2017 Economic benefits of the forest industry in Georgia

Table of Contents
Executive Summary ......................................................... 3 Introduction .................................................................. 9 Definition of the Forest Industry in Georgia ........................... 10 Economic Benefits .......................................................... 17 Economic Impact of Urban and Community Forestry ................. 25 Economic Impact by Regional Commission.............................. 26 References................................................................... 29 Appendix ..................................................................... 30
Economic Benefits of the Forest Industry in Georgia: 2017

Executive Summary
Georgia's forest 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 forest industry, (2) estimate economic activity supported in all Georgia sectors by the industry's activities, (3) compare the level of activity in the forest industry with other industries, and (4) quantify the economic activity of forest 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 forest industry components, and the level of economic activity represented by them in 2017, 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 53,933 workers were employed in all sectors of the forest industry in 2017. These jobs were paid an annual compensation1 of more than $3.8 billion, and generated an estimated total revenue of $21.3 billion.

Table E-1: Georgia Forest Industry Economic Activity (2017)

Sector

Output Employment

Wages & Salaries

Forest Management and Logging

$521,382,649

5,738

$312,015,239

Bioenergy

$868,861,426

894

$147,444,281

Lumber and Wood Preservation

$1,629,200,712

5,662

$347,640,296

Veneer, Plywood, Reconstituted, and Engineered Wood

$1,499,317,624

4,131

$249,662,452

Prefabricated Wood Buildings and Manufactured Housing

$432,041,556

2,138

$92,057,134

Pulp and Paper Products

$13,213,520,387

19,252 $1,872,353,224

Woodworking and Paper Industries Machinery

$100,418,040

405

$27,576,366

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

$2,181,889,844

11,242

$547,102,059

Containers, Showcases, Partitions, and Shelving

$901,167,463

4,471

$240,243,073

Total

$21,347,799,701

53,933 $3,836,094,124

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

1 Wages and salaries including benefits

Economic Benefits of the Forest Industry in Georgia: 2017

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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 forest industry.
The result of the multiplier effect, given by total impacts (which includes the economic activity in Table E-12), is also measured by output, employment, and wages and salaries and is shown in Table E-2. Total economic activity supported by the forest industry in Georgia (including the multiplier effect and forestry-related bioenergy firms) was $35.9 billion in 2017. These activities supported the employment of 147,380 people whose compensation was $8.7 billion (including benefits).

Table E-2: Total Benefits by Major Industry (2017)

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
$1,035,017,821 $37,042,340
$1,795,293,017 $279,160,637
$20,799,457,513 $1,809,415,600 $664,469,528 $1,274,961,027 $829,337,001 $1,239,127,199 $1,640,734,859 $1,078,909,441 $697,350,690 $664,192,960 $114,594,843 $839,657,610 $126,187,979 $492,368,348 $456,789,270 $49,203,168
$35,923,270,852

Employment
11,474 251
1,809 1,870 49,416 7,396 8,240 7,647 1,757 4,701 3,864 8,101 2,930 10,628 1,843 8,182 2,034 8,282 6,776
180
147,380

Wages & Salaries
$593,289,969 $6,539,729
$277,820,547 $92,208,649
$3,514,181,169 $627,332,748 $257,564,414 $466,809,455 $198,988,873 $330,006,642 $101,387,182 $595,363,144 $328,275,374 $324,869,213 $70,847,904 $462,829,579 $40,049,526 $172,565,127 $234,335,213 $13,880,592
$8,709,145,048

Another way to examine forestry in Georgia is to compare it with the state's other manufacturing sectors. Table E-3 lists 2017 employment and income totals for each major manufacturing sector sorted by employment. These data show that forestry ranked second in total employment and in wages and salaries. Food processing ranked first in both employment and in wages and salaries, and transportation equipment ranked third in employment and in wages and salaries.


