Economic benefits of the forestry industry in Georgia: 2007 final report

Economic Benefits of the Forestry Industry in Georgia: 2007
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.
September 2008
Copyright 2008 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........................... 17
Section 4............................................................................................................................ 19 Economic Dependence...................................................................................................... 19
What Is Economic Dependence? .............................................................................. 19 Approach................................................................................................................... 19
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.

This report is the latest in a series that began in 2002, but underwent a significant restructuring in 2003 to reflect the change in industry classification systems (from SIC to NAICS) used by data collection agencies (primarily the Georgia Department of Labor) that provide much of the data used in these analyses.

The forestry industry components, and the level of economic activity represented by them, are shown in Table E-1 for 2007. 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 64,192 in all industry sectors combined, paid an annual compensation of almost $3.4 billion, and had estimated total revenue of almost $18.5 billion. The activities in the sectors 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.

Table E-1: Georgia Forestry Industry Economic Activity 2007

Sector
Forestry Management, Logging, and Misc. Forest Products

Output

Employment

$1,806,862,272

5,914

Lumber and Wood Preservation

$2,099,945,996

8,773

Veneer, Plywood, Reconstituted, and Engineered Wood

$1,321,714,784

6,004

Prefabricated Wood Buildings and Manufactured Housing

$523,282,896

3,581

Pulp and Paper Products

$10,131,473,013

21,651

Woodworking and Paper Industries Machinery

$60,710,076

304

Wooden Furniture and Cabinets

$1,197,442,044

8,914

Windows and Doors

$516,655,904

3,043

Containers, Showcases, Partitions, and Shelving

$624,186,992

4,733

Custom Architectural and Miscellaneous Wood Products

$176,638,616

1,275

Total

$18,458,912,593

64,192

Compensation
$273,307,536 $390,881,854 $290,712,656 $119,088,100 $1,602,173,672
$18,732,410 $340,697,882 $115,219,296 $190,620,928 $52,764,385 $3,394,198,719

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The result of the multiplier effect, given by total impacts (which includes the economic activity in Table E-11), is also measured by output, employment, and income and is shown in Table E-2. Total economic activity supported by the forestry industry in Georgia (including the multiplier effect and federal payments to landowners of about $12.3 million) is over $28.5 billion. This activity employs 141,155 people whose compensation is almost $6.7 billion.

Table E-2: Total Benefits by Major Industry Sector 2007

Sector Agriculture, 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 $2,121,796,736
$9,071,678 $494,897,184
$68,460,944 $17,923,817,472
$1,407,730,816 $937,203,648 $619,328,000 $307,665,216 $740,812,224 $492,653,120 $710,224,320 $398,028,800 $260,618,256 $70,678,272 $537,158,336 $74,889,168 $354,933,344 $353,237,664 $660,072,512
$28,547,185,557

Employment 14,138 39 725 623 61,549 7,324 7,731 9,272 860 3,539 2,754 4,624 1,984 4,344 1,229 6,366 1,396 6,268 5,683 707
141,155

Compensation $449,783,040 $2,429,163 $102,905,168 $27,370,942
$3,322,228,480 $533,253,024 $362,464,320 $251,028,640 $75,633,352 $244,182,688 $85,854,560 $286,874,368 $184,293,872 $125,709,472 $40,261,068 $286,155,264 $30,953,586 $121,684,176 $134,958,832 $27,723,508
$6,695,747,523

Another way to examine the forestry industry in Georgia is to compare it with other manufacturing sectors. Table E-3 lists 2007 income and employment totals for each major industry sector sorted by total wages. 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

1 The economic activity in Table E-1 contains more than just the direct impacts because some of the interindustry purchasing (indirect impacts) is necessarily contained in the estimates of economic activity.

