MNTAINENG M!CHIGAN’S WOODS LABOR SUPPLY Thesis for the Degree of M. S. MICHIGAN STATE UNIVERSHY JAMES E. GRANSKOG 1969 ”WWI!WWII’IWWW 1mg“ 1 31293 00995 2197 w Mxehngan Stam1 ‘ “Why; '4‘!!!- 5W" ; am" 2 sons ‘1 am ammv me nfiti‘ffiw 431:3) ABSTRACT MAINTAINING MICHIGAN'S WOODS LABOR SUPPLY by James E. Granskog Woods labor problems in Michigan have received considerable at- tention in recent years. This report presents the results of a detailed study of these problems. The study objectives were: (1) to determine the current and to project the future number of woods workers associated with current and projected levels of timber output; (2) to determine woods working conditions, both current and future, necessary to attract an adequate supply of woods labor; and (3) to evaluate the problem of maintaining an adequate woods labor supply in the face of projected increases in timber output. To meet these objectives, detailed inter- views were held in 1967 with representatives of pulp mills in Michigan and what the mills considered their "best" producer suppliers. Ten pulp mills and 20 producers were interviewed. Approximately 40 percent of the 8,924 full-time equivalent work- ers in logging in Michigan were involved in pulpwood production in 1966. Projected pulpwood labor requirements for 1980 indicate that approxi- mately 3,530 workers will be needed to harvest the 3,180,000 cords of pulpwood expected in that year. Pulpwood labor requirements for 1980 will be approximately the same as present day employment levels because of (1) increased productivity of capital-intensive operations, (2) length- ening of the work year made possible by the introduction of new tech- nology, and (3) potential use of chips from the waste of wood-using plants. James E. Granskog wood shortages occurred at pulp mills in Michigan at varying periods during 1965 and 1966. The cause of these shortages appears not due to a woods labor shortage in a physical sense, but to economic conditions limiting labor availability. Foremost among these conditions were low average annual earnings, the short work year, the hard physical work, and the lack of security. The sampled pulpwood producers counteracted shrinking labor sup- plies by building capital-intensive, high volume harvesting operations. With increased productivity and hikes in production volume, producers have been able to improve working conditions by offering higher wages, providing some fringe benefits, utilizing less labor-intensive harvest- ing methods, and pursuing a longer work year. However, the pulp pro- ducer's inability to obtain regular and sufficient contracts over lon- ger periods of time have complicated efforts to improve woods working conditions required to maintain an adequate and efficient labor force. Difficulty in securing long-term capital funds because of short and fluctuating wood orders also present problems for some producers. A prerequisite to increasing the availability of woods labor appears to be a change in the wood procurement policies of pulp com- panies. Contracts of longer duration and larger size given to regular and reliable producers would be among the desirable actions. MAINTAINING MICHIGAN'S WOODS LABOR SUPPLY By >1 1 James EJYGranskog A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Forestry 1969 4 54/ M3” 3., / j (1 / ACKNOWLEDGMENTS This study was conducted under a cooperative agreement in for- estry research between Michigan State University and the North Central Forest Experiment Station, Forest Service, U. S. Department of Agricul- ture . The author wishes to express his gratitude to the many individ- uals who gave their time in suggestions and review throughout the course of this study. He is particularly indebted to Dr. Robert S. Manthy for his advice, guidance, and encouragement given during the prepara- tion and completion of this manuscript. And finally he wishes to ex- press his thanks to those representatives of the Michigan pulp mills and to the pulpwood producers who so willingly gave their time and information to make this report possible. 11 TABLE OF CONTENTS CHAPTER I. INTRODUCTION . . . . . . . Importance of Labor . . . . . . . . . . . . . . . . Procedure . . . . . . . II. THE PRESENT LABOR FORCE AND FUTURE LABOR REQUIREMENTS. Present Labor Force . . Popula t ion 0 O O O O O O O C O 0 Working Conditions . . . . . . . Conditions Industry-wide. . . Conditions in the Selected Operations Future Labor Requirements . . . O O Technological Considerations . . . . . . Estimates for 1980 . III. CONDITIONS. . . . . . . Pulp Mills. . . . . . . Wood Shortages . . . Wood Procurement . . Producer Suppliers . Pulpwood Producers. . . Equipment Investment Production and Costs and Timber Production . . iii INDUSTRY ADJUSTMENTS T0 CHANGING Capital AND WOOD SUPPLY Requirements. PAGE 14 14 17 23 23 26 3O 32 32 37 43 46 48 50 50 CHAPTER Costs and Returns . . . . . . . . . . . . Wood Sales Agreements. . . . . . . . . . . . Trends and Problems. . . . . . . . . . . . . IV. MAINTAINING THE WOODS LABOR SUPPLY . . . . . . . . V. SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . LITERATURE APPENDIX A. APPENDIX B. The Woods Labor Force . . . . . . . . . . . . . Adjustments to Changing Labor Supply Conditions Maintaining the Woods Labor Supply. . . . . . . CITED . . . . . . . . . . . . . . . . . . . . . Primary Manufacturer Questionnaire. . . . . . Pulpwood Producer Questionnaire . . . . . . . iv PAGE 52 S6 S8 63 67 67 69 72 74 77 81 LIST OF TABLES TABLE PAGE 1. Logging establishments and workers employed in the Lake States, by state, 1963 . . . . . . . . . . . . . 8 2. Woods employment reported under state unemployment insurance laws, 1965 and 1966 . . . . . . . . . . . . 9 3. Recent and projected employment in forest management and logging in Michigan, as estimated by James, 1952-1980oooooooooooooooooooooo 12 4. Full-time equivalent employment in forest management and logging in Michigan, 1966 . . . . . . . . . . . . 12 5. Average hourly earnings of nonsupervisory woods workers in the Lake States, by method of payment, spring 1963 15 6. Method of payment of employees on sampled pulpwood operations, by function of work performed, 1966 . . . 19 7. Fringe benefits provided for employees on sampled pulpwood Operations, 1966 . . . . . . . . . . . . . . 20 8. Number of weeks of work on sampled pulpwood operations, 1966 O O O O O O O O O I O O O O O O I O O I O O O O O 22 9. Average output per man-day on the sampled producer operations , 19 6 7 O 0 O O O I O O O O O O O O O O O O O 2 7 10. Projected labor requirements for 3,180,000 cords of pulpwood production in Michigan, 1980 . . . . . . . . 29 11. What Michigan pulp mills feel they can do to counteract or avoid wood shortages . . . . . . . . . . . . . . . 36 12. wood receipts at sampled Michigan pulp mills, by species, 1966 O O O O O O O O O O O O O O O O O O O O O O O O O 38 13. Sources of wood supply to Michigan pulp mills, 1966 . . . 39 14. Length of wood purchase agreements with producers by Michigan pulp mills, by type of agreement, 1966 . . . 41 TABLE 15. 16. 17. 18. 19. 20. 21. 22. Wood receipts from large producers at Michigan pulp mills ’ 1966 O O O O O O O O O O O O O O O O O 0 Size class of sampled producers, 1966 . . . . . . . Range of equipment investments on sampled producer Operations ’ 1966 I O O O O O O O O O O O O O O O Timber handled by sampled producers, 1966 . . . . . Number of sampled producers selling pulpwood to different numbers of pulp mills and dealers, 1966 . . . . . . . Costs and profits per cord of output on sampled producer operations ’ 19 66 O O O O O O O O O O 0 O O O O O O O 0 Number of sampled producers indicating length of longer- term contracts desired, 1967 . . . . . . . . . . . . . What sampled producers feel pulp mills can do to help increase wood production to meet future requirements, 1967 O O O O O O O O O O O O O O O O O O O O O O O I 0 vi PAGE 44 47 49 51 53 54 58 61 LIST OF FIGURES FIGURE PAGE 1. Location of sampled pulp-using mills and sampled pulpwood producers in Michigan . . . . . . . . . . . . 2. Pulpwood production and consumption in Michigan, 1960-1966 e o o o o o o o o o o o o o o o o o o o o o 3]- vii CHAPTER I INTRODUCTION Woods labor has recently become a subject of prime importance in the forest economy of the Lake States and other regions of the United States and Canada. Wood shortages experienced by pulp mills and other Lake States wood-using industries at varying periods during 1965 and 1966 were attributed largely to a woods labor shortage. In 1967 an oversupply of wood production followed the previous wood shortage conditions. However, the causes of the wood shortage and the availability and requirements of woods labor for projected increases in timber output are still problems that face the forest products in- dustry in Michigan and elsewhere. The purpose of this report is to investigate future potential woods labor requirements in Michigan, and to determine what can be done to insure that requirements are met. The objectives of the study are: 1. To determine the current and to project the future number of woods workers associated with current and projected lev- els of timber output. 2. To determine woods working conditions, both current and fu- ture, necessary to attract an adequate supply of woods 1a- bor. 3. To evaluate the problem of maintaining an adequate woods labor supply in the face of projected increases in timber output. 2 Importance of Labor Michigan's annual timber harvest requires close to 10,000 man- years of labor. About two-fifths of this labor is devoted to pulpwood production, which in 1966 totaled some 1,570,000 cords (Pfeifer, 1967). The production by woods labor forms a base which contributes significantly to the state's economy. Excluding logging, value added by manufacture as reported by the 1963 Census of Manufactures for the wood-using industries in Michigan totaled $496 million. These indus- tries provided employment for almost 47,000 peOple. Despite the magnitude and the importance of the woods labor force, relatively little attention has been given to it until recent- ly. Reliable data on the actual number of woods workers have not been available. And characteristics and working conditions of these people is not widely known. Past statistics reveal a long term outflow of labor from the woods, similar to that which has been taking place in farming. It has been generally acknowledged that the opportunities in alternative ems ployment have been better, and this influence helps to explain the flow of young and prospective woods laborers to other forms of employment. A focal point of this study is the producer operation. Pulp mills receive their raw material supply from one or a combination of three sources: 1) wood purchased directly from independent producers, 2) wood purchased through pulpwood dealers, and 3) wood purchased from company owned harvesting operations or contractors harvesting company owned timber rights. Producers can be and are involved at all three levels. 3 By far the major source of supply for Michigan mills is direct purchases from independent producers. Thus, independent producers eme ploy the major portion of the woods labor force. If current industry trends toward fewer and larger producers continues, it is here where many aspects of the labor problem must be faced. Until there is sta- bility to our producers, little improvement can be made for their emr ployees. Procedure The study area is the state of Michigan, with concentration in the pulpwood industry. Pulpwood is the leading product of the Michigan timber harvest. Much of the labor used in the production of pulpwood is also used in the harvesting of other timber products, and similar conditions and problems exist throughout. Detailed interviews were held in the summer of 1967 with repre- sentatives of pulp mills in Michigan and a sample of their producer suppliers. Interview schedules, given in the Appendix, were standard- ized for each class. All ten of the pulp mills in the state which actively purchase pulpwood were surveyed. Twenty producers were sampled. The sample was drawn by asking each of the pulp mills sampled to identify their "best" producer suppliers. Producers were selected on this basis to determine the qualities desired by mills among their suppliers, the economic and market conditions existing which contributed toward their success, and what these producers feel can be done to help solve prob- lems normally confronted on pulpwood operations. The location of the sampled mills and the number of sampled producers by county is shown in Figure 1. Operations of the sampled producers are compared with results of other studies that have described the general nature of woods labor and pulpwood production systems that currently exist. 2 O O l P/ l l l o 1 j .5 1 7 z. 2 1 ,7 . Sampled pulp mills i 1 Numbers indicate 4’— sampled producers 2 l per county Z. Figure 1. Location of sampled pulp-using mills and sampled pulpwood producers in Michigan. CHAPTER II THE PRESENT LABOR FORCE AND FUTURE LABOR REQUIREMENTS During the 1965 and 1966 pulpwood shortage in Michigan, reports from many sources identified the cause of the wood shortage as an in- sufficient supply of woods labor. Descriptions ranged from an estimated shortage of 1,000 workers in Michigan's Upper Peninsula (Milwaukee Journal, February 13, 1966) to "The most critical woods labor shortage in 25 years" in the Lake States area (Northern Logger, January 1967). Similar pronouncements appeared in wood industry magazines, journals, local newspapers, and other media. Concurrently with the woods labor shortage descriptions, reports were being issued indicating surplus manpower levels in many of these same areas. An adequate labor supply was found to be available for expanding wood-using industries in northeastern Minnesota (Blyth, 1964). One study showed substantial unemployment levels and a migration of -surplus manpower from Michigan's Upper Peninsula (Northern Michigan University, 1965). Indications are that timber was not a limiting resource input to the wood shortage situation. An example of this is given by Car- land (1964) showing the actual cut of pulpwood in the Upper Peninsula has been only one-third of the allowable cut. The implication to be reached from these sources is that the quantity of labor supplied to the woods is affected more by other fac- tors than by the size of the labor resource. In other words, social, institutional, and economic factors (e.g., working conditions and wages) could be limiting the availability of the physical labor supply. 