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

Economic Benefits of the Forest Industry in Georgia: 2017

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Table E-3: Comparison to Georgia's Other Manufacturing Sectors (2017)

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

Employment
67,840 53,933 53,023 51,226 37,174 23,954 21,107 14,193 12,937
6,764 2,517

Wages & Salaries
$3,925,606,880 $3,836,094,124
$3,537,852,084 $2,278,240,536 $1,888,896,256 $1,385,249,892 $1,598,339,184 $1,058,479,448
$595,988,432 $674,603,280
$93,504,424

Of particular importance to Georgia's state government is how forestry affects its annual budget. This is investigated by estimating the revenues associated with the forest 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. Forestry generated an estimated $970.3 million in revenues for the state budget in 2017. When the costs of providing services to all employees are deducted from these revenues, net annual state revenues were $96.7 million for 2017.

Table E-4: Fiscal Impact Analysis (2017)3

Annual State Government Revenues

$970,342,608

Annual State Government Costs

$873,678,291

Net Annual Revenues

$96,664,317

Table E-5 compares the overall results obtained in each impact analysis conducted from 2007 through 2017. Compared to 2016, the industry's 2017 direct output grew by nearly 2.7 percent, employment grew by 3.9 percent, and wages and salaries increased by 2.5 percent. The industry's increased activity resulted in high net revenues for the state government.


The Georgia Fiscal Impact Model was originally developed in the 1990s by economists at Georgia Tech. Over the years, the econometric equations in the model have undergone revisions based on the State of Georgia's revenue and expenditure data. One such revision was recently completed. Every equation in the model was re-specified and statistically validated. One result of the new model equations is that expenditures in the model tend to be higher than previous model estimates. Many of the reduced form equations in the model are now driven by either the absolute level of the population, or the growth rate of the population. State expenditures are driven by growth in the state's population. As Georgia attracts jobs, it also attracts people and that drives state expenditures. As a result, comparisons between results from previous versions of the Georgia Fiscal Impact Model may show very different net fiscal impact results for similar sized projects.

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Table E-5: Comparison of Results 2007 to 2017
(Dollars in millions; Employment in persons)

