Economic benefits of the forestry industry in Georgia: 2012 final report

Table of Contents

Executive Summary

2

Section 1: Introduction

8

Section 2: Definition of the Forestry Industry in Georgia

9

Section 3: Economic Benefits

17

Section 4: Economic Impact of Regional Commissions

25

References

28

Appendix

29

Economic Benefits of the Forestry Industry in Georgia: 2012

Page 1

Executive Summary

Georgia's forestry industry has many components, which interact with all other sectors of the economy in complex ways. The purposes of this analysis are 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) quantify the economic activity of forestry industry sectors within each of the 12 regional commissions in Georgia.
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 Standard Industrial Classification (SIC) to North American Industry Classification System (NAICS) used by data collection agencies (primarily the Georgia Department of Labor) that provide much of the data used in these analyses. Also, some minor adjustments were made in 2011 NAICS list to reflect the changes in the new 2012 NAICS code definitions.
The forestry industry components, and the level of economic activity represented by them in 2011, are shown in Table E-1. Economic activity is measured by output (similar to sales revenue), employment, and compensation (defined as wages and salaries including benefits). These measures are traditionally used in this type of analysis.
Table E-1 shows that the forestry industry in 2012 employed 49,497 workers in all industry sectors combined, paid an annual compensation (as defined by wages and salaries) of more than $3 billion, and generated an estimated total revenue of almost $16.4 billion.

Table E-1: Georgia Forestry Industry Economic Activity (2012)

Sector
Forestry Management and Logging
Bioenergy
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, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions, and Shelving Total

Output

Employment

$466,563,856 $99,645,798
$1,307,087,765 $901,897,656

4,611 263
5,157 3,918

Wages & Salaries $205,549,916
$17,124,709 $242,317,099
$332,444,286

$157,286,364
$11,428,140,048 $163,372,592
$1,265,814,346
$569,378,408 $16,359,186,833

1,188

$44,796,429

21,788 $1,726,669,358

501

$32,680,233

8,357 $326,392,293

3,714 $158,129,703 49,497 $3,086,104,026

Economic Benefits of the Forestry Industry in Georgia: 2012

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The industry's activities 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 economic activity in Table E-11), is also measured by output, employment, and wages and salaries and is shown in Table E-2. Total economic activity supported by the forestry industry in Georgia (including the multiplier effect and forestry-related bioenergy firms) exceeded $28.9 billion in 2012. These activities supported the employment of 135,732 people whose compensation was nearly $7.5 billion.

Table E-2: Total Benefits by Major Industry (2012)

Sector
Agriculture, Forestry, Fish & Hunting Mining Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation & Warehousing Information Finance & Insurance Real Estate & Rental Professional, Scientific & Tech Services Management of companies Administrative & Waste Services Educational Services Health & Social Services Arts, Entertainment & Recreation Accommodation & Food Services Other Services Government & non-NAICS Industries TOTAL

Output
$856,717,959 $103,535,686 $747,308,228 $261,725,026 $17,475,762,223 $983,492,275 $600,295,839 $881,782,852 $599,016,474 $1,049,048,426 $1,326,277,730 $846,064,777 $422,331,100 $478,639,472 $100,399,902 $743,341,308
$94,419,827 $380,030,227 $379,621,864 $611,741,433 $28,941,552,629

Employment
9,525 192 907
2,803 47,287
5,255 9,153 5,828 1,511 4,580 4,310 6,547 2,152 8,282 1,647 7,966 1,725 6,712 5,942 3,409 135,732

Wages & Salaries
$388,323,198 $24,731,085
$103,581,057 $129,639,156 $3,111,571,463 $418,087,768 $267,788,804 $299,414,891 $159,457,825 $287,742,159
$82,757,258 $457,306,601 $220,509,891 $243,036,011
$57,285,657 $412,254,638
$38,584,096 $141,958,480 $214,873,993 $437,731,133 $7,496,635,163

Another way to examine the forestry industry in Georgia is to compare it with the state's other manufacturing sectors. Table E-3 lists 2012 income and employment totals for each major industry sector sorted by employment. These data show that forestry ranked third in total employment, same as last year's ranking. However, the industry ranked second in terms of wages and salaries. Food processing ranked first in employment and
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.

Economic Benefits of the Forestry Industry in Georgia: 2012

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wages and salaries, and textiles (mostly carpet) was second in employment, but fourth in wages and salaries.