6 7 Present Labor Force Population Reliable data indicating the actual number of woods workers in Michigan are not available. Reports from various sources indicating population numbers are considerably below pOpulation estimates deter- mined by the Forest Service (Hair, 1963) and James (1966). One reason for this discrepancy is because a large part of the woods labor force is composed of part-time workers. The 1963 Census of Manufactures reported 531 establishments (logging camps and contractors) employing a total of 1,726 employees in Michigan (Table 1). Census data were gathered by report forms mail- Ed to all establishments identified as loggers on Social Security Ad- ministration records. Excluded were employees engaged in trucking time her or in other forms of transport who performed no cutting operations. Also excluded were (1) employees of logging and woods operations con- ducted in combination with sawmills and pulp mills, (2) farmers and other part-time, self-employed Operators, and (3) workers engaged in the collection of bark, sap, and other forest by-products. Thus, many woods workers included in other Census classifications (sawmills, pulp mills, veneer and plywood mills, etc.) were not identified as loggers in the Census. In many cases, part-time, self-employed loggers were not even identified as loggers. A similar situation is apparent for estimates of the woods labor force derived from Michigan's unemployment insurance records. Prior to January 1, 1966, loggers were not required to carry unemployment insurance if they employed three or less workers. Workers reported 8 Table l.--Logging establishments and workers employed in the Lake States, by state, 1963. All Production State Establishments employees Workers Michigan 531 1,726 1,564 Minnesota 349 1,622 1,451 Wisconsin 329 1,269 1,119 Source: U. S. Bureau of the Census. Census of Manufactures, 1963. Industry Statistics: Logging camps, sawmills, and planing mills, MC63(2)-24A. Washington: Government Printing Office, 1966. employed prior to this date--a monthly average of 1,058 workers in 1965-~would indicate less than the actual number of workers for this reason. Beginning January 1, 1966, employers were required by law to report if they employed one or more workers. Even though an increase in the number of woods employees reported resulted (Table 2), the lar- gest number reported for any one month in 1966 was 1,551 in June. Here, again, it would seem a large group of workers are not reported, either because they may be self-employed (independent), or, in some cases, because the employer does not comply with the unemployment in- surance laws. Due to the inadequacy of these statistics, an attempt was made in 1966 to estimate the number of workers in logging and pulpwood in Michigan by the Michigan Department of Conservation and the Departments of Employment Security and Economic Expansion. An estimate of the woods labor force was made by a direct count through industry contacts. This survey of the current work force estimated 4,500 Michigan workers in pulpwood cutting or in related positions. Approximately two-thirds 9 Table 2.--Woods employment reported under state unemployment insurance laws, 1965 and 1966. Month 1965 1966 January 1,128 1,385 February 1,146 1,452 March 987 1,365 April 571 904 May 943 1,240 June 1,262 1,551 July 1,159 1,544 August 1,174 1,535 September 1,101 1,495 October 1,099 N.A. November 1,050 N.A. December 1,081 N.A. N.A. Not available. Source: Michigan Employment Security Commission, Detroit, Michigan. 10 were located in the Upper Peninsula and one-third in the northern half of the Lower Peninsula. A more detailed analysis for the Upper Penin- sula estimated from 3,257 to 3,332 woods workers in 1966. While the estimate of 4,500 workers may represent the number of workers in pulp- wood cutting or related-like work, additional workers involved in transporting the timber out make the total woods labor force harvest- ing Michigan's timber products substantially more. An alternative approach to estimating employment figures is to relate output of products per man-day or man-year to the total volumes of timber output. Employment estimated in this manner is in terms of full-time equivalent workers. The actual number of workers will be greater, depending upon what extent the labor force is composed of part-time workers. The importance of part-time workers in pulpwood production, how- ever, is decreasing. In 1947 it was estimated 85 percent of the work force harvesting Lake States pulpwood was composed of part-time, tran- sient Operators (McNutt). Since that time the availability of part- time workers, such as small farm Operators, has decreased considerably as these marginal operators have shifted to other forms of employment, largely in urban areas. And increasing mechanization of pulpwood har- vesting Operations has required more full-time employment. An example of the decreasing part-time employment is given by the producer Operations which were sampled for this study. Whereas part-time employees made up 30 to 40 percent of their work force in 1962, they were only 8 percent of all workers employed in 1966. Forty percent of the pulpwood producers interviewed reported using part-time employees, but in only two instances did these workers contribute 11 significantly to the operations' output. With fewer and higher volume, stable Operations in the future, the employment of part-time labor will be further minimized. Employment estimates in terms of full-time equivalent workers have been determined by the Forest Service. Hair (1963) estimated em— ployment in timber harvesting in the United States, by state, for the years 1954 and 1958. The estimated employment for Michigan was 9,850 workers in 1958. Recent and projected employment in logging in Michigan in terms of full-time equivalent workers has also been reported by James (1966). The employment associated with each timber product for the years 1952, 1962, and 1980 as estimated by James is shown in Table 3. Full-time employment was calculated on the basis of a full work-year consisting of 200 work-days. Logging employment in Michigan totaled more than 8,900 workers in 1966. This is indicated in Table 4. The employment level in each product group is based on different assumptions. The employment occur— ring in the sawlogs and veneer logs and other raw timber product groups is based on (1) employment figures determined by James, and (2) an assumption of a linear trend in employment between 1962 and 1980. The figure of 3,758 workers associated with the pulpwood category, however, is based on (1) Michigan's 1966 roundwood pulpwood output of 1,495,244 cords (Pfeifer, 1967), and (2) an average production of 2.0 cords per man-day for 200 work-days.1 1The figure of 2.0 cords of output per man-day has been cited by the American Pulpwood Association as an industry-wide average for pulpwood productivity (Armstrong, 1966). If pulpwood employment was determined by assuming a linear trend in employment between 1962 and 1980, a larger figure would result than the 3,758 workers shown in Table 4. In other words this would imply a lower man-day productivity than what was recognized as the current industry average in 1966. 12 Table 3.--Recent and projected employment in forest manage- ment and logging in Michigan, as estimated by James, 1952-1980. Product 1952 1962 1980 (Full-time equivalent workers) Forest management and protection 2,600 3,100 4,200 Logging: Sawlogs and veneer logs 5,000 2,250 2,250 Pulpwood 3,240 3,350 6,490 Other raw timber 8,380 3,200 1,920 Total logging 16,620 8,800 10,660 Total management and logging_ 19,220 11,900 14,860 Source: James, Lee M. Michigan timber production-- now and in 1980. Part I--Timber production. Mich. Agr. Exp. Sta. Res. Pap. 38, Natural Resources. 1966. pp. 1-16. Table 4.—-Full-time equivalent employment in forest management and logging in Michigan, 1966. Product 1966 Forest management and protection 3,344 Logging: Sawlogs and veneer logs 2,250 Pulpwood 3,758 Other raw timber 2,916 Total logging 8,924 Total management and logging 12,268 13 While no meaningful average has been determined as to the length of part-time or seasonal employment (due to the high variance and diff- iculty of assembling such data), some descriptions have been made as to the employment of part-time labor. Massie (1965), describing char- acteristics of timber producers in the North Central region, found that sawlog producers who hire employees report an average of two full-time employees and nearly three part-time employees. Overall it was found 37 percent of sawlog producers hire full—time employees, 47 percent hire part-time employees and the remaining 16 percent work without any employees. Post, poles, and piling producers were found to have an average of one employee, usually seasonal in Michigan. Small pulpwood producers had either one part-time or full-time employee, and large producers (those producing more than 1,000 cords annually) generally employed four to five full-time employees. Veneer log producers had an average of more than two full-time employees and one part-time eme ployee. Manthy and James reported the same averages for pulpwood pro- ducers as Massie in their 1964 study of pulpwood marketing in the same region. The survey of producers included in this study revealed an aver- age of almost ten full-time employees and slightly greater than one part-time employee per operation. All but one producer would corres- pond to what the previous studies classified as large producers. These figures are not representative as averages for the whole industry, but they indicate the decreasing importance of part-time employment in pulpwood production. 14 Working Conditions It was suggested previously that social, institutional, and economic factors may be limiting the availability of the physical 1a- bor supply. This section will examine some of these factors which affect the labor force, and more specifically, the employees involved in pulpwood production. Of concern are the factors which comprise the areas of working conditions and characteristics of woods work. Conditions Industry-wide.--Several studies have been made which describe various phases of woods work. Data which are representative Of typical conditions of current pulpwood production activities are extracted from these sources and compared with the results obtained from the pulpwood Operations surveyed. What is taking place on the "best" Operations may be realistic goals for the industry in general. In 1963 the United States Department of Labor studied small logging operations (12 or less employees) to obtain information for an evaluation of the exemption of such operations from the minimum wage and overtime provisions in the Fair Labor Standards Act. A sur- vey was made in the South and Lake States regions to collect data on wage levels and weekly hours of work. In the Lake States--Michigan, Minnesota, and Wisconsin--354 establishments employing 1,754 nonsuper- visory workers were surveyed. The sample of Operations in Michigan included 158 establishments employing 758 workers. Characteristics of the workers in Michigan determined from its survey were listed in the Department of Labor report: 1. The average number of employees was about five workers per operation. 2. per week, 3. incentive 4. 15 Fifty percent of the employees worked less than 35 hours and 75 percent worked less than 40 hours per week. Three-fourths of the workers were paid on a piece-rate or basis, while others were classified as time-rate workers. Average hourly earnings varied by method of payment; $1.88 for piece-rate workers, $1.65 for time-rate workers, and $1.81 for all workers (Table 5). Other characteristics of small logging Operations, described on a regional basis in the Department of Labor report, showed pulpwood accounted for three-fourths of their production. In addition, in 81 percent of the establishments in the Lake States region employing 80 percent of the workers, there was some degree of supervision of the work performed by the employees. Generally, the characteristics list- ed for Michigan workers were similar to those for all workers in the Lake States region. Table 5.--Average hourly earnings of nonsupervisory woods workers in the Lake States, by method of payment, spring 1963. Average hourly earnings State All workers Time-rate workers Incentive-rate workers Michigan $1.81 $1.65 $1.88 Minnesota 1.82 1.67 1.83 Wisconsin 1.73 1.59 1.80 Lake States 1.79 1.63 1.84 tions. 34 pp. U. S. Department of Labor. Small logging opera- Wage and Hour and Public Contracts Divisions. 1964. 16 In evaluating the effects of eliminating the exemption for small logging Operations from minimum wage and overtime regulations, the re- port showed relatively few woods workers in the Lake States earned less than $1.25 an hour. Eight percent of the workers in the region were found to earn less than this amount. And in Michigan, which had the smallest prOportion of low paid workers, only 4 percent earned less than $1.25 an hour.2 Another study, which describes woods labor in Michigan, was con- ducted by the Michigan Department of Conservation and others in 1966. Reference to this source was made previously in the discussion of pop- ulation numbers. Other topics covered in this study were recruitment of workers, methods of payment and wages, and average hours and days of work. Descriptions of working conditions and characteristics of Mich- iSanworkers in the Department of Conservation study were similar to the joint areas contained in the Department of Labor report. Describ- ing piece-rate workers only, the same average earnings of $1.88 per hour were found, or a weekly average around $76.37. Daily earnings of about $12 for a new or inefficient worker and $24 for an efficient worker were described as typical. Because of high transportation costs, power saw expenses, and lost days due to poor weather conditions, an average pulp-cutter received an annual income of less than $3,000 per 2Although the exemption for small logging operations was not eliminated, it was reduced in size from twelve employees to eight em— ployees in 1966. (U. S. Department of Labor. WHPC Publication 1167. Washington: Government Printing Office, 1966. 