Output* Employment Wages & Salaries*

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

Output Employment Wages & Salaries

2008 $18,270
57,812 $3,131
-1.0% -9.9% -7.7%

Forest Industry Direct Economic Impact

2009 $16,906
48,519 $2,770

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

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

2012 $16,072
47,123 $2,917

2013 $16,564
48,139 $2,938

Year to Year Percent Change

-7.5%

-14.3%

4.0%

6.6% 3.1%

-16.1%

-10.5%

6.8%

1.6% 2.2%

-11.5%

-5.3%

13.3%

-1.9%

0.7%

2014 $16,843
48,740 $3,030
1.7% 1.2% 3.1%

2015 $19,203
50,385 $3,553

2016 $20,794 51,900
$3,741

2017 $21,348
53,933 $3,836

14.0% 3.4%
17.3%

8.3% 3.0% 5.3%

2.7% 3.9% 2.5%

Output* Employment Wages & Salaries*

2007 $28,547 141,155
$6,696

Output Employment Wages & Salaries

2008 $28,723 128,388
$6,514
0.6% -9.0% -2.7%

2009 $27,200 118,423
$5,561

Total Impacts

2010

2011

2012

$23,643 $24,975 $27,469

108,112 118,459 120,260

$5,377 $6,491 $6,540

2013 $28,014 127,750
$6,898

Year to Year Percent Change

-5.3%

-13.1%

5.6% 10.0% 2.0%

-7.8%

-8.7%

9.6%

1.5% 6.2%

-14.6%

-3.3%

20.7%

0.8% 5.5%

2014 $28,674 129,329
$7,119
2.4% 1.2% 3.2%

2015 $32,154 133,256
$7,860

2016 $35,237 144,537
$8,529

2017 $35,923 147,380
$8,709

12.1% 3.0%
10.4%

9.6% 8.5% 8.5%

1.9% 2.0% 2.1%

Forest Industry Fiscal Impact

2007

2008

2009

2010

2011

2012 2013

2014

State Revenues

$566

$539

$472

$448

$487

$691 $700

$721

State Costs

$373

$333

$314

$282

$308

$358 $360

$370

Net Revenues*

$193

$206

$158

$166

$179

$333 $340

$351

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

*Output, Wages and Salaries and Revenues are not adjusted for inflation

2015 $753 $393 $360

2016 $778 $433 $345

2017 $970 $873
$97

Economic Benefits of the Forest Industry in Georgia: 2017

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Impact by Region
Quantifying the economic benefits of the forest industry at the local level is difficult given the limitations in employment and wages and salaries data (non-disclosed data). In previous reports, the approach was to group counties with no disclosed data and report aggregate employment, and compensation. In 2011, a new section was added to the report quantifying the impact of the forest 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 Forest Industry in Georgia: 2017

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

Table E-6: Forest Industry's Regional Impact (2017)

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

Output
$5,317,349,748 $1,575,621,910 $2,250,418,103 $865,788,702 $1,758,988,272 $1,262,421,608 $1,282,232,766 $1,543,743,497 $761,267,640 $1,743,884,177 $1,772,584,762 $1,213,498,517 $21,347,799,701

Employment
11,972 3,665 4,424 2,999 4,563 3,365 2,958 4,305 2,058 5,346 4,863 3,415 53,933

Wages & Salaries
$955,501,476 $283,131,472 $404,389,013 $155,577,952 $316,081,501 $226,850,925 $230,410,892 $277,403,079 $136,796,033 $313,367,370 $318,524,723 $218,059,688 $3,836,094,124

Economic Benefits of the Forest Industry in Georgia: 2017

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SECTION 1
Introduction
Georgia's forest 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 forest industry compare to other manufacturing sectors, and how the forest industry affects state government costs and revenues.
The first step in this process was to define the limits of what constitutes the "forest 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 forest industry.
After the industry was defined and activities quantified, the total economic activity supported by the forest 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 economic impact of urban and community forestry, a sector that was added beginning with the 2016 report. Section 5 shows the forest industry's output, employment, and compensation in the state's 12 regional commissions.
This report is the latest of a series of reports that began with an analysis of the 2002 impacts, 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 the 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.
The 2014 report includes revisions of 2012 and 2013 historical data, which were made as a result of a more objective and efficient methodology of retrieving data from the ES202 database provided by the Georgia Department of Labor.

Economic Benefits of the Forest Industry in Georgia: 2017

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SECTION 2
Definition of the Forest Industry in Georgia

The forest 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 forest industry definition, but retail sales of that paper would not. States without commercial forests still sell paper within their borders.
Therefore, the forest 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 forest industry. The NAICS codes and descriptions comprising the detailed definition appear in Table 2-1.

Table 2-1: )RUHVW,QGXVWU\'HILQLWLRQ&RPSRQHQWV1$,&6

Grouping
Forest Management and Logging

Industry Description Timber Tract Operations Forest Nursery and Gathering Forest Products Logging Support Activities for Forestry

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 Newsprint Mills Paperboard Mills Corrugated and Solid Fiber Box Manufacturing

NAICS CODE 113110 113210 113310 115310 321113 321999 221112 221117 321113 321114 321211 321212 321219 321213 321214 321991
321992
322110 322121 322122 322130 322211

Economic Benefits of the Forest Industry in Georgia: 2017

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Pulp and Paper Products

Folding Paperboard Box Manufacturing Other Paperboard Container Manufacturing Paper Bag and Coated and Treated Paper Manufacturing Stationery Product Manufacturing Sanitary Paper Product Manufacturing

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 Planing 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 16 firms in Georgia. The total employment for this sector in 2017 was 894.

The level of economic activity in each forest industry component is measured by output, employment, and wages and salaries. Measures for 2017 appear in Table 2-2, which aggregates the numerous categories from Table 2-1 to a more manageable number4. This table shows that total employment in all of the forest industry sectors was 53,933 and these jobs earned annual compensation (total wages and salaries including benefits) of more than $3.8 billion from estimated total revenue of $21.3 billion.