Table E-3: Comparison of Georgia Industries (2012)

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

Employment
64,348 58,179 49,497 41,316 23,910 19,901 19,918
882 11,145
9,950 7,310

Wages & Salaries
$3,361,153,492 $2,288,465,928 $3,086,104,026 $2,633,535,440 $1,059,020,218 $1,038,732,229 $1,295,537,134
$54,730,291 $751,578,433 $859,805,868 $300,994,663

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 total economic activity and subtracting the costs associated with providing state services to Georgia's households and companies associated with that activity. Revenues include individual and corporate income taxes, 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 generated an estimated $603.5 million in revenues for the state budget in 2012. When the costs of providing services to all employees are deducted from these revenues, net annual state revenues were $242.5 million for 2012.

Table E-4: Fiscal Impact Analysis (2012)

Annual State Government Revenues

$603,527,646

Annual State Government Costs

$360,968,119

Net Annual Revenues

$242,559,527

Table E-5 compares the overall results obtained in each impact analysis conducted from 2003 through 2012. As the table shows, the forestry industry's output, employment, and wages and salaries continued to grow, showing annual growth of 9, 7, and 4 percent, respectively, compared to 2011. The industry's increased activity resulted in higher net revenues for the state government.

Economic Benefits of the Forestry Industry in Georgia: 2012

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Output Employment Wages & Salaries
Output Employment Wages & Salaries
Output Employment Wages & Salaries
Output Employment Wages & Salaries

2003 $12,679
65,706 $3,007
2003 $20,199 136,022
$5,600

Table E-5: Comparison of Results 2003 to 2012
(Dollars in millions; Employment in persons)

Forestry Industry Direct Economic Impact

2004 $14,163
67,633 $3,299

2005 $16,150
67,694 $3,422

2006 $17,760
67,733 $3,513

2007 $18,459
64,192 $3,394

2008 $18,270
57,812 $3,131

11.7% 2.9% 9.7%

Year to Year Percent Change

14.0%

10.0%

3.9%

0.1%

0.1%

-5.2%

3.7%

2.7%

-3.4%

-1.0% -9.9% -7.7%

2004 $22,729 144,944
$6,276
12.53% 6.56%
12.07%

Total Impacts

2005

2006

2007

$25,972 $27,738 $28,547

154,147 149,347 141,155

$6,827

$6,773

$6,696

2008 $28,723 128,388
$6,514

Year to Year Percent Change

14.27%

6.80%

2.92%

6.35%

-3.11%

-5.49%

8.78%

-0.79%

-1.14%

0.62% -9.04% -2.72%

2009 $16,906
48,519 $2,770
-7.5% -16.1% -11.5%
2009 $27,200 118,423
$5,561
-5.30% -7.76% -14.63%

2010 $14,495
43,425 $2,624

2011 $15,082
46,378 $2,972

2012 $16,359
49,497 $3,086

-14.3% -10.5%
-5.3%

4.0% 6.8% 13.3%

8.5% 6.7% 3.8%

2010 $23,643 108,112
$5,377

2011 $24,975 118,459
$6,491

2012 $28,941 135,732
$7,496

-13.08% -8.71% -3.31%

5.63% 9.57% 20.72%

15.88% 14.58% 15.48%

Forestry Industry Fiscal Impact

2003

2004

2005

2006

2007

2008

2009

State Revenues

$514

$546

$591

$580

$566

$539

$472

State Costs

$368

$392

$414

$400

$373

$333

$314

Net Revenues

$147

$155

$176

$180

$193

$206

$158

Source: Enterprise Innovation Institute (EI2)impact assessments and Georgia Department of Labor, Current Employment and Wages

2010 $448 $282 $166

2011 $487 $308 $179

2012 $603 $361 $242

Economic Benefits of the Forestry Industry in Georgia: 2012

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Impact by Region
Quantifying the economic benefits of the forestry industry at the local level is difficult given the limitations in employment and wages and salaries data (nondisclosed data). In previous reports, the approach was to group counties with no disclosed data and report aggregate employment, and compensation. In 2011, we began quantifying the impact of the forestry industry in 12 jurisdictions consistent with the state's regional commissions. Figure E-1 shows the map of the 12 regions and counties located within each region.
Figure E-1: Map of Regional Commissions

Economic Benefits of the Forestry Industry in Georgia: 2012

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Table E-6 shows the impact of the forestry industry in terms of output, employment, and compensation in each region.