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the forestry industry's total 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 include education, public health, safety and welfare, highways, administration, and miscellaneous. Table E-4 provides the fiscal impact estimates based on total impacts. The forestry industry generates an estimated $580 million per year in revenues for the state budget. When the costs of providing services to all employees are deducted from these revenues, net annual state revenues are almost $193 million per year.

Table E-3: Comparison of Georgia Industries 2007

Sector

Employment Wages & Salaries

Food Processing

72,188

$3,044,130,479

Forestry Industry

64,192

$2,655,122,080

Transportation Equipment

42,892

$2,351,785,278

Textiles

64,785

$2,324,049,150

Fabricated Metal Products

29,101

$1,134,770,230

Machinery

24,371

$1,078,843,863

Chemicals

21,651

$1,242,269,565

Printing

20,907

$920,581,830

Electrical Equipment and Appliances

15,207

$895,779,998

Computers and Electronic Products

14,929

$972,445,698

Apparel

5,356

$173,052,321

Table E-5 extracts information from several tables to present a comparison of the overall results obtained in each impact analysis conducted from 2003 through 2007. All measures show growth between 2003 and 2004 and between 2004 and 2005. The highest growth rates are in industry output which grew between 10 and 14 percent depending on the year and whether it is being calculated for forestry industry activity or total activity. Compensation also increased for these periods. In the 2003 to 2004 period, forestry industry compensation increased by 9.7 percent and total compensation increased by 12 percent without considering inflation. From 2004 to 2005, the rate of increase was somewhat lower 4 percent for the forestry industry and 9 percent for total impacts. Employment increases are more modest, increasing 3 percent and 7 percent for forestry industry and total impacts, respectively, in the 2003 to 2004 period. Although employment from total impacts grew an estimated 6 percent between 2004 and 2005, forestry industry employment was essentially flat.
In the 2006 to 2007 period, forestry industry employment declined by 5.2 percent and employment from total impacts fell by 5.5 percent. The two sectors which declined the most (in percentage terms) were prefabricated buildings and veneer, plywood, and reconstituted wood products. Productivity increases are apparent in forestry industry sectors (pulp and paper products, for example) as well as sectors stimulated by the multiplier effect which would serve to allow output increases with employment declines.

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Table E-4: Fiscal Impact Analysis 2007
Annual State Government Revenues Annual State Government Costs Net Annual Revenues

$565,752,222 $373,046,158 $192,706,064

Table E-5: Comparison of Results 2003 to 2007

Forestry Industry Economic Activity

2003

2004

2005

Output $12,679,309,984 $14,162,671,796 $16,150,427,177

Employment

65,706

67,633

67,694

Compensation $3,007,249,626 $3,299,211,578

$3,421,577,066

Percent Change Output

2003-2004
11.70%

2004-2005
14.04%

Employment

2.93%

0.09%

Compensation

9.71%

3.71%

2006
$17,760,458,777 67,733
$3,512,948,218
2005-2006
9.97% 0.06%
2.67%

2007
$18,458,912,593 64,192
$3,394,198,719
2006-2007 3.93% -5.23%
-3.38%

Total Impacts

2003

Output $20,199,375,517

Employment

136,022

Compensation $5,600,491,974

Percent Change Output

Employment

Compensation

2004
$22,729,379,114 144,944
$6,276,217,393
2003-2004
12.53% 6.56%
12.07%

2005
$25,972,228,986 154,147
$6,826,524,997
2004-2005
14.27% 6.35% 8.77%

2006
$27,737,507,105 149,347
$6,772,549,782
2005-2006
6.80% -3.11% -0.79%

2007
$28,547,185,557 141,155
$6,695,747,523
2006-2007
2.92% -5.49% -1.13%

Fiscal Impact

2003

2004

2005

2006

State Revenues

$514,089,031

$546,361,719

$590,558,427

$579,916,979

State Costs $367,579,485

$391,523,592

$414,483,229

$399,560,260

Net Revenues

$146,509,546

$154,838,126

$176,075,198

$180,356,718

Source: EII impact assessments and Georgia Department of Labor, Current Employment and Wages.