24 pp.) 17 year. Workers were reported as receiving no fringe benefits. The majority of workers were found to work in a range from 100 to 200 days annually. Owing to factors such as the strenuous physical work, weather conditions, and because piece workers usually set their own hours, five hours of actual, continuous work four days a week was con- sidered normal. Recruitment of workers was described as unorganized and difficult, due to low average annual earnings, better Opportunities in other work, the low status and image of woods work, and other fac- tors. The Department of Conservation study concluded by recommending several solutions to counteract a woods labor shortage. Among the immediate recommendations were for employers (producers) to pay work- ers' transportation costs, change to hourly rates of pay, service emr ployees' equipment in producers' maintenance shops, and comply with workmen's compensation insurance laws. Longer-term recommendations included longer-term contracts between producers and product buyers, more awareness by tOp management in industry of woods working conditions and problems, worker training programs, and greater equipment research. Conditions in the Selected Operations.--The results from the sample of pulpwood producers interviewed showed better working condi- tions compared to the previous descriptions given for Michigan woods workers. Within the Operations surveyed, the best conditions appeared to occur on those Operations using the tree-length or longwood method of harvesting. Six of the 20 firms were tree-length operations and 14 were conventional, shortwood systems. The surveyed Operations employed 194 full-time and 26 part-time or seasonal workers in 1966. Only eight of the firms actually employed l8 part-time help, and these workers usually worked in construction or farming when not employed in the woods. Sources of workers for these operations were from small town and rural areas. The average earnings per week of all employees during 1966 were $106.55. This figure is $30 higher than the average weekly earnings reported for pulp-cutters in the Department of Conservation study. However, earnings for employees on the six tree-length Operations were $138 per week, whereas earnings on the shortwood Operations were $95.61 per week. This difference was due largely to the closer supervision of work performed by employees and the higher productivity existing on the tree-length Operations. Employees were paid according to the function of work performed (Table 6). Cutters on shortwood operations were paid on a piece-rate or per cord basis, due to the semi-independent status that is charac- teristic of these employees. Other workers on the shortwood Operations, being under closer supervision, were paid on a per cord or time-rate basis, as were employees on the tree—length Operations. Where workers are paid by the hour, they are generally expected to meet certain informal, minimum standards of performance. On a tree- 1ength Operation, for example, a requirement of a truckload per day, wherein the capacity of the truck was approximately 16 cords, required four cords per man-day for four men. Employees on four tree-length Operations and other employees (excluding cutters) on three shortwood Operations were paid by the hour. Eighty-three percent of the producers paid employees weekly, and 17 percent paid bi-weekly. Some producers expressed going to a greater frequency of paying employees then in the past to avoid 19 Table 6.--Method of payment of employees on sampled pulpwood Operations, by function of work performed, 1966. Method of Fellers or Other Payment Cutters employees (Number of operations) Piece-rate 11 -- Per cord 5 12 Per hour 4 7 Per day -— 1 Total 20 20 aIncludes truck drivers, skidder and tractor Operators, and mechanics or maintenance personnel. advancements in pay and to provide added convenience for workers. A significant improvement in working conditions was a beginning trend toward the provision of some fringe benefits. Table 7 shows the number of Operations providing the specified benefits. Workers receiving fringe benefits were either equipment Opera- tors or employees on tree-length Operations. Benefits were not pro- vided to piece-workers except for one producer who had paid bonuses to these employees. Again, this is because these workers are "semi- independent" and largely set their own hours and work schedules. As listed in Table 7, two producers provided means of transpor- tation for employees. The average round trip distance to and from work for all workers was 35 miles per day, although it ranged up to 60 miles. Relatively few workers stayed in housing near their jobs. While improvements are being made with the provision of these 20 Table 7.--Fringe benefits provided for eme ployees on sampled pulpwood Opera— tions, 1966. Benefits Operations providing (Number) Paid vacations and holidays 3 Health and hOSpitaliza- tion insurance 3 Paid bonuses ' 3 Life insurance3 1 Overtime 2 Retirement 1 Transportation 2 aWas provided beginning in 1967. 21 fringe benefits, there are some costly Obstacles. Over and above the wages paid directly to employees, producers are required to pay social security, unemployment insurance, and workmen's compensation insurance. These requirements produced indirect labor costs averaging 28 percent of the sampled producers' payroll for 1966.3 Those producers that pro- vided some of the fringe benefits shown in Table 7 incurred indirect costs totaling over 30 percent. The requirement that workmen's compen— sation must be paid on fringe benefits paid directly to employees (such as bonuses or vacation pay as Opposed to life insurance) further com- plicates intentions to initiate certain fringe benefits. Another area constituting a disadvantage of woods work has been the shortness of the work year. Because of poor weather conditions, 200 work days or 40 weeks has been accepted as a full work year by the logging industry. Even though a worker may earn a good hourly or daily wage, annual earnings are lowered because of this factor. The length of the work year in 1966 on the surveyed operations averaged 47 weeks or 235 work days. However, there was a significant difference between the two peninsulas. Surveyed producers in the Upper Peninsula reported working an average of 42 weeks--shutting down dur- ing the spring "break-up" and excessive rain periods in the fall. Ex- cept for one producer who had just started in business in 1966, all Operators in the Lower Peninsula reported working at least 50 weeks (Table 8). Apparently, better site and soil conditions, the greater 3The workmen's compensation rate for loggers in Michigan in 1966 was $19.17 per $100 of payroll. This rate was increased to $23.43 on December 1, 1966, and was raised again to $27.24 on December 1, 1967. Thus, currently, indirect costs would be much higher for these produc- ers than the average 28 percent reported for 1966. 22 Table 8.-Number of weeks of work on sampled pulpwood operations, 1966. Weeks Number Of operations Less than 408 2 40 — 44 6 45 - 49 2 b 50 or more 10 aOne producer started in business during 1966. bAll Lower Peninsula Operations. produCtion of rough wood, more mechanized operations, and the good mar- ket situation contributed to the longer work year in 1966 in the Lower Peninsula. What is important is that given the market for their prod- ucts, these operations can provide stable, year-round employment. Concerning hours and days of work, these Operations averaged seven and one-half hours per day, five days a week over the number of weeks worked. However, it was often necessary to work six days to make this average. Several producers reported longer hours for their work- ers, but piece-workers were generally below the average—-down to 20 hours per week reported by one producer. These improvements that have taken place within the sampled Opera- tions have been brought about both as a result of a decreasing availa- bility of labor and a desire to increase production. That improvements in the working conditions for employees and the utilization of less labor-intensive methods will attract labor is revealed by two producers-- both tree—length Operators-—who reported no difficulty in recruiting 23 workers. Both producers employed mainly young men, and had little difficulty retaining their workers as conditions were improved. Other producers also experienced less difficulty in recruiting workers as changes were made in their operations. The average age of all employ- ees on the sampled operations was 38 years, and they had been employed an average of 5 years. That improvements reported have been largely confined to employ- ees on the tree-length Operations and equipment Operators on the other operations reveals the type of work in harvesting operations necessary to attract labor to woods work. These Operations, as shown in the next chapter, are comparatively capital-intensive with high volumes of tim- ber output. Promotion toward these types of Operations can help increase the availability of potential workers. And, by increasing productivity, labor requirements can also be eased. Future Labor Requirements This section considers possible future levels of pulpwood labor employment in Michigan. Estimates for 1980 are made based upon the trends in labor requirements and the wood harvesting technology being employed on the pulpwood Operations that were surveyed. Technological Considerations Since the surveyed Operations provide the basic framework for the projection of future labor requirements, a brief description of the equipment used and the trends in wood production methods is desir- able. Generally speaking, the trend among the sampled producers was 24 toward increased production from capital-intensive Operations. A re- flection of the employment of new technology on the surveyed operations is that in the 5 year period between 1962 and 1967 one-half of the operations either increased timber production with the same level of employment or had the same level of production with fewer men. Others had increased or decreased both in varying degrees or had remained about the same. Three of the producers were new entries to the timber pro- ducing business during this 5 year period. The greatest change in the use of new equipment was the shift to 4~wheel-drive, rubber-tired skidders. Several producers had two and even three such skidders. These included both the tree-length and shortwood machines. Only two of the Operations did not have this type of skidding equipment. The use of larger trucking equipment was evi- dent, especially in the Lower Peninsula where some of the larger trac- tor-trailer units had hauling capacities up to 25 cords, depending on the species of wood hauled. Four producers had shifted to tree-length skidding of pulpwood, bringing the number of surveyed Operations using this method of her- vesting to six. In addition, two more producers were in the process of changing to this method at the time of the interviews. In the tree-length method the number of operations performed by the cutter is reduced, making the harvesting process less labor- intensive. The bucking and piling by hand along skid roads is elimin- ated. Bucking is completed at a landing where loading equipment eases the handling of the wood. One surveyed operation used a high capacity slasher to buck tree-lengths at landings along their truck roads, but others did bucking by chain saws. 25 The extent to which the tree-length method will continue to in- crease on pulpwood Operations is unknown. In the Eastern Canadian pulp- wood industry, tree—length Operations were estimated to account for 45 percent of all company limit pulpwood cut (which is two—thirds of all pulpwood production) during 1964-65 (Campbell and Power, 1966). This was up from about 10 percent from 10 years previous. Of course, the large company Operations on large tracts of timber in Eastern Can- ada permit use of this method. In Michigan, tree-length pulpwood harvesting will be more limited due to selective cutting of hardwoods, small ownerships, and the finan- cial capabilities of pulpwood producers. Among those with greater financial means, its eventual use will be determined by develOpments in timber harvesters. As of late 1967, there were two Sirro timber harvesters being used on pulpwood Operations in the Upper Peninsula (Escanaba Daily Press, September 29, 1967). If attempts to mechanize harvesting in the stump area (in the shortwood system) become more successful, the increase in tree-length harvesting of pulpwood may then be more limited. The extent of which new technology is used is determined by many factors. Campbell and Power (1966), discussing the use of new innovations in the pulpwood logging industry of Eastern Canada, listed four factors which they considered most influential in a firm's deci- sion to purchase a new technique: (1) the size of the firm, (2) the profitability of the investment, (3) the amount of investment necessary to purchase one unit of the innovation, and (4) the number of firms already using the machine. In Michigan, the financial limitations of independent producers will probably slow and prevent any major changes in methods of operation, 26 unless additional support is received from some source. The use of more advanced technology will be, for the most part, confined to a few and large producers, such as were surveyed for this study. Estimates for 1980 Several assumptions were made in setting the groundwork for pro- jecting the future labor requirements. First, it is assumed that producers will continue to be the pri- mary source of wood supply for pulp mills. The effects of possible, future company-owned harvesting Operations are not considered. Second, the sampled producer operations which form the base for the estimates were selected on the basis of being the mills' "best" producer suppliers. It is assumed that these Operations were the mills' most desirable and would be the type they would be most likely to en- courage. Third, it is assumed that the productivity of these better Opera- tions may be considered representative of average industry productivity in 1980. With these assumptions in mind, three conditions are specifically considered in projecting the pulpwood labor requirements for 1980. These are the maneday productivity of the producer Operations surveyed, the lengthening of the work year that has been made possible by the introduction of new technology, and the potential use of chips from the waste of wood-using plants. The man-day productivity of the 20 sampled Operations ranged from 1.5 to 6.0 cords per man-day. The average was 3.45 cords per man-day. 27 Table 9.