socio-economic impacts of forest industry change in tasmania

Socio-economic impacts of forest industry change in

Tasmania

J. Schirmer, C. Dunn, E. Loxton, M. Dare

Fenner School of Environment and Society, ANU

Cooperative Research Centre for Forestry

2

Overview

- The study

- Current status of the industry

- Impacts of downturn

- Vulnerability to change

- How to support those impacted? - Businesses- Workers- Communities

Background: Tas forest industry

• Growth (2006-08, 7% ↑jobs) followed by downturn

GFC, $AUS, ENGO campaigns, MIS collapse, closure of old & uncompetitive processing facilities

• 1/3 jobs lost 2008-2010 (2310 jobs)

Spread across both native forest and plantation sector

• Negotiations over future of industry - Statement of Principles

Heads of Agreement announced 24th July

Uncertainty about the future remains

Socioeconomic impacts of forest industry change

• Study undertaken March-May 2011

• Funded by:– Cooperative Research Centre for Forestry– Department of Agriculture, Fisheries and

Forestry

• Follows on from ongoing work since 2006 on Tasmanian forest industry

Study goals

• Analyse impacts of downturn on forest industry businesses, workers

• Identify exposure of communities to change (limited)

• Analyse vulnerability to further change

• Identify how best to assist people impacted by downturn – or future change

• We didn’t:

– Fully assess impacts of downturn on communities

– Assess impacts of specific scenarios of future change

– Study provides a baseline for doing this work

Methods

• Surveys of:– Processors (82.3% response rate)– Contractors, nurseries (72 responded, 35.8%)– Workers (249 surveys returned, 24.9%)– Ex-workers (124 surveys returned, 14.6%)

• Interviews– 53 business managers, workers, ex-workers

• ABS data

• Previous data from Forest Industry Survey

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Current status of the industry

• Also 1750 jobs in woodcraft sector (Farley et al. 2009)7

64096963

46493460

59166463

43433260

510464

410372

0

100

200

300

400

500

600

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2008 2010 2011

Persons Full-time equivalents Number of businesses


3459

8311174 1044

3172

1188 1397 1207

2033

686957 972

1678

478810

4940

500

1000

1500

2000

2500

3000

3500

4000

Native forest Hardwood plantation Softwood plantation Unknown

2006 2008 2010 2011

Jobs by forest/plantation type

How many of what type of jobs are there?

2011 – people

employed

Change, 2008-20111

Growers 474 -32.0Processors 1622 -48.3Silvicultural contractors 158 -79.3

Nurseries & seed suppliers 22 -84.5

Harvest & haulage contractors 823 -47.1

Roading & earthmoving contractors

93 -53.0

Other 268 -43.2

Woodcraft? (1750 in

2009)?


Impacts of job losses on Tasmanian economy?

• 3500 jobs lost Aug 08-May 11

– Approx. 1.5% of employed labour force in Tasmania

• Remaining 3460 jobs = 1.5% labour force

• Flow-on impacts add considerably more employment dependent on industry


Processors - overview

• In March 2011, 64 sites (50 businesses)– 4 woodchip mills, 44 sawmills (some doing

downstream processing), 9 downstream, 6 other (post/pole, veneer, pulp/paper)

• 47 depend solely on native forests (33 small, 13 medium, 1 large)

• 4 softwood, 10 mixed sources


• 2011 turnover compared to 2008:– 33% lower

– 38.9% same

– 27.8% higher

• Native forest sawmills, diversified businesses most likely to report ‘same’ or ‘higher’

• Key pressures since 2008: – Increased operating costs (79%)

– Difficulty maintaining competitiveness (57%)

– Changes in quality of raw material (51%)

– Reduced demand for product (45%)


Processors - impacts of downturn

Processors – adaptation strategies

• Reducing costs & improving efficiency

• Seeking alternative markets, diversifying customer base

• Improving quality of product to ensure customer loyalty

• Expanding downstream processing

• Downsizing business operations

• Running down financial reserves

• Putting up prices (viable only for small price increases)