Table E-6: Forestry Industry's Regional Impact (2012)

Regions
Three Rivers Southwest Georgia Southern Georgia River Valley Northwest Georgia Northeast Georgia Middle Georgia Heart of the Georgia Altamaha Georgia Mountains Coastal Central Savannah River Area Atlanta Regional Commission Total

Output
$1,071,616,918 $1,125,661,460 $1,438,736,054 $771,014,142 $1,277,561,799 $784,765,120 $1,141,331,179 $1,703,522,329 $721,766,453 $1,447,690,179 $1,690,091,141 $3,185,430,058 $16,359,186,833

Employment Wages & Salaries

3,242 3,406 4,353 2,333 3,865 2,374 3,453 5,154 2,184 4,380 5,114 9,638 49,497

$222,585,837 $230,550,634 $265,018,732 $177,329,796 $349,846,436 $234,054,573 $187,403,621 $238,686,819 $213,421,322 $217,068,085 $212,121,627 $538,016,543 $3,086,104,026

Economic Benefits of the Forestry Industry in Georgia: 2012

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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 employee compensation. Economic output is defined as business revenues, and employee compensation is defined as wages and salaries including benefits paid by employers. Additional factors considered include how the manufacturing components in the forestry industry compare to other manufacturing sectors, and how the forestry industry affects state government costs and revenues.
The first step in this process was to define the limits of what constitutes the "forestry industry." This was not a simple task 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 quantifies the industry's output, employment, and compensation in the state's 12 regional commissions.
This report is the latest of a series of reports begun with an analysis of the 2002 impacts and continuing 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 was based on the Standard Industry Classification system (SIC), and the later data sets used the North American Industrial Classification System (NAICS). Industry classification changes introduced by NAICS 2012 code required minor adjustments in the NAICS code selection in the 2011 analysis. The new classification was also used in this year's analysis.

Economic Benefits of the Forestry Industry in Georgia: 2012

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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 2012 North American Industrial Classification System (NAICS) was 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

Grouping
Forestry Management and Logging

Industry Description
Timber Tract Operations Forest Nursery and Gathering Forest Products Logging

Bioenergy

Bioenergy Derived from Forest Products

Lumber and Wood Preservation
Veneer, Plywood, Reconstituted and Engineered Wood
Prefabricated Wood Buildings and Manufactured Housing

Sawmills Wood Preservation Hardwood Veneer and Plywood Manufacturing Softwood Veneer and Plywood Manufacturing Reconstituted Wood Product Manufacturing Engineered Wood Member Manufacturing Truss Manufacturing Manufactured Home, Mobile Home, Manufacturing
Prefabricated Wood Building Manufacturing
Pulp Mills Paper, Except Newsprint, Mills

NAICS CODE 113110 113210 113310 321113 321999 221112 221117 321113 321114 321211 321212 321219 321213 321214 321991
321992
322110 322121

Economic Benefits of the Forestry Industry in Georgia: 2012

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Pulp and Paper Products

Newsprint Mills Paperboard Mills Corrugated and Solid Fiber Box Manufacturing Folding Paperboard Box Manufacturing Other Paperboard Container Manufacturing Paper Bag and Coated and Treated paper Manufacturing Stationery Product Manufacturing Sanitary Paper Product Manufacturing

322122 322130 322211 322212 322219
322220
322230 322291

All Other Converted Paper Product Manufacturing

322299

Woodworking and paper Industries Machinery
Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors
Containers, Showcases, Partitions and Shelving

Sawmill, Woodworking, and Paper Machinery Manufacturing
Wood Kitchen Cabinet and Countertop Manufacturing Upholstered Household Furniture Manufacturing Non-upholstered Wood Household Furniture Manufacturing Institutional Furniture Manufacturing Wood Office Furniture Manufacturing Custom Architectural Woodwork and Millwork Wood Window and Door Manufacturing Cut Stock, Re-sawing Lumber, and Planning Other Millwork, Including Flooring Burial Casket Manufacturing All Other Miscellaneous Wood Product Manufacturing Wood Container and Pallet Manufacturing Showcases, Partitions, Shelving, and Lockers

333243
337110 337121
337122
337127 337211 337212 321911 321912 321918 339995 321999 321920 337215

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

As in previous years, this analysis includes all firms producing products related to bioenergy that are derived from forest products. This relatively new industry sector is represented by ten firms in Georgia. The total employment for this sector in 2012 was 263.

The level of economic activity in each forestry industry component is measured by output, employment, and wages and salaries. Measures for 2012 appear in Table 2-2, which aggregates the numerous categories from Table 2-1 to a more manageable number. There are two changes to the breakdown of categories in this year's report: bioenergy is shown as a separate sector and windows and doors sector is combined with wooden furniture, cabinets, custom archwork & millwork, windows and doors. This table shows that total employment in all of the forestry industry sectors was 49,497 and these jobs earned annual compensation (total wages and salaries including benefits) of more than $3 billion from estimated total revenue of $16.4 billion.

