail practicable is the six-digit level, which roughly equals the fourdigit level in the older SIC system. In some cases, however, the six-digit industry is the same as the five-digit industry, so these duplications are not presented in Table 2-1. For example, industry 11311 (timber tract operations) does not break down into smaller components, so the six-digit industry (which would be 113110) is omitted because it's redundant.
In some cases, the higher-level NAICS industries contain components that are not a part of the forestry industry. For example, metal furniture is included in NAICS 3371, but is not included at the six-digit level used to define the forestry industry. Each component containing only forestry-related industries is indicated by italicized text in the table. Non-forestry-related components have been eliminated.

Table 2-1: Forestry Industry Definition Components: NAICS

NAICS 113
1131 11311
1132 11321
1133 11331
321

Description Forestry and Logging Timber Tract Operations Timber Tract Operations Forest Nurseries and Gathering of Forest Products Forest Nurseries and Gathering of Forest Products Logging Logging Wood Product Manufacturing

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3211 32111 321113 321114
3212 32121 321211 321212 321213 321214 321219
3219 32191 321911 321912 321918 32192 32199 321991 321992 321999
322 3221 32211 32212 322121 322122 32213 3222 32221 322211 322212 322213 322214 322215 32222 322221
322222 322223 322224 322225 322226
32223 322231 322232 322233
32229 322291 322299
33321

Sawmills and Wood Preservation Sawmills and Wood Preservation Sawmills Wood Preservation Veneer, Plywood, and Engineered Wood Product Manufacturing Veneer, Plywood, and Engineered Wood Product Manufacturing Hardwood Veneer and Plywood Manufacturing Softwood Veneer and Plywood Manufacturing Engineered Wood Member (except Truss) Manufacturing Truss Manufacturing Reconstituted Wood Product Manufacturing Other Wood Product Manufacturing Millwork Wood Window and Door Manufacturing Cut Stock, Resawing Lumber, and Planing Other Millwork (including Flooring) Wood Container and Pallet Manufacturing All Other Wood Product Manufacturing Mobile Homes Prefabricated Wood Building Manufacturing All Other Miscellaneous Wood Product Manufacturing Paper Manufacturing Pulp, Paper, and Paperboard Mills Pulp Mills Paper Mills Paper (except Newsprint) Mills Newsprint Mills Paperboard Mills Converted Paper Product Manufacturing Paperboard Container Manufacturing Corrugated and Solid Fiber Box Manufacturing Folding Paperboard Box Manufacturing Setup Paperboard Box Manufacturing Fiber Can, Tube, Drum, and Similar Products Manufacturing Non-folding Sanitary Food Container Manufacturing Paper Bag and Coated and Treated Paper Manufacturing Coated and Laminated Packaging Paper and Plastics Film Manufacturing Coated and Laminated Paper Manufacturing Plastics, Foil, and Coated Paper Bag Manufacturing Uncoated Paper and Multiwall Bag Manufacturing Laminated with Foil for Flexible Packaging Surface-Coated Paperboard Manufacturing Stationery Product Manufacturing Die-Cut Paper and Paperboard Office Supplies Manufacturing Envelope Manufacturing Stationery, Tablet, and Related Product Manufacturing Other Converted Paper Product Manufacturing Sanitary Paper Product Manufacturing All Other Converted Paper Product Manufacturing Sawmill and Woodworking Machinery Manufacturing

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333291 337
3371
33711 33712 337121 337122 337127 337129 337211 337212 337215
333 3332 33321 33329 333291
339 3399 33999 339995

Paper Industry Machinery Manufacturing Furniture & Related Product Manufacturing Household and Institutional Furniture and Kitchen Cabinet Manufacturing Wood Kitchen Cabinet and Countertop Manufacturing Household and Institutional Furniture Making Upholstered Household Furniture Manufacturing Non-Upholstered Wood Household Furniture Manufacturing Institutional Furniture Manufacturing Wood Television, Radio, and Sewing Machine Cabinet Manufacturing Wood Office Furniture Manufacturing Custom Architectural Woodwork and Millwork Manufacturing Showcase, Partition, Shelving, and Locker Manufacturing Machinery Manufacturing Industrial Machinery Manufacturing Sawmill and Woodworking Machinery Manufacturing Other Industrial Machinery Manufacturing Paper Industry Machinery Manufacturing Miscellaneous Manufacturing Other Miscellaneous Manufacturing All Other Miscellaneous Manufacturing Burial Casket Manufacturing