Within the industry, Georgia companies have representatives in each of the sectors and subsectors down to the NAICS six-digit level. Based on this aggregation scheme, the highest employment is seen in pulp and paper with 19,252 workers, followed by wooden


There were two changes to the breakdown of categories that were introduced in the 2012 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.

Economic Benefits of the Forest Industry in Georgia: 2017

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furniture, cabinets, custom arch. & millwork, windows and doors with 11,242 employees and forest management and logging with 5,738 employees.
Compensation, like employment, is dominated by pulp and paper at $1.9 billion (nearly half the total), followed distantly by wooden furniture, cabinets, custom archwork & millwork at $547.1 million and lumber and wood preservation at $347.6 million. The largest outputs are produced by pulp and paper ($13.2 billion), followed by wooden furniture, cabinets, custom archwork & millwork, windows and doors ($2.2 billion) and lumber and wood preservation ($1.6 billion).

Table 2-2: Georgia Forest Industry Economic Activity (2017)

Sector

Output Employment

Wages & Salaries

Forest Management and Logging

$521,382,649

5,738

$312,015,239

Bioenergy

$868,861,426

894

$147,444,281

Lumber and Wood Preservation

$1,629,200,712

5,662

$347,640,296

Veneer, Plywood, Reconstituted, and Engineered Wood

$1,499,317,624

4,131

$249,662,452

Prefabricated Wood Buildings and Manufactured Housing

$432,041,556

2,138

$92,057,134

Pulp and Paper Products

$13,213,520,387

19,252 $1,872,353,224

Woodworking and Paper Industries Machinery

$100,418,040

405

$27,576,366

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

$2,181,889,844

11,242

$547,102,059

Containers, Showcases, Partitions, and Shelving

$901,167,463

4,471

$240,243,073

Total

$21,347,799,701

53,933 $3,836,094,124

Table 2-3 provides a comparison of the forest industry activity from 2008 through 2017. Three measures are included in the comparison: output, employment, and compensation. Output (an estimate of the firms' revenues) continued to grow from 2016 to 2017, increasing by 2.7 percent. However, the increase in activity was not consistent among all sectors. The wooden furniture, cabinets, custom arch. & millwork, windows and doors sector showed the highest growth increasing by 27.6 percent. Bioenergy reported a decline of -11.4 percent.

Employment, like output, improved in 2017 with the state's forest industry reporting an increase of 2,033 jobs, or 3.9 percent from 2016. The majority of the jobs were in the pulp and paper products sector. Wooden furniture, cabinets, custom arch. & millwork, windows and doors and prefabricated wood buildings and manufactured housing sectors saw the highest percentage growth at 16.5 percent and 16.4 percent, respectively.

Wages and salaries increased in all but one sector. The pulp and paper products sector reported a decrease of 7.5 percent.

Economic Benefits of the Forest Industry in Georgia: 2017

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Table 2-3: Forest Industry Activity 2008 - 2017 Comparison

Output (Millions of Dollars)

