BBER Study Analyzes Impacts of Log Supply and Worker Productivity on Montana’s Forest Industry Employment and Labor Income

October 16, 2018

MISSOULA – A new study authored by the Bureau of Business and Economic Research at the University of Montana examines the impacts of changing timber harvest levels, worker productivity and wood product markets on employment and income in Montana’s forest industry.

The study authors are Todd Morgan, director of the Forest Industry Research program at BBER; Paul Polzin, emeritus director of BBER; and retired U.S. Forest Service economist Michael Niccolucci.

Employment and income of workers in Montana’s forest industry have declined since the 1990s, with a very pronounced drop during the Great Recession and little recovery since. Likewise, timber harvest volumes, lumber production and sales from the wood products industry in Montana have gone down. Meanwhile labor productivity – output per worker – has generally increased among Montana’s larger sawmills and panel producers.

Using data collected by BBER since the early 1980s, as well as publicly available data from the U.S. Bureau of Economic Analysis and Random Lengths, BBER researchers found that the main driver of forest industry employment and income in Montana since the 1980s has been timber harvest levels or log supply. Labor productivity and wood product market conditions have been less influential.

“Using linear regression techniques, we found that timber harvest and lumber production per employee were both statistically significant predictors of forest industry employment,” Morgan said, “but timber harvest was over four times more important than worker productivity. Only timber harvest was a significant predictor of labor income in the models we tested.”

The authors found that even though labor productivity in the state’s sawmill industry had increased since the 1980s, it had several prolonged periods of flat or negative growth. The regression models indicate that total employment and labor income actually increase with increasing productivity. In other words, given the other factors of log supply and market conditions, rising worker productivity contributes to rising forest industry employment, not lower employment in Montana.

The study concludes that with additional timber, mills in Montana could not only increase wood product sales, but also increase employment, add workers and increase hours per employee, which would increase labor income.

“With active forest management and a viable wood products industry, Montana has the ability to manage its forests, help reduce wildfire risk to communities, improve habitat for a variety of species, and contribute to the state and local economies,” Morgan said. “Increasing timber harvest levels can lead to more of these social, economic and ecological benefits.”

Established in 1948, BBER is the main research unit of UM’s College of Business. Its researchers engage in a wide range of applied research projects that address different aspects of the state economy, including survey research, economic analysis, health care research, forecasting, wood products research and energy research.

The BBER Forest Industry Research Program has provided analysis of the forest products industry throughout the West for more than 35 years. For more information visit http://www.bber.umt.edu/fir/.

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Contact: Todd Morgan, director of Forest Industry Research, UM Bureau of Business and Economic Research, 406-243-6716, todd.morgan@business.umt.edu.