Source: North American Industrial Classification System, and Georgia Tech's Enterprise Innovation Institute

The level of economic activity in each forestry industry component is measured by output, employment, and income. Measures for the 2005 calendar year appear in Table 2-2, which aggregates the numerous categories from Table 2-1 to a more manageable number. This table shows that total employment in all of the forestry industry sectors is 67,694 and these jobs earned annual compensation (total wages and salaries including benefits) of over $3.4 billion from estimated total revenue of almost $16.2 billion.

Within the industry, Georgia companies have representatives in each of the sectors and subsectors down to the NAICS six-digit level. Based on this aggregation scheme, the highest employment is seen in pulp and paper with 23,150 workers followed by wooden furniture and cabinets with 8,867. Several additional segments have employment exceeding 5,000, including wood lumber and wood preservation, veneer and plywood, and logging and nurseries. Compensation, like employment, is dominated by pulp and paper with almost $1.6 billion (about half the total) followed distantly by lumber and wood preservation (almost $385 million) and veneer and plywood at almost $341 million. The largest outputs are produced by pulp and paper (about $8.8 billion) followed by lumber and plywood, (about $1.8 billion) and logging and nurseries at almost $1.5 billion.

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Table 2-2: Georgia Forestry Industry Economic Activity 2005

Sector
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total
Source: Georgia Tech's Enterprise Innovation Institute

Output
$1,447,089,632 $1,811,062,188 $1,290,298,688
$561,314,328 $8,808,187,803
$53,197,020 $1,065,724,056
$405,603,168 $532,826,960 $175,123,334 $16,150,427,177

Employment
6,133 8,839 7,110 4,531 23,150
319 8,867 2,446 4,788 1,511 67,694

Compensation
$254,133,792 $384,895,901 $340,977,212 $164,212,402 $1,594,677,218
$20,414,041 $323,074,793 $104,375,704 $169,143,160 $65,672,843 $3,421,577,066

Table 2-3 provides a comparison of the forestry industry activity for 2004 and 2005. Three measures are included in the comparison: output, employment, and compensation. Output increased in all industry segments except custom architectural and miscellaneous wood products. The overall increase was a healthy 14 percent. Employment also increased in most sectors except for pulp and paper, windows and doors, and containers, showcases, partitions and shelving. Compensation, however, appears to have increased in all sectors except pulp and paper with an overall increase of about 4 percent.

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Table 2-3: Foresty Industry Activity 2004 and 2005 Comparison

Sector
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total
Source: Georgia Tech's Enterprise Innovation Institute