Economic Benefits of the Forestry Industry in Georgia: 2012

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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 21,788 workers, followed by wooden furniture, cabinets, custom arch. & millwork, windows and doors with 8,357 employees.
Compensation, like employment, is dominated by pulp and paper at more than $1.7 billion (more than half the total), followed distantly by veneer, plywood, reconstituted and engineered wood at $332 million and wooden furniture, cabinets, custom archwork & millwork at $326 million. The largest outputs are produced by pulp and paper ($11.4 billion), followed by lumber and wood preservation (more than $1.3 billion) and wooden furniture, cabinets, custom archwork & millwork, windows and doors ($1.2 billion.)

Table 2-2: Georgia Forestry Industry Economic Activity (2012)

Sector

Output

Employment

Forestry Management and Logging

$466,563,856

4,611

Wages & Salaries
$205,549,916

Bioenergy

$99,645,798

263

$17,124,709

Lumber and Wood Preservation
Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing
Pulp and Paper Products

$1,307,087,765 $901,897,656 $157,286,364
$11,428,140,048

5,157 3,918

$242,317,099 $332,444,286

1,188 21,788

$44,796,429 $1,726,669,358

Woodworking and Paper Industries Machinery
Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors
Containers, Showcases, Partitions, and Shelving

$163,372,592 $1,265,814,346
$569,378,408

501 8,357 3,714

$32,680,233 $326,392,293 $158,129,703

Total

$16,359,186,833

49,497 $3,086,104,026

Table 2-3 provides a comparison of the forestry industry activity for 2004 through 2012. Three measures are included in the comparison: output, employment, and compensation. Output (an estimate of the firms' revenues) continued to increase over the 2012-2013 period, reversing a declining trend that started over the 20072008 period. However, the increase in activity was not consistent among all sectors. Only four forestry sectors reported growth: lumber and wood preservation, veneer, plywood, reconstituted and engineered wood, pulp and paper products, wooden furniture, cabinets, custom archwork & millwork, windows and doors.
Employment, like output, continued to improve in 2012 with the state's forestry industry reporting an increase of 3,119 jobs from 2011. The majority of the

Economic Benefits of the Forestry Industry in Georgia: 2012

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new jobs were in the pulp and paper products sector. Veneer, plywood, reconstituted and engineered wood and wooden furniture, cabinets, custom archwork & millwork, windows and doors sectors also showed employment growth.
Wages and salaries increased overall. Veneer, plywood, reconstituted and engineered wood and wooden furniture showed the biggest improvement, followed by pulp and paper.

Economic Benefits of the Forestry Industry in Georgia: 2012

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Table 2-3: Forestry Industry Activity 2004 - 2012 Comparison

Sector Forestry Management and Logging Bioenergy 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, Cabinets, Custom Arch. & Millwork Windows and Doors Containers, Showcases, Partitions, and Shelving Total

Output (Millions of Dollars)

2004 $1,384
$1,482 $1,062 $388 $7,888
$47 $1,115 $344 $454 $14,163

2005 $1,447
$1,811 $1,290 $561 $8,808
$53 $1,241 $406 $533 $16,150

2006 $1,846
$2,057 $1,260 $596 $9,590
$52 $1,366 $446 $548 $17,760

2007 $1,807
$2,100 $1,322 $523 $10,131
$61 $1,374 $517 $624 $18,459

2008 $1,698
$1,732 $961 $427 $10,856
$67 $1,153 $721 $654 $18,270

2009 $1,454
$1,359 $664 $252 $11,018
$86 $996 $497 $579 $16,906

2010 $902
$1,176 $667 $189 $9,663 $113 $872 $390 $524 $14,495

2011 $805
$1,264 $590 $180 $10,426 $117 $627 $494 $578 $15,082

2012 $466 $99 $1,307 $901 $157 $11,428 $163
$1,265
$569 $16,359

Sector Forestry Management and Logging Bioenergy 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, Cabinets, Custom Arch. & Millwork Windows and Doors Containers, Showcases, Partitions, and Shelving Total