Sector
Forest 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**

2008 $1,698
$1,732
$961

2009 $1,454
$1,359
$664

2010 $902
$1,176
$667

$427

$252

$10,856 $67

$11,018 $86

$1,153

$996

$721

$497

$654

$579

$18,270 $16,906

$189 $9,663
$113 $872 $390 $524 $14,495

2011 $805
$1,264
$590

2012* $662 -
$1,332
$583

2013* $580 $782
$1,272
$1,010

2014 $582 $688 $1,307
$1,071

$180

$174

$174

$206

$10,426 $117

$11,297 $10,752 $10,936

$90

$111

$118

$627 $494

$1,224 $1,249 $1,301

$578

$710

$624

$634

$15,082 $16,072 $16,564 $16,843

2015 $605 $439 $1,674 $1,362
$312 $12,461
$126
$1,494
$732 $19,205

2016 $499 $981 $1,690 $1,436
$380 $13,170
$104
$1,710
$824 $20,794

2017 $521 $869 $1,629 $1,499
$432 $13,214
$101
$2,182
$901 $21,348

Sector Forest 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**

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

Economic Benefits of the Forest Industry in Georgia: 2017

Employment

2010

2011

5,050

5,036

-

-

4,902

5,538

3,025

2,916

1,409 16,939
473 5,905 2,252 3,470 43,425

1,365 19,012
536 4,724 3,156 4,095 46,378

2012* 5,500
5,279
2,898

2013* 5,714
300 5,177
3,651

2014 5,720
673 5,242
3,848

1,285
19,659 479

1,252
18,754 506

1,376
18,538 522

7,985 8,434 8,676

4,017 47,102

4,135 47,941

4,145 48,740

2015 5,820
693 5,527 3,947
1,618 18,919
526
9,008

2016 5,920
916 5,520 4,108
1,836 18,983
422
9,646

2017 5,738
894 5,662 4,131
2,138 19,252
405
11,242

4,326 50,385

4,549 51,900
Page 13

4,471 53,933

Wages and Salaries (Millions of Dollars)

Sector

2008

2009

2010

Forest Management and Logging

$255

$238

$239

Bioenergy

-

-

-

Lumber and Wood Preservation

$282

$250

$238

Veneer, Plywood, Reconstituted, and Engineered Wood

$211

$158

$163

Prefabricated Wood Buildings and Manufactured Housing

$99

$66

$44

Pulp and Paper Products

$1,565 $1,494 $1,412

Woodworking and Paper Industries Machinery

$18

$17

$28

Wooden Furniture, Cabinets, Custom Arch. & Millwork

$330

$271

$249

Windows and Doors

$173

$126

$100

Containers, Showcases, Partitions, and Shelving Total**

$172 $3,131

$150 $2,770

$151 $2,624

*Revised data **Totals may not add up due to rounding ***Output and Wages and Salaries are not adjusted for inflation

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

2012* $305 $255 $150
$44 $1,620
$26
$331
$186 $2,917

2013* $251 $39 $259 $238
$51 $1,544
$36
$344
$176 $2,938

2014 $255
$45 $267 $253
$56 $1,575
$38
$362
$179 $3,030

2015 $345
$49 $342
$253
$67
$1,796 $35

2016 $294
$80 $318
$242
$71
$2,023 $28

$449

$466

$218 $3,553

$219 $3,741

2017 $312 $147 $348 $250
$92 $1,872
$28
$547
$240 $3,836

Economic Benefits of the Forest Industry in Georgia: 2017

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Figures 2-1 through 2-3 show output, employment, and compensation changes for each forest industry sector from 2008 through 2017.

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Economic Benefits of the Forest Industry in Georgia: 2017

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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 inputoutput (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 impact is calculated with IMPLAN I/O model. IMPLAN is a nationally recognized economic model that uses Georgia data to tailor its estimates to the state economy.5
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.
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 2017. It has the drawback, however, of not including single proprietorships (because they have no

One area of uncertainty that persists, however, is the level of benefits provided to workers in each of the forest 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.

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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 forest 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. Forest 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 higher-than-observed level of production from the input-supplying industry. 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, forest sectors that are 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 generated from recirculation of resources resulting from forest 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 2017 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 forestryrelated industry.
Findings
Table 3-1 provides estimates of direct impacts for each of the forest 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 forest 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.

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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 products, which includes all pulping and paper-making activities, continued to be the largest industry segment in 2017 representing 40 percent of the total industry in employment and 64 percent of the entire industry output. The entire forest industry (totals in Table 3-1) exported (to a non-Georgia destination) output valued at $19.6 billion in 2017. These activities supported 46,713 jobs with nearly $3.4 billion in wages and salaries.