Output

2004

2005

$1,384,113,152

$1,447,089,632

$1,481,513,824

$1,811,062,188

$1,062,298,144

$1,290,298,688

$388,201,924

$561,314,328

$7,887,861,361

$8,808,187,803

$46,696,992

$53,197,020

$841,050,860

$1,065,724,056

$343,669,472

$405,603,168

$453,711,824

$532,826,960

$273,554,243

$175,123,334

$14,162,673,800

$16,150,427,177

Employment

2004

2005

6,005

6,133

8,505

8,839

6,588 3,494 25,032
292 8,685 2,522 5,031

7,110 4,531 23,150
319 8,867 2,446 4,788

1,479 67,633

1,511 67,694

Compensation

2004

2005

$234,098,548 $352,721,316 $312,041,524 $121,569,812 $1,616,422,198

$254,133,792 $384,895,901 $340,977,212 $164,212,402 $1,594,677,218

$18,023,702 $301,810,254 $104,148,424 $180,908,656 $57,467,145 $3,299,213,583

$20,414,041 $323,074,793 $104,375,704 $169,143,160 $65,672,843 $3,421,577,066

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SECTION 3
Economic Benefits

Economic impact analyses have used basically the same methods for over 40 years. The tools, although greatly improved in quality and ease of use, are also similar to those in long-time use.
The conceptual basis for estimating economic benefits of an industry is that resources brought into Georgia's economy by the industry raise the level of economic activity. This additional economic activity, commonly called the multiplier effect, supports increased employment, income, and business revenues. These increases are estimated from an input-output model (I/O).
The purpose of an I/O model is to estimate the flows of resources among various economic sectors by using the "recipes" followed by producers. These recipes provide the type and amount of goods and services purchased during production, which are produced by other firms. For example, a pulp mill purchases wood from a logger. The logger, in turn, purchases equipment and fuel from firms, that, in turn, purchase their raw materials from still other firms. Combined with estimates of what percentages of these items are supplied by Georgia firms, the recipes can be used to estimate how much of each item is purchased from Georgia firms and how much is purchased from outside Georgia.
Purchases from sources outside the Georgia economy are known as "leakage," which puts the brakes on the multiplier effect; the higher the leakage, the lower the multiplier effect.
The I/O model used in this analysis is called IMPLAN, devised by the Minnesota IMPLAN Group. It is a nationally recognized model that uses Georgia data to tailor its estimates to the state economy. Still, the model must be modified somewhat to account for differences in specific industry sectors revealed by more current data. For example, the wage and salary data used in this analysis is from 2005, whereas the wage and salary data available to IMPLAN is from 2004.
One area of uncertainty that persists, however, is the level of benefits provided to workers in each of the forestry industry sectors. The available wage and salary information does not include benefits, but the I/O model bases its analysis on wages and salaries that include benefits. An average of 25 percent was assumed for this analysis, based on the latest available U.S. Bureau of Labor Statistics compensation cost data for all civilian employment.
The analytical process includes three steps after the industry sectors are defined, as described in the previous section. The first step is to quantify employment, income, and output associated with each of the defined sectors. Several data sources are used to accomplish this.

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The best source for employment and wages is the employment security data collected and maintained by the Georgia Department of Labor. Commonly called ES202 data, it has the advantage of being current, allowing an estimate of the economic benefits occurring in 2005. It has the drawback, however, of not including single-proprietorships (because they have no employees), and it also does not include employees not covered by unemployment insurance, such as governmental employees.
The second task is to divide the forestry industry output into two categories, (1) output that is sold to another Georgia firm and (2) output sold outside the state. Another way to look at this is to recall that the multiplier effect starts from dollars brought into the Georgia economy. Output not sold to another Georgia firm is, by definition, bringing in resources from outside the Georgia economy, and it is these "exports" that fuel the multiplier effect. Forestry industry output used as an input to another Georgia forestryindustry firm is already accounted for in the multiplier effect; counting it again would result in double-counting and would imply a level of production from the input-supplying industry higher than actually observed. For example, if the multiplier effect is calculated for the paper industry, it will include some of the activities of Georgia logging operations. If the entire output from logging was then added to the multiplier effect for paper, it would double-count the logging output that went to the paper industry. The I/O model is used iteratively for these estimations, with the resulting estimates called "direct impacts." Direct impacts are measures of the output from, in this case, forestry industries that are exported to entities outside Georgia. These are considered exports even if they only go to Alabama.
The third step is to use the I/O model to estimate total impacts, which are divided into three components. The first is the direct impacts (the value of resources brought into the state); the second is indirect impacts (impacts from recirculation of resources resulting from forestry industry purchases from other industries; and the third is induced impacts, which result from activities in the household sector. Adding direct, indirect, and induced impacts yields total benefits.
Three measures of economic benefits are provided. The first, output, is a measure of how much each industry or sector produced in 2005 roughly equivalent to a measure of sales revenue. The second measure is income, including all household income and employee benefits. The third measure is employment provided by the firms in each forestry-related industry.
Results
Table 3-1 provides estimates of direct impacts for each of the forestry industry sectors contained in the industry's definition. These differ from the level of economic activity shown in Table 2-3 because Table 3-1 eliminates production consumed by another sector. This eliminates the double counting of production in the multiplier effect of the consuming industry sector. For example, Table 3-1 does not contain much output from the logging and nurseries industry segment because most of it seems to be consumed by the various Georgia wood-using industries such as paper and lumber. Logging operations

