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 by Regional Commission 25 References 28 Appendix 29 Economic Benefits of the Forestry Industry in Georgia: 2013 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 the 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 2013, 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 2013 employed 50,110 workers in all industry sectors combined, paid an annual compensation (as defined by wages and salaries) of more than $3.1 billion, and generated an estimated total revenue of more than $16.9 billion. Table E-1: Georgia Forestry Industry Economic Activity (2013) 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 $543,155,312 $297,909,266 $1,368,369,678 $1,221,702,976 4,967 300 5,568 4,523 Wages & Salaries $230,458,608 $19,733,614 $278,622,706 $308,202,959 $186,993,664 $11,323,521,664 $110,621,416 $1,326,816,350 $570,211,616 $16,949,301,942 1,272 $51,243,295 20,247 $1,659,013,219 504 $35,679,672 8,924 $364,827,887 3,805 $160,984,641 $50,110 $3,108,766,599 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 2 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) was nearly $28.9 billion in 2013. These activities supported the employment of 133,353 people whose compensation was $7.2 billion. Table E-2: Total Benefits by Major Industry (2013) 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 $985,267,182 $29,846,102 $1,076,501,475 $287,110,185 $16,971,640,115 $1,506,814,729 $555,062,368 $975,325,918 $673,421,530 $933,037,581 $1,234,300,444 $821,175,100 $598,192,782 $520,515,342 $93,549,748 $664,304,550 $101,509,308 $415,673,194 $393,811,649 $57,742,613 $28,894,801,914 Employment 10,717 169 912 1,742 47,202 6,303 7,273 6,292 1,728 5,207 3,757 6,341 2,741 8,681 1,419 7,174 1,682 7,204 6,309 502 133,353 Wages & Salaries $461,372,601 $7,825,238 $101,796,222 $95,916,072 $3,002,632,276 $519,926,146 $219,639,355 $363,035,707 $156,297,859 $324,551,894 $85,082,685 $441,577,662 $295,901,025 $271,757,954 $53,834,982 $373,549,240 $37,764,531 $167,638,302 $226,483,144 $36,165,872 $7,242,748,767 Another way to examine the forestry industry in Georgia is to compare it with the state's other manufacturing sectors. Table E-3 lists 2013 employment and income totals for each major manufacturing 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 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: 2013 Page 3 and wages and salaries, and textiles (mostly carpet) was second in employment, but fourth in wages and salaries. Table E-3: Comparison to Georgia's Other Manufacturing Sectors (2013) 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 61,601 57,637 50,110 41,859 25,626 22,810 18,986 13,376 11,633 7,965 3,079 Wages & Salaries $3,273,297,716 $2,364,655,696 $3,108,766,599 $2,787,988,424 $1,145,362,036 $1,231,362,756 $1,267,403,124 $602,842,864 $833,114,828 $771,771,156 $96,641,844 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 $745.9 million in revenues for the state budget in 2013. When the costs of providing services to all employees are deducted from these revenues, net annual state revenues were $364.9 million for 2013. Table E-4: Fiscal Impact Analysis (2013) Annual State Government Revenues $745,870,432 Annual State Government Costs $380,913,340 Net Annual Revenues $364,957,092 Table E-5 compares the overall results obtained in each impact analysis conducted from 2003 through 2013. As the table shows, the forestry industry's output, employment, and wages and salaries continued to grow but at a much slower pace, showing annual growth of 4, 1, and 1 percent, respectively, compared to 2012. The industry's increased activity resulted in higher net revenues for the state government. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 4 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 2004 $14,163 67,633 $3,299 11.7% 2.9% 9.7% Table E-5: Comparison of Results 2003 to 2013 (Dollars in millions; Employment in persons) Forestry Industry Direct Economic Impact 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 2009 $16,906 48,519 $2,770 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% -7.5% -16.1% -11.5% 2004 $22,729 144,944 $6,276 12.53% 6.56% 12.07% 2005 $25,972 154,147 $6,827 Total Impacts 2006 2007 2008 $27,738 $28,547 $28,723 149,347 141,155 128,388 $6,773 $6,696 $6,514 2009 $27,200 118,423 $5,561 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% -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 2013 $16,949 50,110 $3,109 -14.3% -10.5% -5.3% 4.0% 6.8% 13.3% 8.5% 6.7% 3.8% 3.6% 1.2% 0.7% 2010 $23,643 108,112 $5,377 2011 $24,975 118,459 $6,491 2012 $28,941 135,732 $7,496 2013 $28,895 133,353 $7,243 -13.08% -8.71% -3.31% 5.63% 9.57% 20.72% 15.88% 14.58% 15.48% -0.16% -1.75% -3.38% Forestry Industry Fiscal Impact 2003 2004 2005 2006 2007 2008 2009 2010 State Revenues $514 $546 $591 $580 $566 $539 $472 $448 State Costs $368 $392 $414 $400 $373 $333 $314 $282 Net Revenues $147 $155 $176 $180 $193 $206 $158 $166 Source: Enterprise Innovation Institute (EI2)impact assessments and Georgia Department of Labor, Current Employment and Wages 2011 $487 $308 $179 2012 $603 $361 $242 2013 $746 $381 $365 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 5 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: 2013 Page 6 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 (2013) Regions Atlanta Regional Commission Central Savannah River Area Coastal Georgia Mountains Heart of Georgia Altamaha Middle Georgia Northeast Georgia Northwest GA River Valley Southern Georgia Southwest Georgia Three Rivers Total Output $3,867,807,598 $1,246,689,648 $1,538,805,173 $964,146,270 $1,427,240,148 $948,302,716 $853,571,467 $1,529,893,174 $790,527,325 $1,589,966,650 $1,162,190,694 $1,030,161,078 $16,949,301,942 Employment 13,880 4,108 4,601 2,159 4,189 3,032 2,582 4,186 1,828 3,114 3,591 2,840 50,110 Wages & Salaries $861,100,323 $254,871,948 $285,427,939 $133,966,226 $259,867,543 $188,111,240 $160,212,467 $259,702,972 $113,413,200 $193,159,819 $222,763,105 $176,169,819 $3,108,766,599 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 7 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: 2013 Page 8 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: 2013 Page 9 Pulp and Paper Products Woodworking and paper Industries Machinery Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions and Shelving 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 All Other Converted Paper Product Manufacturing 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 Planing Other Millwork, Including Flooring Burial Casket Manufacturing All Other Miscellaneous Wood Product Manufacturing Wood Container and Pallet Manufacturing Showcases, Partitions, Shelving, and Lockers 322122 322130 322211 322212 322219 322220 322230 322291 322299 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 2013 was 300. The level of economic activity in each forestry industry component is measured by output, employment, and wages and salaries. Measures for 2013 appear in Table 2-2, which aggregates the numerous categories from Table 2-1 to a more manageable number. There were two changes to the breakdown of categories that were introduced in last 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 50,110 and these jobs earned annual compensation (total wages and salaries including benefits) of more than $3.1 billion from estimated total revenue of more than $16.9 billion. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 10 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 20,247 workers, followed by wooden furniture, cabinets, custom arch. & millwork, windows and doors with 8,924 employees. Compensation, like employment, is dominated by pulp and paper at nearly $1.7 billion (more than half the total), followed distantly by wooden furniture, cabinets, custom archwork & millwork at $365 million and veneer, plywood, reconstituted and engineered wood at $308 million. The largest outputs are produced by pulp and paper ($11.3 billion), followed by lumber and wood preservation (more than $1.4 billion) and wooden furniture, cabinets, custom archwork & millwork, windows and doors ($1.3 billion.) Table 2-2: Georgia Forestry Industry Economic Activity (2013) Sector Output Employment Forestry Management and Logging $543,155,312 4,967 Wages & Salaries $230,458,608 Bioenergy $297,909,266 300 $19,733,614 Lumber and Wood Preservation Veneer, Plywood, Reconstituted, and Engineered Wood Prefabricated Wood Buildings and Manufactured Housing Pulp and Paper Products $1,368,369,678 $1,221,702,976 $186,993,664 $11,323,521,664 5,568 4,523 1,272 20,247 $278,622,706 $308,202,959 $51,243,295 $1,659,013,219 Woodworking and Paper Industries Machinery Wooden Furniture, Cabinets, Custom Arch. & Millwork, Windows and Doors Containers, Showcases, Partitions, and Shelving $110,621,416 $1,326,816,350 $570,211,616 504 8,924 3,805 $35,679,672 $364,827,887 $160,984,641 Total $16,949,301,942 $50,110 $3,108,766,599 Table 2-3 provides a comparison of the forestry industry activity for 2004 through 2013. 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. While most forestry sectors reported growth, pulp and paper products and wooden furniture, cabinets, custom archwork & millwork, windows and doors report minor decline. Employment, like output, improved slightly in 2013 with the state's forestry industry reporting an increase of 613 jobs from 2013. The majority of the new jobs Economic Benefits of the Forestry Industry in Georgia: 2013 Page 11 were in the veneer, plywood, reconstituted and engineered wood and lumber and wood preservation. Wages and salaries also increased slightly overall. Bioenergy, Prefabricated Wood Buildings and Manufactured Housing and lumber and wood preservation showed the biggest improvement, followed by pulp and paper. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 12 Table 2-3: Forestry Industry Activity 2004 - 2013 Comparison Output (Millions of Dollars) Sector 2004 2005 2006 2007 2008 2009 Forestry Management and Logging $1,384 $1,447 $1,846 $1,807 $1,698 $1,454 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 $1,482 $1,062 $388 $7,888 $47 $1,115 $344 $1,811 $1,290 $561 $8,808 $53 $1,241 $406 $2,057 $1,260 $2,100 $1,322 $1,732 $961 $1,359 $664 $596 $9,590 $52 $1,366 $446 $523 $10,131 $61 $1,374 $517 $427 $10,856 $67 $1,153 $721 $252 $11,018 $86 $996 $497 Containers, Showcases, Partitions, and Shelving Total $454 $533 $548 $624 $654 $579 $14,163 $16,150 $17,760 $18,459 $18,270 $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 2013 $543 $298 $1,368 $1,222 $187 $11,324 $111 $1,327 $570 $16,950 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 2006 2007 6,133 6,152 5,914 - - - 8,839 8,957 8,773 7,110 6,963 6,004 4,531 23,150 319 10,378 2,446 4,788 67,694 4,500 22,861 314 10,770 2,598 4,618 67,733 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 2013 4,967 300 5,568 4,523 1,272 20,247 504 8,924 3,805 50,110 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 13 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 Wages and Salaries (Millions of Dollars) 2004 $234 $353 2005 $254 $385 2006 $267 $400 2007 $273 $391 2008 $255 $282 $312 $341 $353 $291 $211 2009 $238 $250 $158 2010 $239 $238 $163 2011 $262 $290 $162 2012 $205 $17 $242 $332 2013 $230 $20 $279 $308 $122 $1,616 $18 $359 $104 $181 $3,299 $164 $1,595 $20 $389 $104 $169 $3,422 $165 $1,630 $18 $404 $100 $175 $3,513 $119 $1,602 $19 $393 $115 $191 $3,394 $99 $1,565 $18 $330 $173 $172 $3,131 $66 $1,494 $17 $271 $126 $150 $2,770 $44 $1,412 $28 $249 $100 $151 $2,624 $49 $1,636 $34 $205 $148 $188 $2,973 $44 $1,726 $32 $326 $158 $3,086 $51 $1,659 $36 $365 $161 $3,109 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 14 Figures 2-1 through 2-3 show output, employment, and compensation changes for each forestry industry sector from 2004 through 2013. Figure 2-1: Forestry Industry Economic Activity: Output by Sector (Dollars in Millions) 2013 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 2013 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 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 15 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 $0 Figure 2-3: Forestry Industry Economic Activity: Wages & Salaries by Sector (Dollars in Millions) $500 $1,000 $1,500 $2,000 $2,500 $3,000 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) $3,500 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 16 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. 