Table 3-1: Direct Impacts by Forest Industry Sector (2017)

Sector
Forest 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

$192,453,117 $864,973,934 $1,176,005,457
$1,326,215,199

2,077 890
4,087
3,708

Wages and Salaries
$115,996,380 $146,784,580 $250,937,090
$223,170,296

$424,715,282
$12,515,992,406 $93,475,552
$2,128,511,984
$845,360,286 $19,567,703,217

2,102

$90,539,278

18,285 $1,775,543,866

377

$25,669,850

11,008 $535,386,426

4,179 $224,674,922 46,713 $3,388,702,688

In addition to direct employment, Georgia's forest 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 (I/O) model to the direct impacts (provided in Table 3-1.) Table 3-2 summarizes the impacts by aggregated industry codes (used in the I/O model), which are roughly equivalent to two-digit NAICS codes.

As shown, all industries in Georgia are impacted by the activity of the forest industry. Manufacturing continued to see the biggest benefits, with nearly $20.8 billion in output, 49,416 employees, and more than $3.5 billion in wages and salaries in 2017. A distant second (in employment) was agriculture, forestry, fishing and hunting (which includes logging and nurseries), with 11,474 employees and $593.3 million in compensation. The total economic activity supported by Georgia's forest industry totaled $35.9 billion. This activity supported the employment of 147,380 people who earned $8.7 billion in 2017.

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Table 3-2: Total Benefits by Major Industry (2017)

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
$1,035,017,821 $37,042,340
$1,795,293,017 $279,160,637
$20,799,457,513 $1,809,415,600 $664,469,528 $1,274,961,027 $829,337,001 $1,239,127,199 $1,640,734,859 $1,078,909,441 $697,350,690 $664,192,960 $114,594,843 $839,657,610 $126,187,979 $492,368,348 $456,789,270 $49,203,168
$35,923,270,852

Employment
11,474 251
1,809 1,870 49,416 7,396 8,240 7,647 1,757 4,701 3,864 8,101 2,930 10,628 1,843 8,182 2,034 8,282 6,776
180
147,380

Wages & Salaries
$593,289,969 $6,539,729
$277,820,547 $92,208,649
$3,514,181,169 $627,332,748 $257,564,414 $466,809,455 $198,988,873 $330,006,642 $101,387,182 $595,363,144 $328,275,374 $324,869,213 $70,847,904 $462,829,579 $40,049,526 $172,565,127 $234,335,213 $13,880,592
$8,709,145,048

Table 3-3 extracts information from several previous tables to compare the overall results obtained in each impact analysis conducted from 2007 through 2017.

During the 2006-2007 period, output from direct and total impacts grew by 4 and 3 percent respectively. Compensation and output for both impacts declined during this time period. In the 2008-2009 period, forest industry output declined by 8 percent, and employment and wages and salaries from total impacts fell by 16 and 12 percent, respectively. The decline was not a surprise given that the U.S economy was in recession. 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 forest 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

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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 forest 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 7 percent, employment increased by 2 percent. However, compensation showed a slight decline. During the 2012-2013 period and 2013-2014 period, the direct and total economic impacts of the forest industry showed positive growth.
In 2014-2015 period, the forest industry showed solid growth. Direct and total output impacts showed the highest growth at 14 and 12 percent, respectively. Compensation grew by 17 percent for direct impact and 10 percent for total impacts. Employment also showed positive growth, albeit at lower levels 3 percent for both direct and total impacts.
All measures showed growth from 2015 to 2016. The highest growth rates occurred in industry output, which grew 8 percent in direct impacts and 10 percent for the total forest industry activity. During this period, compensation for the direct forest industry activity increased at 5 percent for direct impacts and 9 percent for total impacts. Employment from direct impacts increased by 3 percent, while employment from total impacts increased by 9 percent.
The forest industry continued to grow in 2017. Direct employment saw the highest growth, an increase of 4 percent from 2016. Employment from total impacts increased by 2 percent. Compensation for the direct forest industry activity increased by 3 percent and showed an increase of 2 percent as measured by total activity, when compared to 2016. Industry output from direct impacts increased by 3 percent, and output from total impacts increased by 2 percent.