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are included primarily as part of the multiplier effect by these consuming industries, not as a direct impact separate from them.
Another way to interpret Table 3-1 is to consider the direct impacts to be estimates of the exports of forestry-related industries. This exporting (to anyone outside Georgia) brings resources into the state to support the increase in economic activity estimated by the multiplier effect.
The largest industry segment by far is "Pulp and Paper", which includes all pulping and paper-making activities representing about half of the total industry. Together, the forestry industry exports over $14 billion with this activity supporting 57,684 jobs with an employee compensation of over $3.0 billion.
Recirculation of dollars brought into Georgia's economy (as measured by the direct impacts) support a higher level of economic activity. This higher level is estimated by applying the IMPLAN input-output model to the direct impacts provided in Table 3-1. The results of this analysis are presented in Table 3-2. Because all industries in Georgia are affected by the forestry industry, Table 3-2 summarizes the benefits by aggregated industry codes (used in the input-output model), which are roughly equivalent to twodigit NAICS code.

Table 3-1: Direct Impacts by Forest Industry Sector 2005

Sector
Logging and Nurseries Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products
Woodworking and Paper Industries Machinery Wooden Furniture and Cabinets Windows and Doors Containers, Showcases, Partitions, and Shelving Custom Architectural and Miscellaneous Wood Products
Total
Source: Georgia Tech's Enterprise Innovation Institute

Output
$461,689,184 $1,178,992,646 $1,154,336,800
$561,314,328 $8,760,899,363
$46,050,741 $1,014,317,336
$391,010,784 $504,576,208 $148,282,738 $14,221,470,128

Employment
840 5,930 6,479 4,531 22,985
283 8,492 2,358 4,527 1,259 57,684

Compensation
$50,211,004 $260,002,575 $304,675,472 $164,212,402 $1,585,581,324
$17,945,508 $308,026,795 $100,620,576 $160,289,520 $54,532,419 $3,006,097,596

The largest sector benefits are seen, not surprisingly, in the manufacturing sector, with some $16 billion in output, 65,910 employees, and about $3.4 billion in compensation. A distant second is held by forestry, fishing and hunting (which includes logging and nurseries), with almost $1.8 billion in output, 14,232 employees, and over $434 million in compensation. Together, the economic activity supported by Georgia's forestry industry (including federal payments to landowners of about $12.2 million) totals almost $26 billion, involving employment of 154,147 people whose compensation exceeds $6.8

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billion. This employment represents about 3.8 percent of total Georgia employment and 3.6 percent of household income when compared to 2005 ES202 totals.

Table 3-2: Total Benefits by Major Industry Sector 2005

Sector Forestry, Fishing and Hunting Mining Utilities Construction Manufacturing Wholesale Trade Transportation and Warehousing Retail Trade Information Finance and Insurance Real Estate and Rental Professional, Technical, and Scientific Services Management of Companies Administrative and Waste Services Educational Services Health and Social Services Arts, Entertainment and Recreation Accommodation and Food Services Other Services Government and Non-NAICS Industries
Total
Source: Georgia Tech's Enterprise Innovation Institute

Output $1,784,738,944
$9,394,378 $533,866,176
$99,402,200 $15,910,316,032
$1,289,656,448 $852,411,392 $588,485,056 $303,962,496 $697,990,720 $474,355,360 $598,519,744 $380,044,384 $241,766,112 $61,162,432 $523,545,248 $80,402,360 $345,511,904 $531,631,808 $664,610,176
$25,972,228,986

Employment 14,232 38 781 1,080 65,910 8,622 7,936 10,678 988 3,911 2,792 4,497 2,365 4,223 1,226 6,895 1,591 7,203 8,282 897
154,147

Compensation $434,053,728 $2,995,445 $106,254,760 $42,347,132
$3,407,663,872 $549,861,504 $340,051,072 $273,429,504 $81,761,304 $240,504,544 $87,963,824 $251,611,200 $174,653,744 $115,325,168 $34,649,672 $288,163,648 $35,431,024 $119,162,568 $198,512,976 $42,128,308
$6,826,524,997

Table 3-3 provides a comparison between the output, employment and compensation estimates derived in the 2004 and current study. All sectors showed increases over the 2004 estimates, with the largest increases seen in the manufacturing sector.