--Average output per man-day on the sampled producer Operations, 1967. Method Number Output per man-day, (cords) Tree-length operations 6 5.1 Shortwood Operations 14 2.75 All operations 20 3.45 Tree-length operations were consistently higher in productivity than the shortwood systems. The average output per man-day on the tree- 1ength operations was 5.1 cords compared to 2.75 cords for the short- wood systems (Table 9). The future labor requirements are developed by relating the average man-day productivity of all Operations to projected levels of pulpwood production. An output of 3,180,000 cords of pulpwood in 1980 in Michigan has been projected by James (1966). As noted earlier in Table 3, pulpwood employment has been pre- viously projected at 6,490 men for 1980 by James in terms of full-time' equivalent workers at 200 work days per year. In other words, this would mean an average output of 2.45 cords per man-day at that time. Assuming the average productivity of the present best operations will be the industry average in 1980, the labor requirements in terms of full-time employment at 200 work days would be 4,609 workers. This is a reduction by almost one-third of the previous projection. Earlier, it was shown that the sampled operations had an aver- age of 235 work days per year. The employment of new technology has helped overcome some of the adverse conditions faced on harvesting 28 operations, particularly in the Lower Peninsula. Assuming the work year in 1980 would consist of 235 work days, labor requirements would than equal 3,922 workers at 3.45 cords per man-day for the projected level of pulpwood output. The use of residual sawmill chips has been a relatively new source of wood supply for pulp mills in Michigan and the Lake States. Utili- zation of this source began in Michigan around 1960, and in 1966 it composed almost 5 percent of the total pulpwood production in Michigan (Pfeifer, 1967). Of the total pulpwood production in the Lake States in 1966, chips made up about 4 percent (Blyth, 1967). Other regions have had greater utilization of wood chips, and it can be expected to increase in Michigan also. Several of the sam- pled mills were planning or beginning to increase their utilization of this source of wood supply. By comparison to the Northeastern region, the utilization of chips may increase to 10 percent of the total pulp- wood production in Michigan by 1980. This would mean a 10 percent de- crease in the amount of labor required to supply the 3,180,000 cords of pulpwood in 1980. The labor requirements would then be 3,530 workers, considering the 3.45 cords per man-day productivity and the lengthening of the work year. A summary of the labor requirements estimates are shown in Table 10. The resulting effect of chip production in the projections of labor requirements considers only the utilization of waste material from wood-using plants. Chip production from roundwood could also have an effect, but, perhaps, more so on occupational distributions within the labor force. While projections show labor requirements relatively equal to 29 Table lO.--Projected labor requirements for 3,180,000 cords of pulpwood pro- duction in Michigan, 1980. Full-time Condition equivalent workers 3.45 cords/man-day @ 200 work days 4,609 3.45 cords/man-day @ 235 work days 3,922 3.45 cords/man-day @ 235 work days with 10% of production composed of chips 3,530 present day levels, more mechanized operations will mean a reduction in pulpwood cutters and a required increase in the number of equipment operators and mechanics. Estimates of changes in the occupational dis- tribution of pulpwood labor in Eastern Canada-~due to technological changes--show pulpwood cutters would decrease from 54 percent of the labor force in 1964-65 to 22 percent in 1975 (Campbell and Power, 1966). Maintenance and service personnel were expected to increase from 9 to 17 percent. The increase in equipment operators was estimated at about ‘16 percent (depends on the harvesting system used). Thus, an implica- tion for possible future training needs would be in the areas of equip- ment Operators and maintenance personnel rather than pulpwood cutters. As harvesting operations become more capital-intensive, they require more stable, year-round employment. Continuous operation of equipment is necessary to meet the large fixed costs of operations with substantial capital investments. Projected labor requirements in terms of full-time employment will more accurately reflect the actual number of workers required. CHAPTER III INDUSTRY ADJUSTMENTS TO CHANGING LABOR AND WOOD SUPPLY CONDITIONS Pulpwood production and consumption in Michigan has been rising in recent years (Figure 2). While the long-term trend is upward, year- ly fluctuations occur mainly according to the market conditions faced by the individual pulp mills for their products. Because of these fluc- tuations, mills express the difficulty of specifying exactly the amounts of pulpwood they will need from their suppliers, especially over longer periods of time. However, pulp mills and pulpwood producers desire more stability in pulpwood production. Mills desire a steady, stable and reliable source of raw material supply. Producers desire a stable market in order to plan their operations, utilize their resources, and have a reason- able assured sale for their timber production. Industry efforts toward greater stability and adjustments to changing labor and wood supply conditions are the concerns of this chapter. The following discussion will also point out what the pulp mills feel they can do to help pulpwood producers, their primary source of wood supply. Further elaboration will be given to producer harvest- ing operations, the problems producers face, and what their needs and desires are. And, in the next chapter, given the required cooperation between pulp mills and producers, it will be shown how these conditions will help maintain Michigan's woods labor supply. 31 Million cords 1.6 1.5 1.4 1.3 .1 0 Production C /’ Consumption. //’/ z’ z’ > ,___— l J I l I l 1960 1961 1962 1963 1964 1965 1966 Figure 2. Pulpwood production and consumption in Michigan, 1960-1966. (Source: North Central Forest Experiment Station, U. S. Forest Service, St. Paul, Minn., Res. Note series.) 32 Pulp Mills Adjustments have been made by the pulp mills to changing condi- tions in their wood supply, specifically the recent wood shortage sit- uation. The following areas of wood shortages, wood procurement, and producer suppliers are analyzed to determine what changes are taking place and what mills feel can be done toward improving conditions. Wood Shortages Wood shortages or difficulties in procuring sufficient wood supplies occurred during two different periods among Michigan pulp mills. Lower Peninsula mills experienced wood shortage conditions at varying periods from January 1965 to March 1966. Tight wood condi- tions among Upper Peninsula mills occurred from March 1966 to March 1967. The response among mills as to the causes of the wood shortages produced various opinions. There was general agreement that the main cause was due to a combination of many factors occurring at about the same time. Major factors cited were a high level economy which created a labor shortage in the woods, and new, higher workmen's compensation costs caused many small producers to drOp out of business. Other con- tributing factors mentioned were weather conditions, an increased de— mand for wood due to the establishment of a new mill in the state and expansion among other mills, and low price levels which existed for wood. One mill attributed its shortage to the withholding of wood by producers until price levels increased. And one mill official attri- buted the overall wood shortage situation to the policies of pulp mills buying wood from many, part-time producers, a system.which could not 33 stand a high level economy. In a survey of the Wisconsin pulpwood situation, Burgy (1968) reported similar responses from mills to tight wood conditions that existed there in 1966. Again, the primary factor indicated was a gen— eral labor shortage in the woods due to better Opportunities available in other forms of employment. Woods labor shortages have been pOpular explanations for wood shortages that have occurred in regions outside of the Lake States also. Southern wood shortages in 1955 and 1959 were attributed to a scarcity of labor at the time of their occurrences. However, this view was dis- counted in a later study by Pikl (1960). Analyzing the 1955 wood short- age, he could find no scarcity in the labor supply. Instead, the wood shortages were due to the reluctance of mills to compete for wood on a price basis. Because of a sudden rise in consumption-due to many new mills and expansion in existing mills--nonprice competitive action fail- ed to procure sufficient wood supplies. Once prices were raised, wood inventories returned to normal in a short period of time, and producers were "cut-off" to stem the flow of incoming wood. Price increases appear to have been the compelling factor in the solution of the wood shortage in Michigan also. Among the measures undertaken to counteract the shortage situation, price increases were reported by all of the sampled mills. Specific data concerning prices and the size of price increases were not collected, but mills mentioned increases ranging from $2 to $5 per cord, varying by species and the location of the mills. The extent of other measures reported undertaken toward reducing wood shortage levels was much less than the price increases. Four 34 mills increased or initiated financial assistance and mechanization aids. And one mill provided longer-term contracts as a regular prac- tice. Although only one mill explicitly indicated providing larger contracts, several probably did so during the shortage period. The increased price levels undoubtedly brought new producers into the industry, as several mills indicated buying from more than their regular number of suppliers. The financial and mechanization aids offered to certain producers permitted them to substitute capital for labor as an agent of production. These factors, plus the increased buying of wood by mills in anticipation of further shortages and a re- ported drop in paper sales, contributed mainly to the end of the wood shortage and brought a surplus of production in 1967. The availability of woods labor was limited during the wood shortage period. However, the cause of the wood shortage was not due to a "labor shortage" in a physical sense. The cause of the shortage was due more to the economic conditions affecting the labor availabil— ity. Price increases have provided a solution, at least temporarily. The elasticity of supply was much greater than what the mills expected when price levels were increased. Currently, price cuts for pulpwood are occurring, in some instances returning price levels close to those which existed when the wood shortages occurred. If the supply of pulpwood is as elastic as it appears, producers can be expected to drOp production, especially smaller Operators. A surplus of wood production, a slump in paper markets, and large inventories may permit lower price levels. However, current mill ex- pansion in both peninsulas and a change in paper markets will again increase the future demand for wood. Combined with increasing costs 35 being faced by producers and low prices for wood, industry may again find itself in the position it faced in 1965 and 1966. Price increases may again be required unless other action is undertaken. What the sampled mills feel they can do to counteract or avoid wood shortages is shown in Table 11. Nine mills indicated raising prices as a solution, with mechanization aids and financial assistance to pro- ducers being cited as the next most important. (Mechanization aids would include financial assistance, but financial assistance was dif- ferentiated to mean loans or advances for working capital, etc.) Five mills mentioned producer training, which included bookkeeping aids, advice as to operational planning, and closer information channels. Company logging was indicated as a possible future action by four mills if other actions failed to provide an adequate wood supply. Other action receiving mention included larger and longer-term contracts, and great- er utilization of different wood species. Increasing prices would not seem to be a favorable course of action for mills, nor do fluctuating price levels contribute to the stability that is desired by mills and producers. Other actions that mills are undertaking or considering have been shown. (These actions, of course, would only be considered if they can augment wood supplies at reasonable costs. However, such actions as longer-term contracts and larger contracts would not require costs as much as a change in attitudes.) Problems and desirable actions on the part of pulp mills as viewed by the sampled producers will be examined under Pulpgood Producers. 36 Table ll.--What Michigan pulp mills feel they can do to counteract or avoid wood shortages. Possible Number action of mills Raise prices 9 Mechanization aids 8 Financial assistance 6 Producer training 5 Company logging 4 Longer-term contracts 3 Larger contracts 2 Greater utilization of species 1 37 Wood Procurement The volume of wood received at the sampled mills totaled almost 1,000,000 cords in 1966 (Table 12). MOst of the wood received was pro- duced in Michigan, but one mill imports a portion of its spruce-fir receipts from Canada. The pattern of wood receipts was somewhat similar for all the sampled mills. Typically, the peak for pulpwood deliveries was during the summer months, and deliveries were at a minimum during the spring breakup period in late March and April. On a quarterly basis, the most common pattern of wood deliveries was as follows: first quarter- 20 percent, second quarter-30 percent, third quarter-30 percent, and fourth quarter-20 percent. Generally, mills expressed a more steady and even flow of wood deliveries than had been the case in previous years. This has been made possible largely by the use of new machin- ery, such as the rubber-tired skidders, in wood harvesting operations. A majority of mills reported their present pattern of wood re- ceipts as desirable. Those expressing dissatisfaction desired a more steady flow of incoming wood then had been previously attained. In an effort to help control and stabilize their flow of incom- ing wood (and to procure more wood), three mills buy wood roadside or at concentration yards and contract with common carriers to haul this wood to the millyard. Wood received at the three mills in this manner varied from 17 to 35 percent of total receipts. WOod supplies for the sampled mills were from three sources: (1) producers, (2) dealers, and (3) by-products in the form of chips from sawmills. No mills interviewed conducted or received wood from company-owned harvesting Operations. 38 Table 12.