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The annual percent-change information in Table 3-3 is also presented graphically in figures 3-1 and 3-2. Figure 3-1 presents a graph of output, employment and compensation of direct activity, while Figure 3-2 presents these metrics for the total economic impact. It should be noted that these data are in nominal dollars and have not been adjusted for inflation. As the graphs show, all direct and total impact metrics realized growth compared to 2017 rates, with employment showing the highest increase in direct impact and wages and salaries increasing the most in total impacts.

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

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

2008 $18,270
57,812 $3,131
-1.0% -9.9% -7.7%

Table 3-3: Comparison of Results 2007 to 2017
Dollars in millions; Employment in persons)

Forest Industry Direct Economic Impact

2009 $16,906
48,519 $2,770

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

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

2012 $16,072
47,123 $2,917

2013 $16,564
48,139 $2,938

Year to Year Percent Change

-7.5%

-14.3%

4.0%

6.6% 3.1%

-16.1%

-10.5%

6.8%

1.6% 2.2%

-11.5%

-5.3%

13.3% -1.9% 0.7%

2014 $16,843
48,740 $3,030
1.7% 1.2% 3.1%

2015 $19,203
50,385 $3,553

2016 $20,794 51,900
$3,741

2017 $21,348
53,933 $3,836

14.0% 3.4%
17.3%

8.3% 3.0% 5.3%

2.7% 3.9% 2.5%

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

2007 $28,547 141,155
$6,696

2008 $28,723 128,388
$6,514
0.6% -9.0% -2.7%

2009 $27,200 118,423
$5,561

Total Impacts

2010

2011

$23,643 $24,975

108,112 118,459

$5,377 $6,491

2012 $27,469 120,260
$6,540

2013 $28,014 127,750
$6,898

Year to Year Percent Change

-5.3%

-13.1%

5.6% 10.0% 2.0%

-7.8%

-8.7%

9.6%

1.5% 6.2%

-14.6%

-3.3%

20.7%

0.8% 5.5%

2014 $28,674 129,329
$7,119
2.4% 1.2% 3.2%

2015 $32,154 133,256
$7,860

2016 $35,237 144,537
$8,529

2017 $35,923 147,380
$8,709

12.1% 3.0%
10.4%

9.6% 8.5% 8.5%

1.9% 2.0% 2.1%

Forest Industry Fiscal Impact

2007

2008

2009

2010

2011 2012 2013

2014

State Revenues

$566

$539

$472

$448

$487

$691 $700

$721

State Costs

$373

$333

$314

$282

$308

$358 $360

$370

Net Revenues*

$193

$206

$158

$166

$179

$333 $340

$351

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

2015 $753 $393 $360

2016 $778 $433 $345

2017 $970 $873
$97

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Comparison of the Forest Industry with Other Manufacturing Sectors
It is difficult to appreciate the significance of the impacts generated by the forest industry without some basis of comparison. This comparison is provided in Table 3-4, which shows that the forest industry is the second largest industry sector in Georgia (behind food processing) in employment and in wages and salaries.

Table 3-4: Comparison to Georgia's Other Manufacturing Sectors (2017)

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

Employment Wages & Salaries

67,840

$3,925,606,880

53,933 53,023 51,226

$3,836,094,124 $3,537,852,084 $2,278,240,536

37,174

$1,888,896,256

23,954

$1,385,249,892

21,107

$1,598,339,184

14,193

$1,058,479,448

12,937

$595,988,432

6,764 2,517

$674,603,280 $93,504,424

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SECTION 4
Economic Impact of Urban and Community Forestry

Urban and community forestry6 provides significant benefits to communities around the state. This study quantifies the sector's economic impact in the state of Georgia.
For the purposes of this study, urban and community forestry includes these sectors:

NAICS Code
111421 541320 561730 924120 925120

Industry Description
Nursery and Tree Production Landscape Architectural Services Landscaping Services Administration of Conservation programs Administration of Urban Planning and Community and Rural Development

Using data provided by the Georgia Department of Labor,7 it was determined that urban and community forestry employed 33,055 people in year 2017 who earned $1.1 billion in wages and salaries and generated $2.1 billion in economic activity. The spending by these companies and their employees generated additional activity in other sectors of the state's economy. Overall, urban and community forestry companies in 2017 created and supported 46,209 jobs with wages and salaries of $1.7 billion and generated $4 billion of economic activity.