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Table 3-3: Benefits by Major Sector, Comparison of 2004 and

2005

Output

Sector

2004

2005

Agriculture Mining Construction Manufacturing

$1,553,836,160 $612,409,472 $4,999,219
$17,525,110,784

$1,794,109,056 $634,884,992 $5,723,917
$20,046,708,736

Transportation, Communication, Utilities Retail and Wholesale Trade Finance, Insurance, Real Estate Services
Total
Agriculture Mining Construction

$391,299,520

$454,680,992

$529,759,104

$689,694,464

$152,917,152

$181,780,064

$1,959,047,659

$2,164,645,824

$22,729,379,070 $25,972,228,045

Employment

2004

2005

11,530

14,270

1,780

1,863

8

6

Manufacturing Transportation, Communication, Utilities Retail and Wholesale Trade Finance, Insurance, Real Estate Services
Total
Agriculture Mining Construction Manufacturing Transportation, Communication, Utilities Retail and Wholesale Trade Finance, Insurance, Real Estate Services
Total

96,814

100,348

3,663

4,116

5,382

5,568

2,614

2,780

23,154

25,195

144,944

154,147

Compensation

2004

2005

$342,135,648

$437,044,128

$145,096,208

$148,742,928

$395,829

$368,455

$4,637,560,832

$4,962,042,368

$208,758,032

$233,997,280

$252,744,736

$275,616,448

$71,216,608

$77,673,416

$618,309,504

$691,040,256

$6,276,217,397

$6,826,525,279

Source: Georgia Tech's Enterprise Innovation Institute

Comparison of the Forestry Industry with Other Industry Sectors
It is difficult to appreciate the significance of the impacts generated by the forestry industry without some basis of comparison. This comparison is provided in Table 3-4, which shows that the forestry industry is the third largest industry sector in Georgia, behind food processing and textiles, and exceeding industries such as transportation equipment.

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Table 3-4: Comparison of Georgia Industries 2005

Sector
Food Processing Forestry Industry Textiles Transportation Equipment Chemicals Machinery Printing Computers and Electronic Products Apparel
Source: Georgia Department of Labor

Employment
72,612 67,694 75,255 46,228 21,067 24,457 20,791 13,260
7,743

Wages & Salaries
$2,783,868,279 $2,673,104,764 $2,443,653,242 $2,398,616,545 $1,149,183,174
$998,240,612 $876,206,298 $840,675,611 $203,440,262

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SECTION 4
Economic Dependence

What Is Economic Dependence?
Economies are interwoven in a complex web. In general, however, a local economy's economic health depends on the flow of resources into and out of it. Economic base theory calls those sectors within an economy that are responsible for bringing resources in "basic" or "traded" sectors. The resources that are brought in are then (at least partially) recirculated within the local economy to support the "non-basic" sectors. For example, a sawmill will generally sell its products to builders or lumber supply houses outside the local economy. The revenue it receives from these sales is then used to purchase logs from, perhaps, a local logging firm, and it also pays wages to its employees who are available to be spent in local restaurants, grocery stores, and the like. As the basic sector grows or declines, so does the non-basic sector.
Forestry industry components are very much part of Georgia's basic industry sector, with products sold worldwide. As such, it is one of the key sources of funds flowing into many local Georgia economies. Where the local economy has many sources of such flows, the growth or decline of any specific sector, such as forestry, may not have significant effects. However, in those communities where forestry is a large proportion of the local basic industry, all of economic support activities, such as retail, are likewise generally dependent.
Approach
There is no clear delineation between economic dependence and non-dependence, and there are many possible facets that can be examined to depict the spectrum that describes the degree of dependence. This analysis examines the proportion of the county-level employment and income (as defined by wages and salaries) indicated by the ES202 data that is attributable directly to forestry industries. Multiplier effects are difficult to distribute to individual counties, and were therefore not included in the definition of forestry-related industries. This exclusion serves to underestimate the true proportion of the county economy supported by forestry.
The ranges of county employment attributable to forestry-related industries used to define the degree of dependence is provided in Table 4-1, which also provided the definitions used to define dependence according to the percentage of income (wages and salaries) attributable to forestry-related industries. These ranges were developed judgmentally, and are intended to define "dependence" in a very general sense.
Applying these criteria to Georgia's counties results in a distribution of counties as depicted in Table 4-2 for employment and income. While most (103 using employment and 101 using income) counties are considered either not, or somewhat, dependent on forestry industries, the remaining counties, concentrated in south Georgia, owe significant proportions of their livelihood to forestry.