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 28.9 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 employment, income, and output associated with each of the defined sectors. Several data sources were used to accomplish this. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 17 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 thus allowing an estimate of the economic benefits occurring in 2013. 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 2013 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. 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 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 18 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 2013 representing 44 percent of the total industry in employment and 69 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 2013. These activities supported 43,583 jobs with nearly $2.8 billion in wages and salaries. Table 3-1: Direct Impacts by Forest Industry Sector (2013) 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 $237,945,400 $273,825,171 $994,328,909 $1,086,834,576 2,044 200 4,048 4,085 Wages and Salaries $95,587,894 $14,829,693 $202,461,817 $278,994,659 $183,086,288 $10,687,086,260 $107,548,600 $1,295,547,759 $530,202,304 $15,396,405,267 1,245 $50,188,911 19,235 $1,569,851,596 490 $34,688,570 8,732 $357,525,547 3,504 $149,216,193 43,583 $2,753,344,880 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. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 19 As shown, all industries in Georgia are impacted by the activity of the forestry industry. Manufacturing continued to see the biggest benefits, with nearly $17 billion in output, 47,202 employees, and $3 billion in wages and salaries in 2013. A distant second (in employment) was held by agriculture, forestry, fishing and hunting (which includes logging and nurseries), with 10,717 employees and more than $461.4 million in compensation. The total economic activity supported by Georgia's forestry industry totaled nearly $28.9 billion. This activity supported the employment of 133,353 people who earned more than $7.2 billion in 2013. Table 3-2: Total Benefits by Major Industry (2013) 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 $985,267,182 $29,846,102 $1,076,501,475 $287,110,185 $16,971,640,115 $1,506,814,729 $555,062,368 $975,325,918 $673,421,530 $933,037,581 $1,234,300,444 $821,175,100 $598,192,782 $520,515,342 $93,549,748 $664,304,550 $101,509,308 $415,673,194 $393,811,649 $57,742,613 $28,894,801,914 Employment 10,717 169 912 1,742 47,202 6,303 7,273 6,292 1,728 5,207 3,757 6,341 2,741 8,681 1,419 7,174 1,682 7,204 6,309 502 133,353 Wages & Salaries $461,372,601 $7,825,238 $101,796,222 $95,916,072 $3,002,632,276 $519,926,146 $219,639,355 $363,035,707 $156,297,859 $324,551,894 $85,082,685 $441,577,662 $295,901,025 $271,757,954 $53,834,982 $373,549,240 $37,764,531 $167,638,302 $226,483,144 $36,165,872 $7,242,748,767 Table 3-3 extracts information from several previous tables to compare the overall results obtained in each impact analysis conducted from 2003 through 2013. 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 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 20 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. During the 2012-2013 period, the direct economic impact of the forestry industry showed positive growth, albeit smaller that previous years. The overall total impacts showed a slight decline. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 21 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 direct impact metrics, output, employment, and wages and salaries are showing positive growth but at lower levels than previous years. The totals impacts showed a slight decline, with wages & salaries showing the biggest decline of 3 percent. Table 3-3: Comparison of Results 2003 to 2013 ((Dollars in millions; Employment in persons) Forestry Industry Direct Economic Impact 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Output $12,679 $14,163 $16,150 $17,760 $18,459 $18,270 $16,906 $14,495 $15,082 $16,359 $16,949 Employment 65,706 67,633 67,694 67,733 64,192 57,812 