2004 6,005
8,505 6,588
3,494
25,032 292
10,164 2,522 5,031 67,633

Employment

2005 6,133

2006 6,152

8,839

8,957

7,110 6,963

4,531 4,500

23,150 22,861

319

314

10,378 10,770

2,446 2,598

4,788 4,618

67,694 67,733

2007 5,914
8,773 6,004
3,581
21,651 304
10,189 3,043 4,733 64,192

2008 5,529
6,477 4,448
2,983
20,816 295 8,235 3,967 4,506
57,812

2009 5,119
5,469 3,137
1,949
18,936 300 6,827 2,973 3,809
48,519

2010 5,050
4,902 3,025
1,409
16,939 473 5,905 2,252 3,470
43,425

2011 5,036
5,538 2,916
1,365
19,012 536 4,724 3,156 4,095
46,378

2012 4,611 263 5,157 3,918 1,188 21,788 501
8,357
3,714 49,497

Economic Benefits of the Forestry Industry in Georgia: 2012

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Wages and Salaries (Millions of Dollars)

Sector Forestry Management and Logging Bioenergy 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, Cabinets, Custom Arch. & Millwork Windows and Doors Containers, Showcases, Partitions, and Shelving Total

2004 $234
$353 $312 $122 $1,616 $18 $359 $104 $181 $3,299

2005 $254
$385 $341 $164 $1,595 $20 $389 $104 $169 $3,422

2006 $267
$400 $353 $165 $1,630 $18 $404 $100 $175 $3,513

2007 $273
$391 $291 $119 $1,602 $19 $393 $115 $191 $3,394

2008 $255
$282 $211 $99 $1,565 $18 $330 $173 $172 $3,131

2009 $238
$250 $158 $66 $1,494 $17 $271 $126 $150 $2,770

2010 $239
$238 $163 $44 $1,412 $28 $249 $100 $151 $2,624

2011 $262
$290 $162 $49 $1,636 $34 $205 $148 $188 $2,973

2012 $205 $17 $242 $332 $44 $1,726 $32
$326
$158 $3,086

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Figures 2-1 through 2-3 show output, employment, and compensation changes for each forestry industry sector from 2004 through 2012.

Figure 2-1: Forestry Industry Economic Activity: Output by Sector (Dollars in Millions)

2012 2011 2010 2009 2008 2007 2006 2005 2004

$0

$2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000

Forestry Management and Logging Veneer, Plywood, Reconstituted, and Engineered Wood Pulp and Paper Products Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions, and Shelving

Lumber and Wood Preservation Prefabricated Wood Buildings and Manufactured Housing Woodworking and Paper Industries Machinery Bioenergy (Began tracking in 2012)

Figure 2-2: Forestry Industry Economic Activity: Employment by Sector

2012 2011 2010 2009 2008 2007 2006 2005 2004

0

10,000

20,000

30,000

Forestry Management and Logging

Veneer, Plywood, Reconstituted, and Engineered Wood

Pulp and Paper Products

Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors

Containers, Showcases, Partitions, and Shelving

40,000

50,000

60,000

Lumber and Wood Preservation

Prefabricated Wood Buildings and Manufactured Housing

Woodworking and Paper Industries Machinery

Bioenergy (Began Tracking in 2012)

70,000

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Figure 2-3: Forestry Industry Economic Activity: Wages & Salaries by Sector (Dollars in Millions)

2012 2011 2010 2009 2008 2007 2006 2005 2004

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Forestry Management and Logging Veneer, Plywood, Reconstituted, and Engineered Wood Pulp and Paper Products Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions, and Shelving

Lumber and Wood Preservation Prefabricated Wood Buildings and Manufactured Housing Woodworking and Paper Industries Machinery Bioenergy (Began tracking in 2012)

$4,000

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SECTION 3
Economic Benefits
Economic impact analyses have used basically the same methods for more than 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 (I/O) model.
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 2012, whereas the wage and salary data available to IMPLAN is from 2011.
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 28 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 following the definition of the industry sectors, as described in the previous section. The first step is to quantify

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employment, income, and output associated with each of the defined sectors. Several data sources were used to accomplish this.
The best source for employment and wages was 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 2012. 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 some governmental employees.
The second task was to divide the forestry industry output into two categories; (1) output 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 forestry-industry 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 was 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 was to use the I/O model to estimate total impacts, which were 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 2012 roughly equivalent to a measure of sales revenue. The second measure is compensation, including all household income and employee benefits. The third measure is employment, or number of jobs, in each forestry-related industry.