• Several reported no strategy beyond ‘surviving’


Processors - vulnerabilities

• Business management:– Stress, capital needs, attracting workers, management

skills

• Markets and finance:– Rising operating costs, low profitability (large processors),

debt (mostly large processors)– Dependence on woodchip sales for profitability

• Lack of certainty about the future– Only 33% confident will operate into future– Viable processors considering closing, delaying investment


Processors - tipping points

• Loss of access to resources- Loss of 20% supply would lead to closure for almost 50%- Little ability to diversify outside forest industry or downsize

• Loss of markets• Most confident can maintain market for primary products• Woodchip market critical - difference between profit and loss

- Native forest processors- 29% could utilise more private native forest- 19% might be able to use eucalypt plantation – in future

- Current resource not mature enough- Can’t make their products from plantation timber- Current infrastructure cannot process plantations


Processors - what is needed to adapt?

• Certainty of supply (90%)

• Assistance to develop markets (67%)

• Access to finance (57%)

• Staff training (43%)

• Financial/business advice (40%) – but many have limited view of what this might entail

• Time to adapt


Contractors – impacts of downturn

We included harvest and haulage, silvicultural, roading contractors; and nurseries

Those still in the industry in March 2011 have experienced the following since 2008:

• Reduced revenue associated with demand for services (78% moderate-large impact)

• Increased costs of operation (64%)

• MIS collapse (45%)

• Difficulty upgrading/maintaining equipment (44%)


2011 turnover compared to 5 year average – for those remaining in industry


60

53

7367

63

0

10

20

30

40

50

60

70

80

Harvest and haulage

contractors (n=29)

Nurseries (n=4) Roading contractors (n=6)

Silvicultural contractors

(n=18)

Total (n=61)

2011

turn

over

as

prop

ortio

n of

ave

rage

tu

rnov

er fo

r pas

t five

yea

rs (%

)

Contractors - dependence on forest industry


93

81 79

60

8791

65 65

47

71

89

64

48

24

50

0

10

20

30

40

50

60

70

80

90

100

Harvest and haulage

contractors (n=29)

Nurseries (n=4)

Other businesses

(n=4)

Roading contractors

(n=6)

Silvicultural contractors

(n=20)

August 2008

September 2010

February 2011

Contractors – adaptation strategies

• Downsizing business

• Seeking new business within or outside forest industry (eg civil construction)

• Reducing business costs – unpaid work, delay maintenance, replacement of equipment

• Run down financial reserves (business & personal)

• Applying for contractor exit package


Contractors - vulnerabilities

• Business management:– Stress, capital equipment, attracting workers, management

skills

• Certainty about the future– Lack of confidence in future (90%) – particularly harvest &

haulage, native forest contractors– 21% considering closing business (many others have left)– 33% confident they will operate into future

• Lower social capital than processors– Approx. 20-30% feel can access support from local

community, others in forest industry


Contractors - vulnerabilities• Markets and finance:

– Lack of demand for services – Poor current financial position of business

• 43% harvest and haulage contractors making a loss• 14% of silvicultural contractors making a loss

– Rising operating costs– High fixed costs

• particularly for harvest & haulage, roading contractors

– High debt • Harvest and haulage contractors have 100% debt:revenue ratio• Silvicultural contractors 52% DRR

– Overall, native forest & harvest/haulage contractors most vulnerable


Contractors – tipping points

• Loss of 20% of business would likely lead to business closure for almost 40%

• 2/3 likely to diversify activities within forest industry

• 2/3 likely to diversify outside forest industry

– Harvest & haulage least able to diversify outside industry

– Roading most able to diversify outside industry

– Industries: agriculture, mining, construction, transport, earthmoving, NRM

• Downsizing limited for many


What support would reduce impacts?