48,519 43,425 46,378 49,497 50,110 Wages & Salaries $3,007 $3,299 $3,422 $3,513 $3,394 $3,131 $2,770 $2,624 $2,972 $3,086 $3,109 Year-to-Year Percent Change Output 11.7% 14.0% 10.0% 3.9% -1.0% -7.5% -14.3% 4.0% 8.5% 3.6% Employment 2.9% 0.1% 0.1% -5.2% -9.9% -16.1% -10.5% 6.8% 6.7% 1.2% Wages & Salaries 9.7% 3.7% 2.7% -3.4% -7.7% -11.5% -5.3% 13.3% 3.8% 0.7% 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 2008 $25,972 $27,738 $28,547 $28,723 154,147 149,347 141,155 128,388 $6,827 $6,773 $6,696 $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% 2009 $27,200 118,423 $5,561 2010 $23,643 108,112 $5,377 2011 $24,975 118,459 $6,491 -5.30% -7.76% -14.63% -13.08% -8.71% -3.31% 5.63% 9.57% 20.72% 2012 $28,941 135,732 $7,496 2013 $28,895 133,353 $7,243 15.88% 14.58% 15.48% -0.16% -1.75% -3.38% 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 $472 $314 $158 2010 $448 $282 $166 2011 $487 $308 $179 2012 $603 $361 $242 2013 $746 $381 $365 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 22 Percent Change 20.00% Figure 3-1: Annual Percent Change in Direct Economic Activity 15.00% 10.00% 5.00% 0.00% -5.00% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -10.00% -15.00% -20.00% Output Employment Wages & Salaries Percent Change Figure 3-2: Annual Percent Change in Total Economic Activity 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% 2004 2005 2006 2007 Output 2008 2009 Employment 2010 2011 2012 Wages & Salaries 2013 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 23 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 to Georgia's Other Manufacturing Sectors: 2013 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 61,601 57,637 50,110 41,859 25,626 22,810 18,986 13,376 11,633 7,965 3,079 Wages & Salaries $3,273,297,716 $2,364,655,696 $3,108,766,599 $2,787,988,424 $1,145,362,036 $1,231,362,756 $1,267,403,124 $602,842,864 $833,114,828 $771,771,156 $96,641,844 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 24 SECTION 4 Economic Impact by Regional Commission 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 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 25 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. These figures were calculated using 5-digit NAICS level data (the only data available at the County level) and therefore should be considered as approximate estimates. Table 4-2 shows that the Atlanta Regional Commission, the Coastal Regional Commission and the Heart of the Georgia Altamaha 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. Economic Benefits of the Forestry Industry in Georgia: 2013 Page 26 Table 4-2: Forestry Industry's Regional Impact (2013) Regions Atlanta Regional Commission Central Savannah River Area Coastal Georgia Mountains Heart of Georgia Altamaha Middle Georgia Northeast Georgia Northwest GA River Valley Southern Georgia Southwest Georgia Three Rivers Total Output $3,867,807,598 $1,246,689,648 $1,538,805,173 $964,146,270 $1,427,240,148 $948,302,716 $853,571,467 $1,529,893,174 $790,527,325 $1,589,966,650 $1,162,190,694 $1,030,161,078 $16,949,301,942 Employment 13,880 4,108 4,601 2,159 4,189 3,032 2,582 4,186 1,828 3,114 3,591 2,840 50,110 Wages & Salaries $861,100,323 $254,871,948 $285,427,939 $133,966,226 $259,867,543 $188,111,240 $160,212,467 $259,702,972 $113,413,200 $193,159,819 $222,763,105 $176,169,819 $3,108,766,599 Figure 4-1: Map of Regional Commissions Economic Benefits of the Forestry Industry in Georgia: 2013 Page 27 References Bureau of Economic Analysis Input-Output Sectors as contained in "IMPLAN Pro: Data Guide," Minnesota IMPLAN Group, Inc., Stillwater, Minn., 2013. Georgia Department of Labor, ES202 Wage and Employment Data: 2013. 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 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 28 Appendix Figure A-1: Regional Forestry Industry Employment: 2013 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 29 Figure A-2: Regional Forestry Industry Wages and Salaries: 2013 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 30 Figure A-3: Regional Forestry Industry Output: 2013 Economic Benefits of the Forestry Industry in Georgia: 2013 Page 31