2007
$565,752,222 $373,046,158 $192,706,064

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 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

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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 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 Forestry Dependency Based on Employment 2007

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Figure E-2 Forestry Dependency Based on Income 2006

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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 five categories according to their degree of dependence on forestry.
This report is the latest of a series of reports begun with an analysis of the 2002 impacts and continues annually to the present analysis. The 2002 analysis is not comparable to the subsequent analyses, however, because of a significant change in the industry classification systems implemented in the 2003 data set. The 2002 analysis is based on the Standard Industry Classification system (SIC) and the later data sets use the North American Industrial Classification System (NAICS).

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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 2007 North American Industrial Classification System (NAICS) is used to define the components of the forestry industry. The NAICS codes and descriptions comprising the detailed definition appear in Table 2-1.

Table 2-1: Forestry Industry Definition Components: NAICS

NAICS Code

Description

113 Forestry and Logging

1131 Timber Tract Operations

11311 Timber Tract Operations

1132 Forest Nurseries and Gathering of Forest Products

11321 Forest Nurseries and Gathering of Forest Products

1133 Logging

11331 Logging

321 Wood Product Manufacturing

3211 Sawmills and Wood Preservation

32111 Sawmills and Wood Preservation

321113 Sawmills

321114 Wood Preservation

3212 Veneer, Plywood, and Engineered Wood Product Manufacturing

32121 Veneer, Plywood, and Engineered Wood Product Manufacturing

321211 Hardwood Veneer and Plywood Manufacturing

321212 Softwood Veneer and Plywood Manufacturing

321213 Engineered Wood Member (except Truss) Manufacturing

321214 Truss Manufacturing

321219 Reconstituted Wood Product Manufacturing

3219 Other Wood Product Manufacturing

32191 Millwork

321911 Wood Window and Door Manufacturing

321912 Cut Stock, Resawing Lumber, and Planing

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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 333291
337
3371
33711 33712 337121

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 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

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337122 Non-Upholstered Wood Household Furniture Manufacturing 337127 Institutional Furniture Manufacturing 337129 Wood Television, Radio, and Sewing Machine Cabinet Manufacturing 337211 Wood Office Furniture Manufacturing 337212 Custom Architectural Woodwork and Millwork Manufacturing 337215 Showcase, Partition, Shelving, and Locker Manufacturing
333 Machinery Manufacturing 3332 Industrial Machinery Manufacturing 33321 Sawmill and Woodworking Machinery Manufacturing 33329 Other Industrial Machinery Manufacturing 333291 Paper Industry Machinery Manufacturing
339 Miscellaneous Manufacturing 3399 Other Miscellaneous Manufacturing 33999 All Other Miscellaneous Manufacturing 339995 Burial Casket Manufacturing
Source: North American Industrial Classification System, and Georgia Tech's Enterprise Innovation Institute
The organization of industries on this list is hierarchical, that is, the NAICS code digits increase as the level of detail increases. The highest level of detail is the six-digit level. 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.
The level of economic activity in each forestry industry component is measured by output, employment, and income. Measures for the 2007 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 64,192 and these jobs earned annual compensation (total wages and salaries including benefits) of almost $3.4 billion from estimated total revenue of almost $18.5 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 21,651 workers followed by wooden furniture and cabinets with 8,914. 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 over $1.6 billion (about half the total) followed distantly by lumber and wood preservation (almost $391 million), and wood furniture and cabinets at almost $341

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million. The largest outputs are produced by pulp and paper (about $10.1 billion) followed by lumber and logging, (about $2.1 and $1.8 billion, respectively) and veneer and plywood at over $1.3 billion.

