Oregon’s declining paper industry

By Erik A Knoder
Oregon Employment Department ^[5]

Employment in paper manufacturing in Oregon has declined for decades, but it remains an important industry in the state. Paper manufacturing provides about 4,700 jobs in Oregon, down from around 10,000 in 1976 (Graph 1 ^[6]). In 1976 paper manufacturing accounted for a little more than 5 percent of Oregon’s manufacturing jobs; by 2011 its share was down to less than 3 percent of manufacturing employment. In this respect it is similar to the wood products industry, which fell from about 40 percent of Oregon’s manufacturing jobs to about 12 percent over the period.

Graph 1

The Industry

The paper industry in Oregon has two major divisions: the pulp and paper manufacturing side with 11 facilities, and the converted paper products (such as box making) side that has 44 facilities. There are a multitude of types of paper manufactured: containerboard, tissue, newsprint, paperboard, copying paper, coated and uncoated, and a nearly-endless list of specialty papers.

The drop in employment over the years is only partly due to decreasing output (as measured by its contribution to Oregon’s gross domestic product ^[7]). Oregon’s production peaked in 1988 when it contributed about $1.3 billion to Oregon’s gross domestic product (all amounts are 2005 dollars). The industry’s contribution has always fluctuated (Graph 2 ^[8]), but as recently as 2005 it was still a billion-dollar-per-year industry. The recent recession ^[9]caused value to decrease to $670 million, but it bounced back to $809 million in 2010.

Paper is not declining globally. The Food and Agriculture Organization of the United Nations (FAO) forecasts world production of paper and paperboard to increase about 3.0 percent per year through 2020. However, much of the growth will be in Asia and Eastern Europe. Imports and trade are important issues for the industry and its unions. The U.S. had net exports of $2.3 billion of paper products from January through July this year.

Nearly 100 different occupations are employed in Oregon’s paper industry. The most common occupation in the industry is, not surprisingly, paper goods machine setters, operators, and tenders – the people who run paper machines. This one occupation made up about 18 percent of the industry’s workforce ^[10]in 2010 and paid a median wage of $22.82 per hour.

Table 1 ^[11] lists those occupations that make up at least 2 percent of the occupational employment in the industry. Many of them, such as mechanics and fork lift drivers, are common to other manufacturing operations aside from paper making.

Many jobs in paper manufacturing pay well. The average wage in the industry in 2011 was about $32.00 per hour, or $66,564 per year, for full time work. The average wage for all jobs in Oregon in 2011 was $43,092, or about $20.70 per hour.

The wages listed in Table 1 are for the occupation in general – not for just the paper industry. (Those are often confidential.) Six of the 15 jobs listed have a median wage that is higher than the average wage for Oregon. Manufacturing industries tend to pay higher wages than many other industries, and traded-sector (export) industries also tend to pay higher wages. Paper manufacturing is in both these categories.

Wages are also influenced by the education and training that an occupation requires. Occupations such as manager, mechanic, and electrician require more education and training, and pay more. The notable exception to this rule is that the paper machine operators occupation has a fairly high wage, but requires only work experience.

Another reason for high wages is that some paper manufacturers have a unionized workforce, and this partly explains why paper machine operators have high wages. There appears to be no readily available, public list of firms that have a unionized workforce, but officials from two unions, the Association of Western Pulp and Paper Workers and the United Steelworkers, identified eight facilities that had members of their unions. These facilities tended to represent the pulp and paper manufacturing side of the industry and comprised about 55 percent of the jobs. As far as they knew, most of the paper converting firms had nonunionized workers. The average wage in 2011 for the firms that are known to have union workers was about $77,400. The average wage for the firms that were nonunion or of unknown status was about $53,200. This was a difference of about $24,200 per year.

There are differences between these two groups of firms aside from the union status of their workers. As noted, they tend to be in two different divisions of the industry: manufacturing and converting. They also differ in size; the unionized firms had an average of 324 employees in 2011 and the nonunion/unknown firms averaged 45 employees.

From an employment perspective, paper manufacturing is a declining industry. The long-term outlook is for the industry to shed another 900 jobs from 2010 to 2020. It seems on course to cut at least this many: employment dropped by 159 from 2010 to 2011. By the second quarter of 2012 about 30 more jobs were lost. By 2020, paper industry employment ^[12]is forecast to be down to 4,100 in Oregon.

Even though total employment ^[13] in the industry is dropping, that is not the entire story. There are still openings to be filled due to retirement. In all of manufacturing, about 60 percent of total openings are for replacements, primarily due to retirement and death, and only 40 percent are due to growth of the specific industry. The paper industry is not growing, but it is still replacing retiring workers and that provides job openings. As shown in Table 2 ^[14], paper machine operators is a good example of this: the occupation is expected to shrink by 147 by 2020, but will have enough people retire to provide a net of 98 openings for new people to enter the occupation. A similar situation exists for printing press operators. The occupation is expected to shrink by 50 workers by 2020, but 330 openings will be created due to replacement needs. Not all these openings will be in the paper industry, but the openings will be there for people desiring to enter the occupation.

Other paper industry occupations are expected to show some openings due to growth as well as for replacement reasons. Laborers and material movers, and customer service representatives are expected to provide large numbers of openings. Of course, most of these will not be in the paper industry, but some will be.

The future of Oregon’s paper industry will be influenced by global conditions. The FAO notes that “Paper and paperboard is one of the most globalized commodity groups, with a high share of production exported and a high share of consumption imported.” The U.S. is currently negotiating the Trans-Pacific Partnership, a free-trade agreement such as NAFTA, with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Paper workers’ unions expect the agreement to cost jobs in the domestic industry.

Another important factor in the industry’s future is the use of recycled paper as an input. The FAO stated that Europe is the largest exporter of paper products and that it has benefited from its high growth in wastepaper recovery. Oregon had been increasing its paper recycling, although the total amount dropped substantially when the recession hit in 2007. The Oregon Department of Environmental Quality estimates that Oregon recovered about 200,000 tons of cardboard in 1992 and increased recovery to more than 400,000 tons by 2007. The percent being disposed in landfills fell from 6.5 percent in the years 1993 to 1995 to 3.3 percent for 2009 to 2010.

Oregon’s forests make it a natural place for paper manufacturing. The industry also benefits from abundant water, a well-trained workforce and support for paper recycling. Foreign trade and improvements in technology may limit employment growth, but the industry will have a place in Oregon for years to come.