-Wood receipts at sampled Michigan pulp mills, by species, 1966. Lower Upper Species Peninsula Peninsula MIIIs Mills Mills (Thousand cords) Aspen 430.0 65.9 495.9 Mixed hardwoods 145.5 49.5 195.0 Pine 153.1 4.0 157.1 Spruce-fir 62.5 42.0 104.5 Hemlock 2.5 2.5 Chips 29.1 29.1 Total 822.7 161.4 984.1 39 Producers are the most important agent source of wood, supply- ing 88 percent of total receipts (Table 13). WOod receipts from the other sources include 9 percent from dealers and 3 percent from chip suppliers. While chips are only a small percentage of receipts current- ly, those mills using chips (three) expressed a desire to increase this source of supply. In addition, a fourth mill had just started to pur- chase wood in this form. Table l3.-Sources of wood supply to Michigan pulp mills, 1966. Source Amount Percent supplied of total (cords) Producers 865,156 88.0 Dealers 89,924 9.1 Chip suppliers 29,055 2.9 Total 984,135 100.0 Although mills purchased wood from identified dealers, these dealers are merchant middlemen. They are paid exactly the same price for wood as are independent producers who sell directly to the mill. Rather than purchase through dealers, the sampled mills expressed a desire to have direct and closer relations with producers. The most significant change among the agent sources of wood supply over the period 1962-1966 has been the trend toward fewer and larger producers. Six mills reported this change among their suppliers. It was generally felt, however, that although smaller producers were decreasing in number, there was a definite place for this type of 40 producer to harvest small woodlots. The type of producer most mills felt would disappear was the so called "middle-size" producer, one who required more and better equipment but did not produce enough to just- ify his investment. Increased mechanization was the explanation given for the trend toward fewer and larger producers. Other changes among agent sources included one mill switching from a complete dependence upon dealers who acted as agent middlemen toward direct purchases from producers. This change was in process because dealers were unable to supply sufficient wood orders during the wood shortage period. Also, two mills had increased the percent- age of wood orders from chip suppliers. This was an additional source during the wood shortage and was considered a more stable supply. Recent changes in inventory and wood purchase patterns were also largely initiated because of the wood shortages. Longer daily hours, longer contracts, and larger inventories were various adjust- ments made among seven mills to better enable suppliers to deliver more wood and to provide a larger cushion against further anticipated short- ages. To obtain a more even influx of wood, some mills have lengthened purchase periods and initiated monthly quotas. Agreements by which wood purchases were obtained in 1966 varied among the sampled mills. Written agreements or contracts were used by five mills, informal or oral agreements were used by four mills, and one mill used both types of agreements. The length of wood purchase agreements usually varies by the type of contract. As a rule, informal agreements were shorter, ranging from one to six months; and most written contracts were from six to twelve months in length (Table 14). One mill used both 6- and 12-month 41 Table l4.--Length of wood purchase agreements with producers by Michigan pulp mills, by type of agreement, 1966. Length of Written a Informal Agreement Agreement Agreement (Months) (Number of mills) l — l 3 1 2 6 3 _ - 8-10 1 - 12 l - b indefinite - 2 aOne mill used both 6- and lZ-month written contracts with producers. bUsually twice a year. 42 written contracts, granting the latter as producers proved their reli- ability in making deliveries. Two mills, obtaining wood under oral agreements, did not specify any set time period (usually twice a year). But one of these, just beginning to purchase wood direct from producers, was planning to initiate yearly written contracts. Agreements were usually the same for all agent sources, but three mills reported differences in contracts with different groups of agents. Two mills had longer agreements with chip suppliers, from two to three years in length (because they were considered more stable). Another mill had written contracts with dealers and oral agreements with pro- ducers. Written contracts usually include conditions specifying the physical requirements of wood to be purchased, volume, price, and meth- od and time of payment. In addition, whether or not contracts are writ- ten, mills in the Lower Peninsula require certification of compliance with workmen's compensation, social security, and federal and state unemployment insurance regulations. If satisfactory proof is shown, producers are paid an additional amount above the current purchase price. This procedure is absent among Upper Peninsula mills, however. Mills in this area pay the same price to all producers and do not re- quire certification of compliance with the aforementioned regulations. The reason for this difference in procedure of payment for wood is prob- ably the influence of the market for wood to the Wisconsin pulp mills. If a producer had not produced his wood in compliance with the required coverages and faced strict requirements on the part of local mills, he could, in turn, sell his wood to the Wisconsin market. Payment for delivered wood was usually made weekly or within 43 a period of ten days at eight mills. Two mills paid producers by the truckload at the time of delivery. Producer Suppliers Since the most important agent source of wood for mills was from producers, more detailed information was sought concerning mill rela- tions with producer suppliers. The total number of producers selling directly to the Michigan mills in 1966 was 932. The average receipts per producer was 928 cords for all mills, although among Lower Peninsula mills it was 1,437 cords and among Upper Peninsula mills only 324 cords. These averages compare to only 236 cords per producer for all Michigan mills in 1954 (James, 1957), and 440 cords per producer among Lower Peninsula mills in 1959 (Manthy and James, 1964). Thus, the trend toward fewer and larger pro- ducers has been substantial, and most mills felt this trend would con- tinue. The importance of larger producers is shown in Table 15 by their number and the percentage of wood receipts obtained from this source. Large producers were defined as those supplying 1,000 cords of pulpwood or more.“ The number of producers supplying this amount or more was 206, 22 percent of the total number of producers. These 22 percent accounted for 64 percent of total wood receipts at the mills, and 73 percent of the wood supplied by producers. The large producers are In view of the large average size, a producer supplying 1,000 cords would no longer be considered as large, especially at Lower Mich- igan mills. Also, the actual size of operations of some producers is larger, as some sell to more than one mill. 44 Table 15.-Wood receipts from large producers at Michigan pulp mills, 1966. Area Large Volume ,producers obtained (Number) (Percent) (Percent) Upper Peninsula 32 8 21 Lower Peninsula 174 34 73 Total 206 22 64 predominately in the Lower Peninsula where 73 percent of mill receipts are purchased from this source. Upper Peninsula mills purchased 21 percent of their wood from the large producer suppliers. Eight mills Offered producers prepayments (loans) in advance of the time of payment specified in the purchase agreements. All six of the Lower Peninsula mills provided this service for some of their producers, and this was reported as usual procedure by their firms. In contrast, two of the four Upper Peninsula made advances, and only one mill stated this as usual procedure. Those that did not offer such aids reported that producers had not requested financial assistance in this form from their firms. There was no set policy among mills as to size limitations on prepayments that were made to producers. The reliability of the pro- ducers and a sufficient cut of wood to cover the amount of the advance usually determine the respective sizes. One mill specified a maximum of about $9 per cord advancement on wood that had been cut. Other business aids for producers were also Offered by eight of the sampled mills. Six mills reported helping producers procure stumpage, six mills helped in financing equipment, and five mills 45 provided advice as to the efficient use of equipment and operational planning. In connection with the latter form of business aid, two mills employed personnel on their wood procurement staffs specifically for this purpose. Other forms of business aids Offered included two mills helping in the construction and plowing of roads on company-owned tim- ber lands, and one mill sold safety equipment at their office to encour- age greater safety practices on harvesting operations. Two mills charged a nominal rate of interest on financial aids offered to producers. The number of producers receiving financial and other business aids from all mills in 1966 was 340 or 36 percent of all producers. This number was high for two reasons, however. Four mills suffered strikes in 1966 and advanced money to more producers than was usual. Another mill advanced money to more producers to help them pay the initial premium required for writing workmen's compensation policies. Thus, the number of producers normally receiving financial and other business aids is much lower than what was reported in 1966. An item that has received considerable discussion in mill rela- tions with producers is the subject of long-term contracts. This has been recommended as a solution for stability of employment on pulpwood Operations and as a means of providing security for producers (Pfeifer, 1967). Long-term contracts were defined as being greater than one year in length. Only one mill made two to three year contracts with producers who requested longer-term.agreements for the purpose of showing secur- ity when arranging for the financing of new equipment. These contracts were a small minority, as only 5 percent of that mill's receipts were purchased under these agreements. 46 Seven mills report producers do not request or want longer-term contracts than what currently exist at the individual mills. Producers had requested long-term contracts at two mills besides the one which was granting a limited number of such contracts. Both mills expressed reluctance to meet these requests, however. Reasons cited were indi- cations from past experience reveal producers do not always meet the long and large committments, and less complications arise when adjust- ments in wood purchases must be made when shorter and less formal agree- ments are used. Pulpwood Producers Some of the adjustments that have been made by the sampled pulp- wood producers to changing labor supply conditions were previously des- cribed under the discussion of working conditions in the selected oper- ations. A more detailed description of these producer operations, some of the reasons for their success, and a look at trends and problems to determine what improvements in conditions are needed are examined here. As a group, the sample of 20 pulpwood producers had high volume, capital-intensive harvesting Operations. They have been reliable, with a stable or increasing production level in recent years. The relatively large size of the producers is shown in Table 16. Sampled producers have been operating as timber producers for an average of almost 15 years. Upper Peninsula Operators have been in business longer-~19 years-compared to an average of 10 years for Lower Peninsula producers. This is probably due in part to the newness of industry in the northeastern part of the Lower Peninsula. 47 Table l6.--Size class of sampled producers, 1966. Size class ::::::e:: (Cords produced) 1,000 or less 1 1,001 - 2,000 2 2,001 - 4,000 2 4,001 - 6,000 5 6,001 - 8,000 5 8,001 - 10,000 2 More than 10,000 3 Total 20- Although all producers had full-time woods Operations, six were involved in other businesses also. Other businesses owned or Operated included two sawmills, a store, a machine manufacturing shop, a farm, and a gas station. Except for the sawmill owners, all were primarily involved in their wood harvesting Operations. Sixteen of the Operations were conducted as individual ownerships, and four firms were Operated as partnerships. The corporate form of business organization was not present primarily because workmen's com- pensation must be paid for all corporation members.5 Otherwise, the advantage of limited liability might make this type of organization desirable where the size of capital investment is large. 5Compensation coverage is optional for partnerships. (Informa- supplied by the Workmen's Compensation Department, Lansing, Michigan.) 48 Equipment Investment and Capital Requirements Investment capital for equipment purchases has been a recognized problem area of independent timber producers. A 1959 report to the United States Senate by Stoddard, concerned with the problems of inde- pendent logging operations, listed credit availability among the major areas in which services and facilities were lacking compared to other small businesses. Since then the size of the capital requirements of producers has continued to increase as newer and more expensive equip- ment has been develOped and put into use. The average total equipment investment for the sampled operations was $66,475. This was the initial investment (cost) of the equipment being used on the Operations. These figures are significant as this is what would be required to set up a comparable Operation. The actual investment at a particular time would be less due to depreciation. The range of total investments was from $20,000 to $226,000. Table 17 shows the spread of investment sizes among the operations. The largest groupings were six in the $20,000 to $30,000 range and six at $100,000 or over. A Not only is the size of equipment investment large on the same pled Operations, but machinery maintenance is a costly item also. Be- cause it was expressed to be cheaper than having repair work done else- where, 11 producers had additional investment in their own maintenance shops. Six producers employed full-time mechanics, although some of their time was spent on other than logging equipment. Eight of the producers reported doing major repairs in their shops, while essentially all producers do their own minor repair work. 49 Table l7.