Table 2-2: Georgia Forestry Industry Economic Activity 2007

Sector
Forestry Management, Logging, and Misc. Forest Products 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
$1,806,862,272 $2,099,945,996 $1,321,714,784
$523,282,896 $10,131,473,013
$60,710,076 $1,197,442,044
$516,655,904 $624,186,992 $176,638,616 $18,458,912,593

Employment
5,914 8,773 6,004 3,581 21,651 304 8,914 3,043 4,733 1,275 64,192

Compensation
$273,307,536 $390,881,854 $290,712,656 $119,088,100 $1,602,173,672
$18,732,410 $340,697,882 $115,219,296 $190,620,928 $52,764,385 $3,394,198,719

Table 2-3 provides a comparison of the forestry industry activity for 2004 to 2007. Three measures are included in the comparison: output, employment, and compensation. Output (an estimate of the firms' revenues) increased slightly over the 2006-2007 period, but the increase was uneven across industry sectors with some (such as manufactured housing) showing declines.

Overall employment dropped between 2006 and 2007 with the largest number of jobs lost in the pulp and paper sector, which has shown consistent declines over the years shown. Other sectors showing losses include the manufactured housing and plywood, veneer and reconstituted wood products sectors. These latter declines are probably due to the problems seen in the current housing markets, but this is countered by an increase in window and door employment.

Changes in employee compensation are generally negative over the most recent period, but with a few exceptions. From 2006 to 2007, the largest declines are in the same sectors as the declines in employment (manufactured housing, and veneer & plywood) and the smaller increases found in containers, showcases, partitions and shelving, and in wooden windows and doors.

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Table 2-3: Forestry Industry Activity 2004 - 2007 Comparison

Output

Sector
Forestry Management, Logging, and Misc. Forest Products

2004

2005

2006

2007

$1,384,113,152 $1,447,089,632 $1,845,804,352 $1,806,862,272

Lumber and Wood Preservation

$1,481,513,824 $1,811,062,188 $2,057,422,972 $2,099,945,996

Veneer, Plywood, Reconstituted, and Engineered Wood

$1,062,298,144 $1,290,298,688 $1,259,775,984 $1,321,714,784

Prefabricated Wood Buildings and Manufactured Housing

$388,201,924

$561,314,328

$595,598,848

$523,282,896

Pulp and Paper Products

$7,887,861,361 $8,808,187,803 $9,589,567,207 $10,131,473,013

Woodworking and Paper Industries Machinery

$46,696,992

$53,197,020

$52,269,742

$60,710,076

Wooden Furniture and Cabinets

$841,050,860 $1,065,724,056 $1,176,198,972 $1,197,442,044

Windows and Doors

$343,669,472

$405,603,168

$445,641,376

$516,655,904

Containers, Showcases, Partitions, and Shelving

$453,711,824

$532,826,960

$548,023,952

$624,186,992

Custom Architectural and Miscellaneous Wood Products

$273,554,243

$175,123,334

$190,155,372

$176,638,616

Total

$14,162,673,800 $16,150,427,177 $17,760,458,777 $18,458,912,593

Forestry Management, Logging, and Misc. Forest Products 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

2004
6,005 8,505 6,588 3,494 25,032 292 8,685 2,522 5,031 1,479 67,633

Employment

2005

2006

6,133

6,152

8,839

8,957

7,110

6,963

4,531

4,500

23,150

22,861

319

314

8,867

9,308

2,446

2,598

4,788

4,618

1,511

1,462

67,694

67,733

2007
5,914 8,773 6,004 3,581 21,651 304 8,914 3,043 4,733 1,275 64,192

Forestry Management, Logging, and Misc. Forest Products 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

2004
$234,098,548 $352,721,316 $312,041,524 $121,569,812 $1,616,422,198
$18,023,702 $301,810,254 $104,148,424 $180,908,656 $57,467,145 $3,299,213,583