• Security of access to forest resources

• Assistance to develop new business opportunities

– Market development assistance

– Access to finance (loan guarantees; grants)

– Business planning advice (e.g. RFCS)

• Exit assistance

– For those unable to adapt

– Needs to be adequate to enable successful exit

– Must be accompanied by assistance for business managers, workers, communities affected by exit


Workers – changes resulting from downturn

• More than 50% report:

– Reduced job security

– Increased stress, depression or anxiety

• 25% reported ↓ work hours and/or income

– Harvest and haulage, silvicultural workers

• 2011 income compared to 2008:

– 20% lower income

– 68% same income

– 12% higher income

• 16% had increase in work hours

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Workers - impacts of changes

• Those who reported downturn had led to greater changes (income, stress, certainty) also had significantly lower levels of satisfaction with their:

– Life overall

– Own health

– Standard of living

– Financial situation

– Sense of belonging to local community

– Work (income, daily interactions, stress, feeling of accomplishment)


Workers - vulnerabilities

Confidence in own capacity to adapt

– 46.3% confident can find new work outside industry

– 23.5% confident can find new work within industry

– Harvest & haulage, silvicultural contractors least confident

Attachment to forest industry• Those who want to stay in forest industry, and have

worked longer in industry, more vulnerable (HH, SILV)

• 87% have spent most/all working life in industry

Certainty about the future• Skilled workers leaving due to uncertainty


Workers – vulnerabilities

Educational attainment

• Forest industry workers less educated than average member of Tasmanian labour force

• Highest level of educational attainment:– 28.2% - 4th year high school– 26.1% - high school certificate– 23.9% - TAFE diploma– 21.8% - university/postgraduate degree

• Native forest workers lower attainment than those in plantation sector

• Harvest/haulage & processing workers lower educational attainment


Financial capital• Lack of financial buffer

– 41.3% report income just enough to cover living costs with nothing to spare

– 45.7% report income enough for living costs plus some extras such as holidays

– Lowest income earned by those working in native forest dependent jobs, processing jobs

• High dependence on industry for income

– 53% obtain all household income from industry; only 17% obtain <60% income


Workers - vulnerabilities

How has downturn impacted those who left industry?

• Included people who have left industry voluntarily and involuntarily– Have they found new work?– How did losing a job impact on them?– What helped them to adapt/find new work?



0

10

20

30

40

50

60

70

80

Found new employment

Unemployed, looking for work

Left labour force (eg retired, ill,

other)

Prop

ortio

n (%

)

Ex-workers -processing sector (n=429)

Ex-workers -contracting sector (n=179)

Total (n=608)

Ex-workers – employment outcomes


15 16

31

10

15 14

23

18

29

7

11 12

0

5

10

15

20

25

30

35

Currently unemployed

Found work in local area in the forest industry

Found work in local area

outside the forest industry

Found job outside local area in forest

industry

Found job outside local area outside

forest industry

Other eg retired, ill

Prop

ortio

n (%)

Ex-workers - processing sector (n=124) Ex-workers - contracting sector (n=179)

Ex-workers – employment outcomes

• 85.1% - new job was outside forest industry• Most common industries:

– Construction– Agriculture– Transport– Manufacturing– Mining– Tradesperson

• On average, took 4.3 months to find new work


Ex-workers – finding a new job

• Factors assisting finding work:– Having local employment opportunities– Social networks– Access to training (machinery operator tickets, new skills)

• Factors hindering finding new work:– Lack of support (eg employment referral, CV assistance)– lack of available work (particularly locally)– Lack of confidence and self-perceived ability to find work– costs of looking for and travelling to new employment.