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Findings
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 and logging industry segment because most of it appears to be consumed by the various Georgia wood-using industries 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.
Pulp and paper, which includes all pulping and paper-making activities, continued to be the largest industry segment in 2012 representing 48 percent of the total industry in employment and 72 percent of the entire industry output. The entire forestry industry (totals in Table 3-1) exported (to a non-Georgia destination) output valued at nearly $15.4 billion in 2012. These activities supported 43,162 jobs with more than $2.8 billion in wages and salaries.

Table 3-1: Direct Impacts by Forest Industry Sector (2012)

Sector
Forestry Management and Logging
Bioenergy 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, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions, and Shelving Total

Output
$210,921,288 $36,816,754 $952,712,763 $873,876,576

Employment
2,024 158 3,523 3,558

Wages and Salaries
$93,369,513 $7,754,077 $171,230,369
$310,126,664

$151,425,932
$11,146,493,552 $162,698,672
$1,293,594,725
$550,551,929 $15,379,092,192

1,093
20,722 477
8,217
3,389 43,162

$43,039,846
$1,689,922,361 $32,181,385
$332,099,461
$150,701,962 $2,830,425,638

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In addition to direct employment, Georgia's forestry industry generates economic activity and supports jobs in other sectors of the state's economy. The total impact is estimated by applying the IMPLAN input-output model to the direct impacts (provided in Table 3-1.) Table 3-2 summarizes the impacts by aggregated industry codes (used in the input-output model), which are roughly equivalent to two-digit NAICS codes.
As shown, all industries in Georgia are impacted by the activity of the forestry industry. Manufacturing continued to see the biggest benefits, with more than $17 billion in output, 47,287 employees, and $3.1 billion in wages and salaries in 2012. A distant second (in employment) was held by agriculture, forestry, fishing and hunting (which includes logging and nurseries), with 9,525 employees and more than $388 million in compensation. The economic activity supported by Georgia's forestry industry totaled more than $28.9 billion. This activity supported the employment of 135,732 people who earned nearly $7.5 billion in 2012.

Table 3-2: Total Benefits by Major Industry (2012)

Sector
Agriculture, Forestry, Fish & Hunting Mining Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation & Warehousing Information Finance & Insurance Real Estate & Rental Professional, Scientific & Tech Services Management of Companies Administrative & Waste Services Educational Services Health & Social services Arts, Entertainment & Recreation Accommodation & Food Services Other Services Government & non-NAICS Industries TOTAL

Output
$856,717,959 $103,535,686 $747,308,228 $261,725,026 $17,475,762,223 $983,492,275 $600,295,839 $881,782,852 $599,016,474 $1,049,048,426 $1,326,277,730 $846,064,777 $422,331,100 $478,639,472 $100,399,902 $743,341,308
$94,419,827 $380,030,227 $379,621,864 $611,741,433 $28,941,552,629

Employment
9,525 192 907 2,803 47,287 5,255 9,153 5,828 1,511 4,580 4,310 6,547 2,152 8,282 1,647 7,966 1,725 6,712 5,942 3,409 135,732

Wages & Salaries
$388,323,198 $24,731,085
$103,581,057 $129,639,156 $3,111,571,463 $418,087,768 $267,788,804 $299,414,891 $159,457,825 $287,742,159
$82,757,258 $457,306,601 $220,509,891 $243,036,011
$57,285,657 $412,254,638
$38,584,096 $141,958,480 $214,873,993 $437,731,133 $7,496,635,163

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Table 3-3 extracts information from several previous tables to compare the overall results obtained in each impact analysis conducted from 2003 through 2012. All measures show growth between 2003 and 2004 and between 2004 and 2005. The highest growth rates occurred in industry output which grew between 10 and 14 percent depending on the year and whether it was 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 were 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 2008-to-2009 period, forestry industry output declined by 7.5 percent, and employment from total impacts fell by 16 and 11.5 percent, respectively. The two sectors that declined the most (in percentage terms) were prefabricated buildings and veneer, plywood, and reconstituted wood products. Productivity increases were 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.
From 2009 to 2010, the decline in industry activity accelerated with output declining by about 14 percent. Employment and compensation, however, declined by smaller percentages, compared to the previous year, with declines of almost 11 percent and 5.3 percent, respectively. Total impacts did not decline as much in percentage terms in all parameters, probably because compensation declined the least, and induced impacts almost always depend on income. In the fiscal impact analysis, both revenues and costs declined, but because the cost decline was slightly larger than the revenue decline, net revenues actually increased slightly.
The forestry industry's activity picked up pace in 2011, showing growth after three years of continuous decline. Output increased by 4 percent, nearly the same growth rate as in the 2006-2007 period. Employment and compensation also showed improvement, with 7 percent and 13 percent growth rates, respectively. These improvements were also reflected in total impacts which showed higher growth in percentage terms than direct impact. In the 2010 to 2011 period output increased by nearly 6 percent, employment increased by nearly 10 percent, and wages and salaries increased by an impressive 21 percent.
The trend of positive growth continued in the 2011-2012 period. Output increased by nearly 9 percent, employment increased by 7 percent and compensation increased by 4 percent.

