The Economic Impact of Sawmill Closures

When a sawmill closes, the effects reverberate throughout the local economy. And the impact cuts wider and deeper than you might suspect.

That's one of the key findings of new research published by Michigan State University forestry researchers Basanta Lamsal, Jagdish Poudel and Raju Pokharel. In their paper titled <deep breath> "Regional economic and employment impacts of industrial decline in the forest sector: Evidence from sawmill closures in Michigan," the academics tie specific numbers to the decadeslong decline of Michigan's forest sector. 

Highlights of the findings include:

• 2019–2023: Michigan’s sawmill sector lost 273 jobs, triggering nearly 820 wider job cuts and $211.55 million in output decline.
• Labor-intensive logging suffered disproportionate job and income losses due to their strong ties to sawmills.
• Evidence supports policies for mill upgrades, supplier linkages, and workforce support to mitigate disruptions.

The research concludes that the effects of mill closures are widespread, affecting economic activity through changes in employment, output, and supply chain dynamics. Specifically, the effects were found to be "most pronounced in labor-intensive sectors such as logging and transportation, as well as in downstream sectors like wholesale trade and real estate." The findings emphasize the vital role of sawmills in regional supply chains and wider labor markets, "with two-thirds of job losses occurring outside the mills themselves." 

According to the study, sawmills comprise more than 80% of Michigan’s wood-processing facilities, but the state's wood-processing infrastructure and investment has been in decline. The paper points out that Michigan's sawmills decreased from 257 to 237 during the 2019-2023 research period. That includes a drop in large mills from 48 to 35 and smaller sawmills going from 132 to 121. 

That drop is no anomaly, as the researchers say Michigan's total sawmill count has dropped 31 percent since 1990. Meanwhile, total roundwood receipts declined 27 percent between 2018 and 2023, going from 131,773 to 106,911 cubic feet. 

The sharp reduction in timber demand, according to the study, weakened the financial viability of various logging operations and forestland management across the state.

Mill operators, meanwhile, complained about shortages of logging contractors and rising procurement costs. Loggers, for their part, reported struggling for fair compensation.

The news wasn't all bad during the research period, as the study shouts out Precision Hardwood’s $12 million mill investment and Wilson Enterprises’ expansion into industrial sawmilling. However, positive momentum was largely cancelled out by larger closures, such as the shuttering of two Besse Forest Products Group mills in the Upper Peninsula.

The way forward

There are no easy fixes for Michigan's forestry sector, but the researchers offer ideas for improvement. The data supports policy interventions focused on upgrading mill infrastructure, strengthening supplier linkages, and providing support for displaced workers and vulnerable regions. 

The authors conclude:

"As the industry continues to consolidate and adjust to market and labor challenges after the Covid pandemic, a clearer understanding of how sawmill dynamics affect the wider economy is essential for effective forest marketing and utilization policy planning."

Read the full study here.