Table 4-1: Economic Impact of Urban and Community Forestry: 2017

Direct Indirect and Induced

Total

Employment

33,055

13,154

46,209

Wages & Salaries $1,105,545,970

$611,263,535 $1,716,809,505

Output

$2,122,003,955

$1,879,034,264 $4,001,038,219

The impact values of urban and community forestry are separate values from the impact of forest industry and are not included in the charts and tables shown in other sections of this report.


6 Urban and Community Forestry can be defined as the planning, establishment, protection, maintenance and
management of trees and associated plants, individually through arboricultural practices, in small groups, or
under forest conditions (open spaces, greenbelts, roadside screens, parks, woodlands, curb areas, and residential developments) within cities, their suburbs, and towns for their economic, environmental,
physiological, sociological and psychological public health benefits (developed from the Cooperative Forestry
Assistance Act of 1978, as amended through 2008). 7 Source: Georgia Department of Labor, ES202 data

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Section 5
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.
Forest 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 forest industry. Instead, this report shows the forest industry's impact on Georgia's 12 regional commissions. Table 5-1 shows a list of the regional commissions and their respective counties.

Table 5-1: Regional Commissions

Regions
Northwest Georgia

Counties
Bartow, Catoosa, Chattooga, Dade, Fannin, Floyd, Gilmer, Gordon, Haralson, Murray, Paulding, Pickens, Polk, Walker, Whitfield

Georgia Mountains

Banks, Dawson, Forsyth, Franklin, Habersham, Hall, Hart, Lumpkin, Rabun, Stephens, Towns, Union, White

ATL Regional Commission

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

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Three Rivers Northeast Georgia Middle Georgia

Butts, Carroll, Coweta, Heard, Lamar, Meriwether, Pike, Spalding, Troup, Upson
Barrow, Clarke, Elbert, Greene, Jackson, Jasper, Madison, Morgan, Newton, Oconee, Oglethorpe, Walton
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 forest industries. These figures were calculated using 6-digit NAICS level data and should be considered as approximate estimates. Table 5-2 shows that as in the previous years, the Atlanta Regional Commission, Southern Georgia and the Heart of Georgia Altamaha are the top three regions with the largest employment in the forest 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 5-2: Forest Industry's Regional Impact (2017)

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

Output
$5,317,349,748 $1,575,621,910 $2,250,418,103
$865,788,702 $1,758,988,272 $1,262,421,608 $1,282,232,766 $1,543,743,497
$761,267,640 $1,743,884,177 $1,772,584,762 $1,213,498,517 $21,347,799,701

Employment
11,972 3,665 4,424 2,999 4,563 3,365 2,958 4,305 2,058 5,346 4,863 3,415
53,933

Wages & Salaries
$955,501,476 $283,131,472 $404,389,013 $155,577,952 $316,081,501 $226,850,925 $230,410,892 $277,403,079 $136,796,033 $313,367,370 $318,524,723 $218,059,688 $3,836,094,124

Figure 5-1: Map of Regional Commissions

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References
Bureau of Economic Analysis Input-Output Sectors as contained in "IMPLAN Pro: Data Guide," IMPLAN Group, Inc.,2018.
Georgia Department of Labor, ES202 Wage and Employment Data: 2017.
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"

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Appendix
Figure A-1: Regional Forest Industry Employment: 2017

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Figure A-2: Regional Forest Industry Wages and Salaries: 2017

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Figure A-3: Regional Forest Industry Output: 2017

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