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The annual percent-change information in Table 3-3 is presented graphically below for output, employment, and compensation, measuring levels of direct economic activity (Figure 3-1). This followed by a similar graph measuring total economic impact (Figure 3-2). It should be noted that these data are in nominal dollars and have not been adjusted for inflation. As the graphs show, all metrics, output, employment, and wages and salaries have stabilized, showing an upward trend.

Output Employment Wages & Salaries
Output Employment Wages & Salaries

2003 $12,679
65,706 $3,007

Table 3-3: Comparison of Results 2003 to 2012
(Dollars in millions; Employment in persons)
Forestry Industry Direct Economic Impact

2004 $14,163

2005

2006

2007

2008

$16,150 $17,760 $18,459 $18,270

67,633 67,694 67,733 64,192 57,812

$3,299 $3,422 $3,513 $3,394 $3,131

11.7% 2.9% 9.7%

Year-to-Year Percent Change

14.0%

10.0%

3.9%

-1.0%

0.1%

0.1%

-5.2%

-9.9%

3.7%

2.7%

-3.4%

-7.7%

Output Employment Wages & Salaries
Output Employment Wages & Salaries

2003 $20,199 136,022
$5,600

2004 $22,729 144,944
$6,276
12.53% 6.56%
12.07%

Total Impacts

2005

2006

2007

$25,972 $27,738 $28,547

154,147 149,347 141,155

$6,827 $6,773 $6,696

2008 $28,723 128,388
$6,514

Year-to-Year Percent Change

14.27%

6.80%

2.92%

0.62%

6.35% -3.11% -5.49% -9.04%

8.78% -0.79% -1.14% -2.72%

Forestry Industry Fiscal Impact

2003

2004

2005

2006

2007

State Revenues

$514

$546

$591

$580

$566

State Costs

$368

$392

$414

$400

$373

Net Revenues

$147

$155

$176

$180

$193

Source: EI2 impact assessments and Georgia Department of Labor, Current Employment and Wages

2008 $539 $333 $206

2009 $16,906
48,519 $2,770
-7.5% -16.1% -11.5%
2009 $27,200 118,423
$5,561
-5.30% -7.76% -14.63%
2009 $472 $314 $158

2010 $14,495
43,425 $2,624
-14.3% -10.5%
-5.3%
2010 $23,643 108,112
$5,377
-13.08% -8.71% -3.31%
2010 $448 $282 $166

2011 $15,082
46,378 $2,972
4.0% 6.8% 13.3%
2011 $24,975 118,459
$6,491
5.63% 9.57% 20.72%
2011 $487 $308 $179

2012 $16,359
49,497 $3,086
8.5% 6.7% 3.8%
2012 $28,941 135,732
$7,496
15.88% 14.58% 15.48%
2012 $603 $361 $242

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Percent Change

20.00% 15.00% 10.00%
5.00% 0.00% -5.00% -10.00% -15.00% -20.00%

Figure 3-1: Annual Percent Change in Direct Economic Activity

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Output

Employment

Wages & Salaries

25.00% 20.00% 15.00% 10.00%
5.00% 0.00% -5.00% -10.00% -15.00% -20.00%

Figure 3-2: Annual Percent Change in Total Economic Activity

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Output

Employment

Wages & Salaries

Percent Change

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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) in employment and the second largest industry in wages and salaries.

Table 3-4: Comparison of Georgia Industries: 2012

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

Employment
64,348 58,179 49,497 41,316 23,910 19,901 19,918
882 11,145
9,950 7,310

Wages & Salaries
$3,361,153,492 $2,288,465,928 $3,086,104,026 $2,633,535,440 $1,059,020,218 $1,038,732,229 $1,295,537,134
$54,730,291 $751,578,433 $859,805,868 $300,994,663

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SECTION 4
Economic Impact By Region
Regional Economies
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 economic sectors 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 it also pays 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
Employment and income data limitations at the county level make it difficult to quantify the local economic impact of the forestry industry. Instead, this report shows the forestry industry's impact of Georgia's 12 regional commissions. Table 4.1 shows a list of the regional commissions and their respective counties.