Ex-workers – finding a new job

• ¾ offered some type of assistance (usually 1-2 types, from ex-employer/union or government):– Redundancy (62%)– CV/resume preparation (35%)– Retraining (26%)– Financial planning advice (25%)– Unemployment benefits (19%)– Career referral service (16%)– Psychological counselling (12%)– Relocation assistance (5%)

Bold indicates workers more likely to rate as useful form of assistance

Often difficult to identify available assistanceInsert/remove name of area (view > header and footer) 35

Ex-workers – assistance offered

Ex-workers – Comparing new jobs to old

• Income of new job compared to old job:– 66.2% lower– 16.9% same– 16.9% higher

• Overall working conditions:– 29.3% better– 33.3% about the same– 37.3% worse

• New jobs– Often lower income, higher hours, lower job security

and higher stress


Ex-workers - Impacts of losing job

• Worsening of:– personal stress (46.8%)– certainty about the future (59.1%)– financial stress (63.9%)

• Improvements in:– Time spent with family and friends (39.3%)– Health (30.6% reported improved compared

to 26.1% reporting worsened health)– 34.2% reported decreased personal stress


Ex-workers – factors associated with more negative impact

• Involuntary redundancy • Type of work

– Harvest/haulage & silvicultural contractors more impacted – Those who manage forest/plantation least impacted

• Human capital: – Those with less confidence in their own skills and resources

more likely to report negative impacts

• Educational attainment:• 4th year high school – 58% found new work• High school – 68% found new work• University degree – 73% found new work



• For both current workers and ex-workers:• Cost of living support for those in high financial stress• Retraining opportunities• Psychological support – many means through which

this can be provided

• For those who lose employment:– Employment referral services targeted to skills; liaison

with construction, mining, agriculture, manufacturing industries

– Assistance applying for new work (preparing CV, financial costs of travel, phone etc)

– Redundancy assistance


Exposure of communities to change

• Very limited analysis identified:– where jobs lost– which communities most dependent on

industry– likelihood of migration out of forest industry

dependent communities


Change in employment 1996-2006



Change in employment 2006-2011


Change in % labour force working in forestry – 2008-2011

Exposure to change

• Most exposed to change (>4% labour force + >50% forestry jobs lost since 2008):– Dorset– Central Highlands– Glamorgan-Spring Bay– Derwent Valley– Southern Midlands– Circular Head– Waratah-Wynyard– Burnie– Kentish– Huon Valley– Meander Valley


Outmigration most likely in:• Dorset• Hobart• Central Coast• Glenorchy• Huon Valley

Outmigration least likely in• Circular Head• Glamorgan-Spring Bay

(based on level of attachment to community, confidence that would be living there in five years time or able to find a job there)


Likelihood of migration with job loss

• Direct assistance for communities is needed– Business/worker assistance won’t necessarily reach

local communities

• Short-term:– Community activities to build social capital, support

those impacted – Ensure local support services adequately resourced

to assist those affected

• Medium and long term:– Regional development assistance grants, strategies



Conclusions

• Impacts of downturn severe– Every number is a person– 3500 individuals, their families, and those affected by

flow-on impacts

• Uncertainty about future of the industry is exacerbating impacts of downturn– Lack of investment, inability to make decisions– Stress, anxiety– Certainty is needed as soon as possible –

requires implementation of agreement– Any decision must provide adequate time for

businesses and workers to adjust


Conclusions (cont.)

• What assistance is needed?– Short term:

• Help with cost of living

• Community and industry support

– Medium to long term• Build on existing initiatives being taken by businesses, workers,

communities

• Funding to help people build new economic opportunities – within or outside forest industry

• Go further than exit funding – support people to adapt and find new futures

• Use one stop shops– Reduce confusion and stress of applying for assistance

• Good communication essential


Conclusions (cont.)

• Use existing programs– Rural Alive and Well, RFCS etc

• Use forest industry organisations to reach people– Needs support for those organisations

• But need to target/reorient to forest industry

• Unfinished work– This assessment is limited – assessment of flow-on

impacts to communities urgently needed– Further work should be done as assistance is

implemented


socio-economic impacts of forest industry change in tasmania

Documents

area view header

forest industry businesses

future of industry

type of jobs

highernative forest

tas forest industrygrowth

future changewe didnt

downstream processing