Compensation

2005

2006

$254,133,792

$267,437,328

$384,895,901

$399,561,280

$340,977,212

$352,537,400

$164,212,402

$165,216,458

$1,594,677,218 $1,630,396,895

$20,414,041

$18,256,298

$323,074,793

$342,927,437

$104,375,704

$100,483,456

$169,143,160

$175,315,696

$65,672,843

$60,815,971

$3,421,577,066 $3,512,948,218

2007
$273,307,536 $390,881,854 $290,712,656 $119,088,100 $1,602,173,672
$18,732,410 $340,697,882 $115,219,296 $190,620,928 $52,764,385 $3,394,198,719

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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 2007, whereas the wage and salary data available to IMPLAN is from 2006.
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 or, more recently CEW (covered employment and wages) data, it has the advantage of being current, allowing an estimate of the economic benefits occurring in 2007. 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 is 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 impacts.
Three measures of economic impacts are provided. The first, output, is a measure of how much each industry or sector produced in 2007 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, or number of jobs, 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 Tables 2-2 and 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 Forestry Management, Logging, and Misc. Forest Products industry segment because most of it appears to be consumed by the various Georgia wood-using industries

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such as paper and lumber. Logging operations 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. The entire forestry industry (totals in Table 3-1) is estimated to export (to a non-Georgia destination) almost $16.4 billion with this activity supporting 55,559 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 impacts by aggregated industry codes (used in the input-output model), which are roughly equivalent to twodigit NAICS codes.

Table 3-1: Direct Impacts by Forest Industry Sector 2007

Sector

Output

Employment Compensation

Forestry Management, Logging, and Misc. Forest Products

$546,537,344

799

$55,566,132

Lumber and Wood Preservation

$1,522,831,656

6,509

$293,829,793

Veneer, Plywood, Reconstituted, and Engineered Wood

$1,190,529,728

5,503

$263,517,812

Prefabricated Wood Buildings and Manufactured Housing

$523,282,896

3,581

$119,088,100

Pulp and Paper Products

$10,117,197,570

21,614

$1,600,087,059

Woodworking and Paper Industries Machinery

$51,612,988

262

$15,970,305

Wooden Furniture and Cabinets

$1,165,399,654

8,661

$331,298,712

Windows and Doors

$502,563,776

2,960

$112,076,616

Containers, Showcases, Partitions, and Shelving

$602,243,904

4,556

$183,943,416

Custom Architectural and Miscellaneous Wood Products

$152,564,216

1,114

$46,609,172

Total

$16,374,763,732

55,559

$3,021,987,117

The largest sector impacts are seen, not surprisingly, in the manufacturing sector, with some $17 billion in output, 61,549 employees, and about $3.3 billion in compensation. A distant second is held by agriculture, forestry, fishing and hunting (which includes logging and nurseries), with over $2.1 billion in output, 14,138 employees, and almost $450 million in compensation. Together, the economic activity supported by Georgia's forestry industry (including federal payments to landowners of about $12.3 million) totals over $28.5 billion, involving employment of 141,155 people whose compensation is

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about $6.7 billion. This employment represents about 3.3 percent and 3.1 percent of total Georgia employment, and wages and salaries, respectively.

Table 3-2: Total Benefits by Major Industry Sector 2007

Sector Agriculture, Forestry, Fishing and Hunting

Output $2,121,796,736

Mining

$9,071,678

Utilities

$494,897,184

Construction

$68,460,944

Manufacturing

$17,923,817,472

Wholesale Trade

$1,407,730,816

Transportation and Warehousing

$937,203,648

Retail Trade

$619,328,000

Information

$307,665,216

Finance and Insurance

$740,812,224

Real Estate and Rental

$492,653,120

Professional, Technical, and Scientific Services

$710,224,320

Management of Companies

$398,028,800

Administrative and Waste Services

$260,618,256

Educational Services

$70,678,272

Health and Social Services

$537,158,336

Arts, Entertainment and Recreation

$74,889,168

Accommodation and Food Services

$354,933,344

Other Services

$353,237,664

Government and Non-NAICS Industries

$660,072,512

Total

$28,547,185,557

Employment 14,138 39 725 623 61,549 7,324 7,731 9,272 860 3,539 2,754 4,624 1,984 4,344 1,229 6,366 1,396 6,268 5,683 707 141,155