Regions
Northwest GA Georgia Mountains

Table 4.1: Regional Commissions
Counties
Bartow, Catoosa, Chattooga, Dade, Fannin, Floyd, Gilmer, Gordon, Haralson, Murray, Paulding, Pickens, Polk, Walker, Whitfield
Banks, Dawson, Forsyth, Franklin, Habersham, Hall, Hart, Lumpkin, Rabun, Stephens, Towns, Union, White

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ATL Regional Commission

Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Fulton, Gwinnett, Henry, Rockdale

Three Rivers

Butts, Carroll, Coweta, Heard, Lamar, Meriwether, Pike, Spalding, Troup, Upson

Northeast Georgia

Barrow, Clarke, Elbert, Green, Jackson, Jasper, Madison, Morgan, Newton, Oconee, Oglethorpe, Walton

Middle Georgia

Baldwin, Bibb, Crawford, Houston, Jones, Monroe, Peach, Pulaski, Putnam, Twiggs, Wilkinson

Central Savannah River Area
River Valley
Heart of Georgia Altamaha

Burke, Columbia, Glascock, Hancock, Jefferson, Jenkins, Lincoln, McDuffie, Richmond, Taliaferro, Warren, Washington, Wilkes
Chattahoochee, Clay, Crisp, Dooly, Harris, Macon, Marion, Muscogee, Quitman, Randolph, Schley, Stewart, Sumter, Talbot, Taylor, Webster
Appling, Bleckley, Candler, Dodge, Emanuel, Evans, Jeff Davis, Johnson, Laurens, Montgomery, Tattnall, Telfair, Toombs, Treutlen, Wayne, Wheeler, Wilcox

Southwest Georgia

Baker, Calhoun, Colquitt, Decatur, Dougherty, Early, Grady, Lee, Miller, Mitchell, Seminole, Terrell, Thomas, Worth

Southern Georgia

Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Charlton, Clinch, Coffee, Cook, Echols, Irwin, Lanier, Lowndes, Pierce, Tift, Turner, Ware

Coastal

Bryan, Bulloch, Camden, Chatham, Effingham, Glynn, Liberty, Long, McIntosh, Screven

Source: Georgia Department of Community Affairs

This analysis examines the proportion of each region's output, employment, and compensation (as defined by wages and salaries) indicated by the ES202 data that is attributable directly to forestry industries. Table 4-2 shows that the Atlanta Regional Commission, the Heart of the Georgia Altamaha and Central Savannah River Area are the top three regions with the largest employment in the forestry industry. See Figures A-1 through A-3 in the Appendix for maps showing each region's output, employment, and wages and salaries.

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Table 4-2: Forestry Industry's Regional Impact (2012)

Regions
Three Rivers Southwest Georgia Southern Georgia River Valley Northwest Georgia Northeast Georgia Middle Georgia Heart of the Georgia Altamaha Georgia Mountains Coastal Central Savannah River Area Atlanta Regional Commission Total

Output
$1,071,616,918 $1,125,661,460 $1,438,736,054 $771,014,142 $1,277,561,799 $784,765,120 $1,141,331,179 $1,703,522,329 $721,766,453 $1,447,690,179 $1,690,091,141 $3,185,430,058 $16,359,186,833

Employment
3,242 3,406 4,353 2,333 3,865 2,374 3,453 5,154 2,184 4,380 5,114 9,638 49,497

Wages & Salaries
$222,585,837 $230,550,634 $265,018,732 $177,329,796 $349,846,436 $234,054,573 $187,403,621 $238,686,819 $213,421,322 $217,068,085 $212,121,627 $538,016,543 $3,086,104,026

Figure 4-1: Map of Regional Commissions

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References
Bureau of Economic Analysis Input-Output Sectors as contained in "IMPLAN Pro: Data Guide," Minnesota IMPLAN Group, Inc., Stillwater, Minn., 2011.
Georgia Department of Labor, ES202 Wage and Employment Data: 2012.
North American Industrial Classification System (NAICS), http://www.census.gov/epcd/www/naicstab.htm
U.S. Department of Labor, Bureau of Labor Statistics, "Employer Costs for Employee Compensation," http://data.bls.gov/cgi-bin/surveymost

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Appendix
Figure A-1: Regional Forestry Industry Output: 2012

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Figure A-2: Regional Forestry Industry Employment: 2012

Economic Benefits of the Forestry Industry in Georgia: 2012

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Figure A-3: Regional Forestry Industry Wages and Salaries: 2012

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