--Range of equipment investments on sampled producer Operations, 1966. Range 12:22:13; $20,000 - 29,999 6 30,000 - 39,999 1 40,000 - 49,999 2 50,000 - 74,999 3 75,000 - 99,999 2 100,000 or over 6 Total '20 The majority of sampled producers received most of their capital requirements from local banks or other credit institutions, sometimes requiring several sources to meet their needs. However, five Lower Peninsula producers received loans from pulp mills for financing equip- ment, and four producers overall received aids to purchase stumpage. Of those producers not receiving these aids, ten producers stated there was a need for such aids, even though some did not desire it personally. Thus, including the producers who were getting the specified assistance, 75 percent of the sampled producers stated a need for long-term capital funds from their product buyers. Forty percent of the producers had received short-term loans or prepayments for working capital purposes from mills. Again these were all Lower Peninsula producers. Only two producers desired and three stated a need among those not receiving this type of aid. The less expressed need for this type of assistance, prevalent among the 50 Upper Peninsula producers, might be due to their longevity in business and, therefore, greater financial security. Producers that had been operating for shorter lengths of time expressed a definite need for credit aids from some source, whether from pulp mills or elsewhere. Production and Costs This section is concerned with the production of the timber handled by the sampled producers, their markets, and the costs and returns involved. Timber Production.--The 1966 output of the sampled producers was 133,150 cords, an average of about 6,660 cords per producer (Table 18). Pulpwood comprised 88 percent of the total production, with Aspen be- ing the major species cut. Aspen would be the largest component of the unidentified category, along with a significant portion of spruce and balsam-fir. Included in the total production shown are 19,000 cords purchased by three producers, either at roadside or in the woods, which was haul- ed or skidded and hauled by them. This amount was 56 percent of the wood handled by these three Operators. Labor problems were cited as the reason for supplementing their production with purchased cut wood. Three producers subcontracted for all their hauling Operations. Actually, two of these sold their pulpwood roadside, as the mills pur- chasing their wood wanted to buy at that location. The mills then con- tracted with haulers for the wood they purchased. The third producer did not want to invest the additional capital required for hauling equipment. Even though the sampled producers were generally quite large, 51 Table l8.--Timber handled by sampled producers, 1966. Product Amount (Cords) Pulpwood: Aspen 48,710 Pine _ 11,050 Mixed hardwoods 17,225 Spruce—balsam fir 620 Hemlocka 1,500 Unknown 37,700 Total pulpwood 116,805 Other Products: Sawlogs and veneer 16,320 Posts 25 All products 133,150 aSome producers who handled two or more species did not give a complete breakdown by species handled. bFigured at 500 bd. ft. per cord. 52 many did not specify a minimum size tract or volume of timber necessary for the profitable operation of their equipment. Producers stating a minimum volume or tract size were primarily tree-length Operators. Some producers indicated the versatility of rubber-tired, shortwood skidders made many small, good stands of timber more available. The most often stated minimum was 40 acres, and three larger tree-length Operations indicated a minimum of 160 acres. The largest operation encountered (14,000 cords), using a high-capacity slasher to buck tree- length wood, expressed a section of timber as a desirable size tract for their type of operation. Only two producers expressed some difficulty in obtaining stump- age. Other producers had not experienced problems in this area so far, although a few expected stumpage availability at moderate prices to be more limited in the future. The majority of wood handled by the sampled producers was sold directly to primary manufacturers, including pulp mills, sawmills, ve- neer mills, or other product manufacturers. Eighty-eight percent of total wood sales was sold direct, and 12 percent was sold to dealers (mostly in the Upper Peninsula). Due to the smaller size of the Upper Peninsula pulp mills, sam- pled producers in that area sell their pulpwood to a larger number of outlets. Table 19 shows the number of mills and dealers sampled pro- ducers sold their pulpwood to in 1966. In addition, sawlogs and other by-products were usually sold directly to local markets as they were available. Costs and Returns.-Costs of production are probably most often calculated by the different phases of harvesting--cutting, skidding, 53 Table l9.-Number of sampled producers selling pulpwood to different numbers of pulp mills and dealers, 1966. A Number of pulp mills Number of dealers “3 1 2 3 4 1 2 (Number of producers) Lower Peninsula 8 2 l - l - Upper Peninsula 1 4 l 3 3 1 and hauling. Producers tend to be more familiar with costs figured on this basis. Labor and machine costs are then combined in each phase, and their effects are not explicitly distinguished. With increasing mechanization and changing methods of wood har- vesting (e.g., the trend toward tree-length harvesting where labor is often paid by the hour), calculating costs by labor and machine expenses per cord helps in effective cost control and in planning possible new harvesting methods.6 Costs figured in this manner, along with produc- tivity rates, help in the comparison of the profitability and the sen- sitivity to labor costs of different harvesting systems. Table 20 shows costs and profits per cord of output for the sam- pled producer Operations. The data obtained were averages for all wood products combined. The ranges and variance would be greater if shown by species. Because of the limited production of peeled wood by the sampled producers, costs for peeled wood were not included. Hand-peeled produced wood would add significantly to labor costs, and wood that is machine-peeled would add to both labor and machine costs. 6Examples of costs calculated in this manner to help analyze and plan operations in Michigan are recent publications by Gardner (1966) and Hartwig (1967). Complete references are given in the Literature Cited. 54 Table 20.--Costs and profits per cord of output on sampled producer Operations, 1966. Items Range Average Percent Labor cost $6.00 - 10.50 $7.16 42.5 Machine costs 2.50 - 5.50 3.78 22.5 Stumpage costs 1.10 - 7.00 1.93 11.5 Miscellaneous and a overhead costs 1.00 - 2.50 1.75 10.4 Profit .77 - 3.50 2.21 13.1 aIncludes road building and maintenance, snow plowing and equipment, record keeping expenses, cruising, transportation facilities, buildings, etc. 55 The average profit figure shown in Table 20 includes the return to the producer for labor and management. MOst producers usually do not figure their labor explicitly as part of their costs, and, there- fore, the return shown is for both. Also, the figures are only for wood harvested by the producers themselves.7 Figures for the tree-length Operations were about the same as for the conventional shortwood set-ups. While they had a higher pro- ductivity per man, higher wage levels produced similar labor costs per cord. Seven of the sampled producers did the majority of their book- keeping themselves. Five producers had their wives keep most of the records, six had outside accountants do their work, and two had full- time bookkeepers. Producers who did their own bookkeeping generally were more cost conscious and knew more precisely what their costs of production were. Considering the average profit figure of $2.21 per cord and the .average of about 5,700 cords harvested on the sampled operations (plus the income received from the handling of the purchased cut wood), these producers had fairly good returns for 1966. However, it must be rememr bered that (l) 1966 market conditions and prices were better than usual, and (2) these producers are above average in management, are quite effi- cient, and depend upon high volume production. To stay in business profitably, sampled producers stated either a 10 percent net return per cord or $10,000 net annually was necessary. 7Producers who supplemented their production with purchased cut wood reported an average return of about $1 per cord on that wood. 56 If the return was much less, it was considered hardly worth their time or effort, especially for the investment involved. Wood Sales Agreements The sales agreements or contracts by which producers sell their pulpwood to Michigan mills was discussed previously in the section on "Pulp Mills" under the heading of "Wood Procurement." A majority of the sampled producers, however, expressed dissatisfaction with current- ly existing contract agreements. Of the producers interviewed, only two supplied less than their 1966 contract agreements. Of these, one was primarily a sawlog producer, and his annual pulpwood sales varied as a by-product of his sawlog pro- duction. The other had reduced production below his original agreement because a labor strike at the pulp mill had forced the mill to reduce purchases. Fifty-five percent of the producers supplied mills with the amount of wood they had contracted for, and 35 percent supplied more than their agreements called for. Those that produced over generally did so either because they were encouraged by the mills because of the wood shortage situation, or they believed that such a performance would be favorable for them in securing larger future contracts. At the time of the interviews (summer, 1967), 12 or 60 percent of the producers expressed current difficulty in getting sufficient wood orders. During the previous year, essentially no difficulty was incurred in receiving desired volume agreements. Because of increased investment and "geared-up" production levels, current reductions in ‘wood orders were quite serious to some of the producers. Due to a 57 large prOportion of fixed costs, a few producers reported just meeting expenses or credited 1966 income as carrying a portion of their costs. The difficulties faced because of fluctuating wood orders explain largely the desire for longer-term contracts by a majority of the pro- ducers. Wanting primarily a more stable planning period, 13 producers desired longer-term contracts or agreements with their wood buyers. Table 21 shows the number of producers by the length of contract desired. Besides stability, another reason for desiring long-term contracts was for showing security when making credit arrangements. MOst of the producers agreed they would accept long-term contracts subject to established changes in market conditions. Also mentioned were conditions pertaining to possible price changes. Of those producers not expressly desiring long-term contracts, three felt they had sufficient relations with their mills and were sat- isfied with present agreements. Two producers were indifferent, stating if such contracts proved to be meaningful, they would then accept them. And two did not want to commit themselves to long-term agreements. A study of pulpwood producers in Wisconsin in 1966 by the Nor- thern Great Lakes Resource Development Commission reported that producers generally did not desire long-term contracts. As indicated earlier, the majority of pulp mills sampled in this study similarly believe that most producers do not want long-term contracts. This may be true when one considers all pulpwood producers, since numberwise, small producers make up the majority. Small, part-time producers may not want to come mit themselves, as they may desire to be free to switch markets as prices change. Such a viewpoint is not prevalent among large, high volume 58 Table 21.-~Number of sampled producers indicating length of longer- term contracts desired, 1967. Contract Number of lepgth producers (Years) 1 5 2 3 5 2 a Indefinite 3 Total 13 8Did not specify a given length but wanted a continuing agreement over a longer period of time. producers with large capital investments, as is exhibited by the sampled producers. Stable and secure markets are necessary and more important for and to these producers. Trends and Problems As has been shown, the sampled producers depend upon and require high volume production to assure a fair return for their efforts and capital investments. In spite of an overall trend of increasing produc- tion size, a large majority do not plan to expand their operations any further or will not unless certain conditions and practices can be reme- died within the pulpwood industry. For the most part, the producers sampled gradually expanded their Operations through years of hard work and by establishing their credit and reliability with local credit institutions and major product buyers. 59 Nine producers had received financial assistance from mills and dealers in past years which helped build their organizations. Others had built their productive capacity by selling through many outlets or by estab- lishing good relations with a particular mill which usually assured a market for their production. Also, a few had taken over and built upon organizations established by others, usually a father's. Eleven of the sampled producers, however, expressed no plans to expand their present Operations. The primary reason discouraging new expansion was the desire to limit further capital investment. The riskebearing of such ventures was considered too great, due to previous experience with unstable markets. Also cited, as a dissuading factor in increasing employment, was the high cost of workmen's compensation insurance. Among the 11 producers not planning to expand were three approach- ing retirement who desired to scale down the size of their operations. In addition, one other producer planned to phase out his own harvest- ing Operation if current cutbacks in wood orders were not regained in the near future. Four producers who expressed a desire to increase production levels could not because of current conditions. All stated an inability to get sufficient wood orders or an assured market for any possible increased production. It was believed by a few that some mills desired to limit the size that producers could attain. Another four producers had definite plans for increasing timber output. Intentions were mainly to increase output per man, although two indicated increasing employment along with greater productivity per man. All but one indicated their added production would go to a single 60 mill, but financing for the expansion would not be aided from any of the product buyers. Thus, only 20 percent of the sampled producers were planning future expansion under existing conditions within the industry . Of course, the current slump in markets being faced by producers would tend to dampen the outlook for possibly enlargening their Opera- tions. But setting aside what is presumably a temporary condition, producers feel certain practices and problems must be improved upon for satisfactory operating conditions in future periods. The need for more stability in wood orders to attract an adequate labor force and to achieve efficient production was the overriding con- cern of the sampled producers. This is evident by their response as to what they feel pulp mills can do to help increase the production of wood to meet future increasing demands (Table 22). The large support for longer-term contracts followed by the response for larger contracts and closer relations with regular producers reveals this predominant problem. 