Compensation $449,783,040 $2,429,163 $102,905,168 $27,370,942
$3,322,228,480 $533,253,024 $362,464,320 $251,028,640 $75,633,352 $244,182,688 $85,854,560 $286,874,368 $184,293,872 $125,709,472 $40,261,068 $286,155,264 $30,953,586 $121,684,176 $134,958,832 $27,723,508
$6,695,747,523

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 3-3, which shows that the forestry industry is the third largest industry sector in Georgia, (behind food processing and textiles) in employment and the second largest in wages and salaries.

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Table 3-3: Comparison of Georgia Industries 2007

Sector
Food Processing Forestry Industry Transportation Equipment Textiles Fabricated Metal Products Machinery Chemicals Printing Electrical Equipment and Appliances Computers and Electronic Products Apparel

Employment
72,188 64,192 42,892 64,785 29,101 24,371 21,651 20,907 15,207 14,929 5,356

Wages & Salaries
$3,044,130,479 $2,655,122,080 $2,351,785,278 $2,324,049,150 $1,134,770,230 $1,078,843,863 $1,242,269,565
$920,581,830 $895,779,998 $972,445,698 $173,052,321

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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 inflow and outflow of resources. 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 spend their wages 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 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 (110 for both employment and 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

Forestry Employment
> 10% 6% - 9.9% 4% - 5.9% 1.6% - 3.9%
< 1.6%

Forestry Wages & Salaries
> 15% 10% - 14.9%
9.9% - 5% 2% - 4.9%
< 2%

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

Number of Counties

Employment

Wages & Salaries

Critically Dependent

20

12

Very Dependent

17

21

Moderately Dependent

12

17

Somewhat Dependent

48

40

Not Dependent

62

69

Total

159

159

Source: EII estimates using Georgia Department of Labor, Current Employment and Wages data.

Tables 4-3 and 4-4 show how overall dependency has changed (for dependency based on employment and income, respectively) over the three years these statistics have been produced. Generally, the number of counties in each of the dependency categories has remained quite stable. The year 2006, however, shows an increase in those counties considered critically dependent largely at the expense of counties considered very dependent.

Table 4-3 Forestry Dependency Over Time: Employment

Critically Dependent Very Dependent Moderately Dependent Somewhat Dependent Not Dependent

Number of Counties

2004 2005 2006 2007

19

19

22

20

18

18

15

17

20

20

18

12

49

49

50

48

53

53

54

62

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Table 4-4 Forestry Dependency Over Time: Income

Critically Dependent Very Dependent Moderately Dependent Somewhat Dependent Not Dependent

Number of Counties

2004 2005 2006 2007

14

14

16

12

17

17

13

21

26

26

26

17

42

42

42

40

60

60

62

69

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Figure 4-1 Forestry Dependency Based on Employment 2007

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Figure 4-2 Forestry Dependency Based on Income

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Table 4-5: Level and Percent of Forestry in County Economies Based on Employment and Income: 2007

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

Level of Forestry:

Employment Wages and Salaries

346

$13,603,364

528

$16,313,260

313

$9,021,858

12

$391,172

214

$6,122,461

55

$1,322,406

176

$8,080,268

494

$17,953,216

424

$13,694,178

120

$2,997,947

1,634

$90,984,971

51

$1,807,443

203

$6,102,128

221

$7,797,853

86

$3,039,656

336

$10,558,824

27

$708,575

462

$12,155,458

7

$56,038

236

$9,745,076

23

$610,319

987

$47,345,187

285

$8,327,889

677

$12,716,328

1,430

$89,090,942

1

$21,840

154

$4,966,578

669

$21,057,481

537

$24,192,689

15

$355,373

339

$14,819,482

260

$8,309,346

3,413

$129,497,468

707

$19,359,274

750

$19,203,851

387

$13,728,193

247

$7,097,325

Percent of Forestry to Total:

Employment Wages and Salaries

5.4%

6.3%

30.0%

38.4%

8.3%

9.8%

2.1%

2.7%

1.1%

1.1%

1.1%

1.0%

1.0%

1.5%

1.4%

1.5%

5.6%

6.6%

2.3%

2.1%

1.9%

3.1%

1.4%

1.4%

9.7%

12.1%

7.4%

10.5%

1.3%

1.6%

1.4%

1.6%

0.4%

0.3%

7.8%

7.5%

0.5%

0.2%

1.5%

1.9%

0.7%

0.8%

2.4%

3.5%

1.8%

1.8%

25.5%

19.2%

1.0%

1.7%

0.1%

0.0%

2.3%

2.7%

1.3%

1.3%

0.8%

1.0%

1.6%

1.7%

0.3%

0.3%

10.5%

12.4%

1.0%

0.9%

4.1%

4.1%

4.7%

4.6%

1.3%

1.5%

4.8%

5.9%

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Coweta Crawford Crisp 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

206 42
223 15 27
298 2,134
42 146 1,548 289 639
22 280
39 209 164
47 290 1,029 738 243 3,826 226
46 262 123 218 130 3,012 270 968
9 30 77 404 35 311 308 155 441 640 549

$6,706,952 $1,698,594 $6,636,577
$389,914 $941,429 $8,455,591 $100,858,858 $1,073,892 $7,270,611 $94,800,468 $15,798,823 $48,913,047 $869,727 $87,915,534 $1,253,439 $6,875,524 $6,071,715 $1,154,974 $15,367,047 $31,327,523 $28,860,908 $6,535,169 $204,715,286 $5,702,690 $1,168,682 $11,953,338 $3,398,295 $6,077,934 $4,397,082 $114,286,259 $6,831,242 $32,420,889 $188,794 $881,008 $2,528,899 $21,119,411 $1,416,939 $16,392,117 $12,109,312 $2,345,146 $22,518,892 $23,765,880 $18,537,397

Georgia Forestry Commission 2007 Report

0.6% 2.7% 2.4% 0.4% 0.3% 2.9% 0.7% 0.6% 4.1% 2.9% 0.7% 14.6% 3.2% 2.8% 0.6% 2.6% 3.5% 0.8% 0.7% 2.5% 1.3% 3.1% 0.5% 2.5% 11.3% 0.7% 0.5% 3.3% 2.2% 0.9% 1.8% 1.3% 0.7% 0.4% 1.8% 6.0% 1.5% 0.6% 0.5% 6.3% 2.3% 22.9% 12.6%

0.6% 4.2% 2.8% 0.4% 0.5% 3.2% 0.7% 0.7% 7.4% 5.4% 1.3% 32.0% 6.1% 27.4% 0.6% 3.5% 4.6% 0.8% 1.0% 2.4% 1.2% 2.9% 0.5% 2.3% 13.4% 0.9% 0.5% 3.6% 2.6% 0.8% 1.6% 1.2% 0.6% 0.4% 2.5% 10.8% 1.6% 1.0% 0.5% 3.8% 3.9% 30.3% 15.6%
Page 25

Jefferson Jenkins Johnson Jones Lamar Lanier Laurens Lee Liberty Lincoln 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

665 432 222
56 138
85 1,247
97 478 145
11 1,627
101 985
6 371 277 318 398
4 109 167 155 455 116 515 325 123
24 196
12 358 395
37 293
88 892
41 53 223 2,108 1,189 184