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Figure 4-1 depicts the degree of forestry-related dependence based on employment and Figure 4-2 depicts the degree of dependence based on income. Table 4-3 provides the percentages of forestry to county employment and wages and salaries used to assign the degree of dependence.

Table 4-1: Definitions of Levels of Dependence

Critically Dependent Very Dependent Moderately Dependent Somewhat Dependent Not Dependent

Percentage of County Direct Forestry:

Employment

Wages & Salaries

> 10%

> 15%

6% - 9.9%

10% - 14.9%

4% - 5.9%

9.9% - 5%

1.6% - 3.9%

2% - 4.9%

< 1.6%

< 2%

Source: Georgia Tech's Enterprise Innovation Institute

Table 4-2: Distribution of Georgia Counties by Level of Dependence

Critically Dependent Very Dependent Moderately Dependent Somewhat Dependent Not Dependent
Total

Number of Counties Based On:

Employment

Wages & Salaries

19

14

18

17

20

26

49

42

53

60

159

159

Source: Georgia Tech's Enterprise Innovation Institute

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Figure 4-1

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Figure 4-2

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Table 4-3: Level and Percent of Forestry in County Economies Based on Employment and Income

County Appling Atkinson Bacon Baker Baldwin Banks Barrow Bartow Ben Hill Berrien Bibb Bleckley Brantley Brooks Bryan Bulloch Burke Butts Calhoun Camden Candler Carroll Catoosa Charlton Chatham Chattahoochee Chattooga Cherokee Clarke Clay Clayton Clinch Cobb Coffee Colquitt Columbia Cook Coweta Crawford Crisp

Level of Forestry:

Employment Wages and Salaries

367

$14,180,561

626

$20,062,317

371

$11,113,251

16

$382,760

278

$5,671,447

46

$1,247,916

170

$7,365,542

346

$9,359,073

403

$12,555,241

107

$2,661,331

1742

$85,904,294

40

$1,060,215

201

$6,015,882

248

$8,945,288

98

$3,369,298

343

$11,223,584

37

$900,393

535

$14,714,496

16

$705,952

281

$9,216,135

27

$652,699

985

$41,644,952

371

$9,248,922

459

$13,962,323

1718

$100,267,339

1

$21,840

174

$5,351,873

666

$19,308,841

557

$21,288,777

22

$440,503

489

$24,621,106

217

$6,896,662

2765

$113,979,035

821

$20,831,310

875

$19,514,900

404

$13,630,369

226

$6,600,557

213

$6,232,573

35

$1,165,699

181

$5,366,221

Percent of Forestry to Total:

Employment Wages and Salaries

5.5%

6.9%

34.9%

44.7%

9.9%

12.7%

2.8%

2.8%

1.4%

1.1%

1.2%

1.3%

1.2%

1.7%

1.0%

0.9%

4.8%

5.6%

2.1%

2.0%

2.0%

3.0%

1.1%

1.0%

9.5%

12.1%

8.1%

12.6%

1.8%

2.4%

1.5%

1.9%

0.6%

0.4%

8.1%

8.0%

1.0%

2.1%

1.8%

2.1%

0.8%

0.9%

2.8%

3.9%

2.4%

2.2%

18.4%

22.4%

1.3%

2.2%

0.1%

0.1%

2.5%

2.9%

1.5%

1.4%

0.9%

1.0%

2.9%

2.5%

0.4%

0.6%

8.9%

11.3%

0.9%

0.8%

4.1%

4.3%

5.8%

5.4%

1.5%

1.7%

4.5%

6.2%

0.7%

0.7%

2.4%

3.5%

2.0%

2.5%

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Dade Dawson Decatur DeKalb Dodge Dooly Dougherty Douglas Early Echols Effingham Elbert Emanuel Evans Fannin Fayette Floyd Forsyth Franklin Fulton Gilmer Glascock Glynn Gordon Grady Greene Gwinnett Habersham Hall Hancock Haralson Harris Hart Heard Henry Houston Irwin Jackson Jasper Jeff Davis Jefferson Jenkins Johnson Jones Lamar Lanier Laurens Lee Liberty Lincoln

19 39 412 2377 119 139 1594 100 844 14 1662 47 178 175 55 466 1932 686 210 3325 261 38 1095 125 246 155 3408 299 991 15 17 117 340 29 418 355 181 446 723 592 638 472 242 60 173 80 1242 120 442 163

$633,934 $1,190,292 $10,378,503 $100,945,862 $2,980,399 $6,069,883 $90,412,747 $3,315,040 $59,087,931
$506,572 $94,746,550
$1,285,564 $6,653,011 $6,899,248 $1,053,944 $22,771,422 $86,368,781 $25,664,832 $4,984,972 $154,189,272 $6,675,467
$926,438 $70,090,006
$3,113,793 $5,505,239 $4,204,616 $118,510,770 $6,910,753 $35,631,487
$313,217 $359,657 $3,389,886 $14,185,768 $997,589 $14,744,686 $12,965,194 $4,651,296 $22,614,702 $25,513,292 $16,298,733 $22,477,081 $12,495,394 $6,252,281 $1,478,263 $6,794,902 $1,779,821 $57,068,240 $3,666,368 $22,276,530 $5,015,300

Georgia Forestry Commission Final Report

0.5% 0.6% 3.8% 0.8% 1.8% 3.8% 3.0% 0.3% 17.3% 1.7% 19.4% 0.7% 2.3% 3.6% 1.0% 1.2% 4.5% 1.5% 2.6% 0.4% 3.0% 6.9% 2.8% 0.5% 3.9% 3.0% 1.0% 1.9% 1.4% 1.0% 0.2% 2.4% 4.7% 1.2% 1.0% 0.7% 7.1% 2.4% 26.5% 12.3% 11.4% 17.9% 11.7% 1.8% 5.2% 6.2% 6.0% 2.5% 2.5% 10.2%

0.7% 0.8% 3.9% 0.8% 1.9% 6.9% 5.3% 0.3% 35.6% 3.5% 35.0% 0.7% 3.5% 5.6% 0.8% 1.7% 6.1% 1.5% 2.3% 0.4% 3.1% 5.9% 5.7% 0.5% 3.6% 3.1% 0.9% 1.6% 1.6% 1.0% 0.2% 3.3% 7.3% 1.1% 1.1% 0.7% 7.8% 4.2% 34.3% 13.6% 14.9% 19.3% 11.8% 1.8% 7.1% 6.0% 9.6% 3.0% 4.7% 14.4%
Page 25

Long Lowndes Lumpkin McDuffie McIntosh Macon Madison Marion Meriwether Miller Mitchell Monroe Montgomery Morgan Murray Muscogee Newton Oconee Oglethorpe Paulding Peach Pickens Pierce Pike Polk Pulaski Putnam Quitman Rabun Randolph Richmond Rockdale Schley Screven Seminole Spalding Stephens Stewart Sumter Talbot Taliaferro Tattnall Taylor Telfair Terrell Thomas Tift Toombs Towns Treutlen