$21,511,528 $8,006,648 $5,635,776 $1,357,441 $5,902,031 $2,124,302
$59,016,228 $3,146,632
$25,080,725 $4,722,488 $333,104
$65,836,140 $2,130,888
$66,181,019 $137,109
$23,670,908 $11,204,061
$7,877,357 $16,502,350
$73,780 $2,967,690 $6,333,734 $5,935,657 $19,610,068 $2,966,853 $18,888,893 $14,349,319 $3,234,124
$495,839 $5,487,153
$449,345 $23,667,015 $12,896,040
$1,113,509 $10,619,197
$4,545,722 $25,175,478
$1,587,936 $1,440,841 $6,448,775 $112,801,585 $53,348,647 $6,176,824

Georgia Forestry Commission 2007 Report

12.0% 19.3% 11.2%
1.5% 3.7% 5.6% 6.1% 1.8% 2.8% 9.4% 1.3% 3.1% 1.5% 11.4% 0.2% 10.6% 7.3% 18.8% 8.1% 0.2% 1.2% 2.6% 8.0% 7.0% 0.9% 0.5% 1.5% 1.4% 1.3% 0.9% 0.1% 4.5% 9.2% 1.6% 2.4% 2.7% 12.4% 8.9% 1.0% 10.5% 2.0% 3.5% 12.4%

13.4% 14.9% 11.8%
1.3% 5.5% 5.5% 9.3% 2.1% 4.5% 12.6% 1.6% 4.6% 1.1% 24.4% 0.2% 23.6% 10.8% 18.7% 12.5% 0.2% 1.4% 3.2% 11.0% 10.4% 0.8% 0.5% 1.9% 1.2% 1.1% 0.9% 0.2% 9.7% 11.4% 1.8% 3.0% 5.1% 12.0% 14.2% 1.0% 11.6% 3.0% 4.6% 13.8%
Page 26

Screven Seminole Spalding Stephens Stewart Sumter Talbot Taliaferro Tattnall Taylor Telfair Terrell Thomas Tift Toombs Towns Treutlen Troup Turner Twiggs Union Upson Walker Walton Ware Warren Washington Wayne Webster Wheeler White Whitfield Wilcox Wilkes Wilkinson Worth Non-County
State Total

155 4
245 767
32 510
66 8
163 28
113 44
931 294 421
8 7 246 192 38 63 325 27 377 629 302 133 1,198 262 157 137 751 49 401 168 124 1,566 64,192

$4,264,645 $86,760
$9,292,107 $24,567,383
$1,213,826 $13,889,598
$1,778,813 $368,331
$4,602,156 $444,309
$3,256,258 $680,145
$23,907,682 $9,710,088
$14,003,852 $137,509 $255,904
$7,725,873 $5,806,533 $1,043,596 $1,509,400 $11,456,152
$772,145 $13,740,974 $17,697,589 $10,378,372
$4,628,604 $77,450,796
$7,846,941 $4,811,577 $2,759,907 $23,591,315
$793,024 $9,809,380 $4,809,520 $2,520,202 $755,909,169 $3,394,198,719

4.0% 0.2% 1.0% 7.6% 2.4% 4.0% 7.6% 3.5% 2.9% 1.5% 2.4% 1.7% 3.9% 1.5% 3.5% 0.2% 0.6% 0.8% 7.6% 3.2% 0.9% 4.1% 0.2% 1.8% 3.9% 23.4% 1.6% 13.0% 46.8% 9.9% 2.0% 1.2% 3.6% 11.8% 5.4% 3.4%

4.1% 0.1% 1.3% 8.1% 3.6% 3.9% 6.9% 7.5% 3.2% 0.8% 3.2% 1.0% 3.2% 1.6% 4.3% 0.1% 1.0% 0.7% 10.0% 2.5% 0.8% 5.3% 0.2% 2.1% 4.1% 29.8% 1.9% 25.2% 51.9% 12.7% 1.5% 1.1% 2.5% 11.4% 4.3% 2.6%

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References
Georgia Department of Labor, ES202 Wage and Employment Data: 2007.
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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