36 1586
118 279
5 417 286 271 405
4 84 207 143 505 124 578 364 155 25 162
8 309 444
68 332
82 987
46 46 219 2190 1231 178 221
4 250 741
35 620
63 12 169 44 60 29 1310 305 265
7 9

$592,127 $63,076,492
$2,231,988 $13,644,220
$83,636 $23,827,888 $10,827,065
$7,461,019 $15,822,632
$78,880 $1,548,353 $6,977,845 $4,485,873 $20,650,241 $3,184,209 $19,106,309 $14,924,026 $5,552,671
$464,251 $5,903,599
$244,256 $12,540,062 $13,685,755
$1,463,064 $12,033,938
$4,285,802 $32,037,130
$1,726,680 $1,062,745 $6,451,274 $113,411,606 $53,162,832 $5,274,821 $5,757,480
$110,641 $8,606,555 $22,094,027 $1,201,981 $14,269,903 $1,430,512
$379,176 $4,398,422
$671,178 $1,047,843
$643,992 $34,681,008
$9,199,719 $7,673,163
$167,376 $265,733

Georgia Forestry Commission Final Report

3.8% 3.1% 1.9% 3.4% 0.2% 10.3% 7.4% 15.9% 7.5% 0.2% 0.7% 3.7% 7.8% 7.8% 1.0% 0.6% 1.8% 1.9% 1.5% 0.9% 0.1% 4.6% 10.4% 2.8% 2.8% 2.7% 13.6% 9.3% 0.7% 9.5% 1.9% 3.6% 13.2% 5.5% 0.2% 1.0% 7.6% 3.4% 4.8% 7.4% 4.9% 2.9% 2.3% 1.4% 1.2% 5.4% 1.3% 2.3% 0.4% 0.3%

3.3% 5.0% 1.3% 6.4% 0.2% 21.0% 11.0% 18.7% 10.9% 0.2% 0.7% 4.4% 10.0% 11.7% 0.9% 0.6% 2.2% 2.4% 1.2% 1.2% 0.1% 6.4% 13.1% 2.4% 3.7% 5.1% 16.5% 14.3% 0.6% 11.4% 3.2% 4.8% 13.8% 5.7% 0.2% 1.3% 8.2% 5.5% 4.2% 6.3% 7.5% 3.3% 1.3% 1.2% 1.1% 5.0% 1.6% 2.8% 0.4% 0.4%
Page 26

Troup Turner Twiggs Union Upson Walker Walton Ware Warren Washington Wayne Webster Wheeler White Whitfield Wilcox Wilkes Wilkinson

362 215
39 23 354 28 353 867 313 84 1192 227 190 178 793 60 434 215

$10,798,517 $5,856,936 $1,014,901 $484,779
$11,760,010 $657,012
$12,598,343 $24,131,560
$9,687,095 $2,774,885 $72,248,949 $6,784,505 $5,234,055 $3,475,290 $23,573,288
$928,237 $10,873,465
$5,306,146

1.1% 8.1% 2.9% 0.4% 4.3% 0.2% 1.9% 5.6% 21.6% 1.0% 12.9% 42.3% 16.0% 2.7% 1.2% 4.6% 12.1% 7.0%

Source: Georgia Department of Labor (ES202) and Georgia Tech's Enterprise Innovation Institute

1.1% 10.2%
2.2% 0.3% 5.5% 0.2% 2.2% 6.1% 25.4% 1.1% 26.6% 50.5% 17.7% 2.1% 1.1% 3.1% 12.5% 5.2%

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References
Georgia Department of Labor, ES202 Wage and Employment Data: 2005.
U.S. Bureau of the Census, "Census of Manufacturers 2002," http://www.census.gov/epcd/ec97/ga/GA000.HTM
U.S. Department of Labor, Bureau of Labor Statistics, "Employer Costs for Employee Compensation," http://data.bls.gov/cgi-bin/surveymost
North American Industrial Classification System (NAICS), http://www.census.gov/epcd/www/naicstab.htm
Bureau of Economic Analysis Input-Output Sectors as contained in "IMPLAN Pro: Data Guide," Minnesota IMPLAN Group, Inc., Stillwater, Minn., 1997.

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