4 The replies for closer relations between mills and regular pro- ducers concern both the desire for more accurate information involving current events and trends in market conditions, and mill policy toward buying from additional producers during higher demand periods. It was expressed that during periods of higher demand for wood, mills did not give prOper consideration to the capabilities of regular producers in the industry of supplying the increased requirements. Rather, addition- al wood requirements are often purchased from new suppliers, resulting in inefficient volume orders for all producers, especially if markets happen to slump and orders are curtailed. Table 22.--What sampled producers feel pulp mills can do to help increase wood production to meet future require- ments, 1967. Action Number of cited producers Raise prices 3 Financial and mechanization aids 5 Longer-term contracts l3 Larger contracts 5 Producer training 1 Closer relations with regular producers 5 Related to the area of closer relations with regular producers were the viewpoints expressed concerning price increases. Only three producers advocated price increases as necessary for increasing produc- tion, while most pointed out current prices were adequate. In fact, two producers thought recent price increases may have gone too high, since such action encouraged too many new producers to enter the indus- try and flood the market with wood. These new producers, it was pointed out, are usually less familiar with costs of operation. Therefore, they raise production costs by bidding higher for stumpage, and continue to produce wood when markets are full and prices drop as long as they cover operating costs (in effect, ignoring or underestimating fixed costs). Thus, over time, wood production costs are forced to increase. Financial and mechanization aids by mills were put forth by five producers as an action to encourage future wood production. However, 62 some producers were already receiving such help, and more indicated a need for this form of aid as discussed in the section on "Equipment Investment and Capital Requirements." Only one producer recognized producer training as a necessary course of action by mills. But, educating and aiding producers might perhaps be implied as a part of closer relations and information chan- nels between the mills and producers. Outside of what pulp mills could possibly do to help in the production of wood, one-half of the sampled producers stated a need for an investigation of workmen's compensation insurance costs. While some producers realized safety practices must be increased, many felt there were inequities in the present regulations that should be cor- rected. Specific areas mentioned were payments on fringe benefits, corporation members (meaning payments on the producer's earnings when the business is incorporated), and machine expenses included as labor. Also questioned was the possibility of having separate rates on differ- ent occupations within the overall harvesting operations. One other area of necessary action referred to by a producer was training programs for equipment Operators. Virtually all the equip- ment operators on the sampled Operations had been trained on-the—job. Although several producers expressed on-the-job training as a costly procedure, there was no other alternative readily available. CHAPTER IV MAINTAINING THE WOODS LABOR SUPPLY The pulpwood labor requirements projected for 1980 showed approx- imately the same levels of employment as estimated for the current labor force. However, certain conditions are necessary to insure that an available supply of woods labor is maintained. For several years the pulpwood industry has been forewarned of a limited supply of woods labor. In 1957 Bromley pointed to a woods labor crisis as a more crucial problem for pulp mills to face, sooner than any possible shortage of wood supplies. Also in 1957, Levene noted developing manpower problems in pulpwood harvesting and a dwindling supply of woods labor. Both Bromley and Levene recommended that steadier and more stable work be provided for woods workers. Also recommended were improved safety practices, the provision of fringe benefits, more recognition of unemployment and workmen's compensation insurance, and greater mech- anization. These warnings by Bromley and Levene were directed toward the industry at large, but most of the recommendations involve employer- employee relationships. Therefore, they directly have to be provided to woods workers by their employers--the producers. It is important to recognize that the woods labor supply be considered apart from pro- ducers. Producers are the employers of the woods labor force. And if producers face conditions that make it unprofitable to Operate, this in itself will reduce employment, even if an adequate labor resource is willing to work. Indirectly, certain conditions may determine what 63 64 producers can provide for their workers. In years previous to 1965 surpluses of wood and rural labor enabled pulp mills in Michigan and the Lake States to procure their wood requirements at fairly stable prices. Procurement policies led to a system of many small producers with a large part-time labor force. Manthy and James (1964), analyzing such policies in a study of pulpwood marketing in the North Central region, stated: Present policies which lead to widespread use of seasonal, part-time pulpwood producers can be viewed as socially desirable in that they offer some earnings to a great many of rural workers. In another sense, such policies contribute to the oversupply and underemployment of labor in the pulp- wood producing regions. They may provide income which, when added to that available from other marginal forms of employ- ment, is enough to hold an abundance of lowbincome labor in the area. In the long run, such labor supply may be lost in any case (at least the most productive part of it). It is apparent from the interviews with both the pulp mills and producers that the availability of woods labor has become limited. The course of action that basically appears to be necessary to increase the availability of woods labor is a change in the wood procurement policies of pulp companies. While the wage rate for woods labor has been fairly competitive if compared to other occupations, low average annual earnings, the lack of fringe benefits, the short work year, the hard physical work, and the general lack of security have made woods work less than attractive. However, the sampled producers have shown that it is possible to off- set these disadvantages to a certain extent. By establishing capital- intensive (more mechanized), high volume operations, producers have been able to incorporate improvements in working conditions for employees while achieving a fair return for their investment and labor. But the producers are limited in their efforts to the extent that they have 65 a fairly stable and assured market for their volume production. In the previous chapter it was outlined what the pulp mills feel they can do to counteract wood shortages, and what the producers feel the pulp mills can do to help increase future wood production. Longer- term and larger contracts, the major desires of the producers, did not receive as favorable reaponse from the pulp mills. The high reliance upon price increases by mills perhaps reflects a more immediate solu- tion to wood supply problems, and also may indirectly reflect a concern over reducing the number of producers. Reducing the number of producers may be a question of social concern on the part of the mills. However, in the long run, greater efficiency in the industry is needed for it to remain competitive. And for efficiency to be achieved, better producer harvesting operations are needed. As pointed out by the sampled producers, prices for wood were not so much a problem as instability in wood orders. Producers believe long-term contracts will help reduce instability and permit them to create better employment conditions and reach more efficiency in production. Of course, some degree of annual fluctuation in pulpwood require- ments appears inescapable. However, the size of the fluctuations do not appear to be that large. A large proportion of the mills' pulpwood requirements could be reasonably assured of purchase over time. A production system consisting of many small, part-time producers has not been able to provide the improvements in working conditions necessary to attract labor to woods work. Such a system is also more adversely affected by changes like the new workmen's compensation law in 1965, which made workmen's compensation applicable to producers 66 employing one man or more.8 As reported previously, a number of the sampled pulp mills attributed the wood shortage in part to the forcing out of business of small producers who became subject to the high work- men's compensation costs. A change, such as the elimination of the exemption of small log- ging Operations from minimum wage and overtime regulations under the provisions of the Fair Labor Standards Act (which may be expected in the not too far distant future), could produce adverse effects among small operators similar to that which occured with the change in the workmen's compensation law. However, such action would hardly affect the operations of the producers sampled for this study. Particularly, the tree-length Operations could accommodate such a change easily. The promotion of a pulpwood production system which can accommodate such changes is desirable for the stability of the whole industry. Regarding the possibility of training woods workers as a means of increasing the woods labor supply, it would be necessary to be able to offer such trainees a fairly attractive job. Training a person to be a pulp cutter under working conditions generally existing today is not likely to attract many potential workers. The minimum requirements necessary would be conditions which exist currently in the "best" Operations. Emphasis must be directed towards improving general working conditions before considering training programs (which, in some form, may be desirable for future equipment operators and maintenance men). 8Currently, Michigan's loggers are legally required to carry workmen's compensation insurance if they employ one man 35 hours a week for 13 weeks (or three part-time employees 35 hours a week for 13 weeks). Prior to the change in 1965 the law applied to only emr players of three men or more. (Information supplied by the Workmen's Compensation Department, Lansing, Michigan.) CHAPTER V SUMMARY AND CONCLUSIONS The wood shortage of 1965 and 1966 has awakened concern over the problem of maintaining an adequate supply of woods labor for the forest products industry in Michigan. This study has focused attention on the present status and future requirements of woods labor for the pulpwood industry. Data and resulting conclusions are based largely on interviews with representatives of Michigan pulp mills and a portion of their producer suppliers. Interviews were conducted during the sum— mer of 1967. Interest was centered on data for the year 1966. The Woods Labor Force In the absence of reliable data concerning the actual number of workers involved in the harvesting of forest products, employment fig- ures were estimated by relating the average productivity per man-day and man-year of labor to total volumes of timber output. Using this method, it is estimated that in 1966 approximately 40 percent of the 8,924 full-time equivalent workers in logging in Michigan were involved in producing pulpwood. The recent wood shortage conditions have been largely attributed to a woods labor shortage. Yet indications are that an adequate phys- ical labor resource was present in wood producing areas during this same period. Factors other than the size of the labor resource were affecting the availability of the physical labor supply. Studies of woods labor reveal the following as typical woods labor characteristics and working conditions: The average Michigan pulp cutter earns 67 68 approximately $76 a week over a period of 40 weeks a year, or an annual income of less than $3,000; engages in hard physical labor for his earn- ings; receives no fringe benefits; and, in general, lacks any job se- curity. Accordingly, during periods of high economic activity, Oppor- tunities in other forms of employment limit the availability of woods workers. It is implicit, therefore, that woods work must be made more attractive than alternative work to bring entrants into the wood pro- ducing industry. With this in mind, working conditions were observed on the "best" pulpwood producing operations to determine reasons and conditions which contributed to the success of these Operations. By building capital-intensive, high volume operations, sampled producers considerably improved working conditions of their employees. Wages for the 194 full-time and 26 part-time workers employed on these operations in 1966 averaged $106.55 per week. Employees on the higher productivity tree-length operations earned $138 per week, and employees on the shortwood operations earned $95.61 per week. A longer work year-- 47 weeks--was averaged during 1966 compared to the usually cited indus- try average of 40 weeks. Also present was a beginning trend toward the provision of such fringe benefits as paid vacations and holidays, health and hospitalization insurance, overtime, retirement, and trans- portation. By building more capital-intensive operations (utilizing less labor-intensive harvesting methods) and increasing productivity and total output, these producers experienced less difficulty in hiring and retaining employees. Assuming the sampled pulpwood operations will be representative of pulpwood Operations in the near future, pulpwood labor requirements 69 for 1980 will be approximately the same as present day employment levels. This is so because of (1) increased productivity of capital-intensive operations, (2) lengthening of the work year made possible by the in- troduction of new technology, and (3) potential use of chips from the waste of wood-using plants. Specifically, 3,530 full-time equivalent workers will be required to harvest the 3,180,000 cords of output pro- jected for 1980, assuming a productivity of 3.45 cords per manrday for 235 work days, with 10 percent of total production composed of chipped residues. Adjustments to Changing Labor Supply Conditions While labor requirements will not be greatly increased, the prob- lem remains of maintaining an adequate, available labor supply. Recent industry adjustments to changing wood and labor supply conditions in- dicate, with some additional changes, that this problem can be solved. The most notable adjustment that has been made by the pulp mills in response to the wood shortages experienced in 1965 and 1966 was an increase in the price paid for wood. Pulp mills interviewed view price increases as the most effective means of cOping with possible future wood shortages. Producers are the most important agent source of wood for mills, supplying 88 percent of total receipts in 1966. Contractual agreements for purchasing wood from producers were approximately equally divided between written and oral agreements among the mills. Oral agreements ranged from 1- to 6-months, and written contracts usually ranged from 6- to lZ-months in length. Contracts covering a period greater than one year in length are 70 provided to a limited number of producers by only one of the sampled pulp mills. Mills in general expressed reluctance to grant long-term contracts to producers because it was felt producers would not meet the long and large committments. And, less complications arise when adjustments in wood purchases must be made when shorter and less for- mal agreements are used. However, two of the three mills utilizing chips granted 2- and 3—year contracts with their chip suppliers, stat- ing they were considered more stable and reliable. The most significant change among the sampled producers was the trend toward increased production through the utilization of capital- intensive production methods. The average total investment in equip- ment for all operations was $66,475. Average output was 6,660 cords. Producers have been forced to mechanize as the supply of labor has become more limited, particularly the availability of part-time labor. As capital investments have increased, output has increased to lower unit costs of equipment and achieve efficient production. Characteristically, sampled producers have been reliable produc- ers, with a stable or increasing level of production in recent years. Their operations have been gradually expanded through years of hard work and by establishing their credit and reliability with local credit in- stitutions and major product buyers. They depend upon high volume pro- duction to assure a fair return for their efforts and capital investments. Through capital-intensive, high volume operations, producers have at- tempted and, to a limited degree, achieved improved working conditions for their employees. However, the producers' inability to obtain regular and suffi- cient contracts over longer periods of time have complicated efforts 71 to improve woods working conditions required to maintain an adequate and efficient labor force. Primarily because of this problem, only 20 percent of the sampled producers were considering future expansion of their harvesting operations. Sixty-five percent of the sampled producers definitely expressed the need for longer-term contracts. With high volume operations a lon- ger planning period is needed. Stumpage should be obtained well in advance of harvesting to assure adequate cutting supplies. Longer-term contracts assist in securing long-term capital funds for equipment in- vestment. And stability in wood orders is needed to maintain full-time employment for workers. The pulp mills react directly to changing wood supply conditions by increasing or decreasing prices. However, the changing wood supply conditions result largely from changes in the availability of woods labor. And the producers-—the employers of woods labor--face directly the changing conditions in the labor supply. While the pulp mills indicated their major reliance upon price increases as a means to avoid wood shortages, the sampled producers pointed out that wood prices do not constitute a major problem for them. Longer-term contracts, larger contracts, closer relations with regular producers, and financial and mechanization aids received more favorable response by producers as desirable actions by pulp mills to help increase wood production to meet increasing demands. 72 Maintaining the Woods Labor Supply With the trend toward fewer and larger producers, the needs ex- pressed by the sampled producers will continue to grow in importance. What the pulpwood producer is able to do to improve working conditions for his employees is largely determined by the practices of the pulp mills. A prerequisite to increasing the availability of woods labor appears to be a change in the wood procurement policies of the pulp companies. Greater stability in pulpwood production is needed. The reduc- tion in the seasonal purchasing of pulpwood shown to date is a signifi- cant step in this direction. To further achieve this stability, longer-term and larger con- tracts with regular and reliable producers would be a desirable action on the part of pulp companies. To a limited extent, action in this direction has been implemented. As an example, one of the sampled mills was using yearly contracts with producers, was allowing producers to establish their reliability, and was dealing with fewer and larger producers. Perhaps these policies were implemented because this mill was a new competitor and recognized changes necessary to attract new entries to the timber producing business. One reason that has been voiced by pulp mills against large and long-term contracts is that past indications and experience reveal pro- ducers will not always meet large committments. However, the perfor- mance of the sampled producers would tend to counteract this position. Careful selection and close relations with good producers should pro- vide a more reliable and stable source of raw material supply for the 73 pulp mills. Greater financial and mechanization aids would also appear to be a desirable action by pulp companies. A.willingness to increase and initiate this action was expressed by a majority of the sampled mills. Greater involvement by this form of action may also help con- trol unwarranted development of productive potential, which happens when excessive encouragement is given to too many operators. As shown by the sampled "best" producers, improved woods working conditions can be initiated when better relations exist between mills and producers. However, even these producers expressed a need for the stated changes. If further improvements for maintaining an adequate, available supply of woods labor are to be brought about, these basic changes would appear to be the focal point for initial action. LITERATURE CITED 7. 10. 11. LITERATURE CITED Anonymous (1967). Report on forest industry business conditions and predictions of things to come. Northern Logger and Timber Processor 15(7): 11-13, 26-27, 41. Armstrong, Donald B. (1966). Effects of increased timber demand upon labor supply and training. Proceedings of Seventh Conference on Southern Industrial Forest Management. Duke Univ., Durham. pp. 98-116. Blyth, James E. (1964). The labor resource for expanding wood- using industries in Northeastern Minnesota. Lake States Forest Expt. Sta. 27 pp. . (1967). 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Forest Service Misc. Pub. 941. Washington, D. C. 74 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 75 Hartwig, R. T. (1967). Pulpwood operations: what it costs--how it pays. Cooperative Extension Service, Mich. State Univ. A. BC. 76. 13 pp. James, Lee M. (1957). Marketing pulpwood in Michigan. Mich. Agric. Expt. Sta., Special Bul. 411. 67 pp. . (1966). Michigan timber production--now and in 1980. Part I--Timber production. Mich. Agric. Expt. Sta. Research Pap. 38, Nat. Res. pp. 1-16. Levene, L. (1957). Manpower problems in the woods. Pulp and Paper 31(7): 89-91. Manthy, Robert S. and Lee M. James (1964). Marketing pulpwood in selected areas of the North Central region. Mich. Agric. Expt. Sta. Res. Bul. 6. 120 pp. Massie, R. C. Micheal (1965). Marketing timber products in selected areas of the North Central region. Unpublished Ph. D. thesis, Mich. State Univ., East Lansing. McNutt, J. W. (1947). New developments to improve methods of pulpwood procurement in the United States. TAPPI Monograph Milwaukee Journal (1966). Sunday, February 13. Northern Great Lakes Resource Development Commission (1966). Wood production problems in Wisconsin. Report of the subcommittee to the NGLRDC, Green Bay. Northern Michigan University (1965). Manpower problems and economic Opportunities in an adjusting regional economy: the Upper Peninsula of Michigan. Northern Mich. Univ., Marquette. 245 pp. Pfeifer, Ray E. (1967). Michigan pulpwood production--l966. Mich. Dept. of Conservation, Forestry Div. Unnumbered mimeograph. 8 pp. . (1967). Unpublished report concerning woods labor in Michigan. Mich. Dept. of Conservation, Forestry Div., Lansing. Pikl, I. J. (1960). The southern woods labor shortage of 1955. Southern Economic Jour. 27: 43-50. U. 8. Bureau of the Census (1966). Census of manufactures, 1963. Area Statistics: Michigan, MC63(3)-23. Washington: Gov. Print. Office. 26. 27. 28. 29. U. U. 76 8. Bureau of the Census (1966). Census of manufactures, 1963. Industry Statistics: Logging camps, sawmills, and planing mills, MC63(2)-24A. Washington: Gov. Print. Office. S. Department of Labor (1966). Fair labor standards act of 1938, as amended. WHPC Publication 1167. Washington: Gov. Print. Office. 24 pp. (1964). Small logging operations. WHPC Research Report. Washington: Gov. Print. Office. 34 pp. S. Senate, Select Committee on Small Business (1959). The problems of the independent logging and sawmill industry. Report No. 240, 86th Congress, lst Session. APPENDICES APPENDIX A. PRIMARY MANUFACTURER QUESTIONNAIRE CONFIDENTIAL Date Recorder PRIMARY MANUFACTURER Name of firm Address A. Wood Procurement 1. What was the total volume of wood receipts at your mill in 1966? What was the pattern of wood receipts at your mill in 1966? (Indicate by season and amounts or 2) Season Volume or Z Do you consider this pattern in volume of wood receipts at your mill in 1966 to be a desirable pattern? Yes No If NO, what is your preferred pattern of wood receipts? From.which agent sources was your 1966 wood supply obtained? (Estimate volume of wood or percentage of total volume obtained from each source.) N Volume a. Own employees: 1) From own land 2) From other land b. Producer c. Dealer d. Other agent (specify) Have there been any significant changes in the agent sources of your wood supply over the period 1962-1966? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? 78 Have you made any adjustments in your inventory and wood purchase patterns to accommodate wood suppliers during the period 1962- 1966? a. Longer purchase periods b. Longer daily hours c. Larger inventories d. Longer contracts e. Other 7. What percentages of your firm's 1966 cut wood purchases were obtained under the following types of agreements? Z a. Written contract b. Oral contract c. No prior agreement 8. How far in advance of the beginning of wood deliveries are con- tracts usually negotiated? 9. Are there any differences in the cut wood purchase contracts made with different groups of agents? Yes No If YES, what are examples of these differences? 10. Are any long-term cut wood purchase contracts made with producers? (Greater than 1 year in length.) Yes No If YES, what is the length of time of these contracts? If YES, what percentage of producer receipts are purchased under these contracts? 11. Do producers request or want longer term contracts? Yes No 12. Does the standard cut wood purchase contract specify any condi- tions under which timber is to be harvested? Yes No If YES, what are these conditions? Producers 13. How many producers sell cut wood directly to your mill? No. 79 14. What number or percentage of these producers are large producers? (Large producers are defined as those supplying 1,000 cords of pulpwood or more.) No. Z 15. What volume or percentage of total wood receipts are received from large producers? Volume Z of total 16. How are producers paid who sell directly to the mill? a. By load b. Weekly c. Other 17. Are any producers Offered payments (loans) in advance of time of payment specified in a standard contract? Yes No If NO, do producers request financial assistance from your firm? Yes No If YES, is this the usual procedure adopted by your firm? Yes No If YES, does the producer pay interest on such prepayments or loans? Yes No If YES, what is the size limitations on the financial aids offered? 18. Are any producers offered other business aids by your firm? Yes No If NO, do producers request business aids from your firm? Yes No If YES, is this the usual procedure adopted by your firm? Yes No If YES, what are these business aids? 19. What percentage or number of producers received financial or other business aids by your firm in 1966? No. N 80 C. Trends 20. To what degree does your firm perform the following functions in regard to wood procurement? a. Logging b. Hauling 21. Has your firm experienced any wood shortages or difficulties in procuring sufficient wood supplies to meet your demands in the years 1962-1966? Yes No If YES, which years? If YES, what do you feel were the causes of these shortages? 22. What do you feel your firm can do to counteract or avoid wood shortages? a. Raise prices b. Financial assistance c. Longer term contracts d. Larger contracts e. Producer training f. Mechanization aids g. Company logging h. Other assistance or business aids 23. Has your firm taken action in any of these areas in relations with wood suppliers? 24. Firm's best producer Operations. Name Address APPENDIX B. PULPWOOD PRODUCER QUESTIONNAIRE CONFIDENTIAL Date Recorder PULPWOOD PRODUCER Name Address A. General 1. How many years have you been Operating as a timber producer in your present location? years. 2. Are you a full-time timber producer? Yes No If NO, what other business or occupation are you engaged in? a. b. C. Sawmill Operator ____ d. Farmer .___ Operator of other e. Wage earner wood-using mill ____ f. Other Store Operator If NO, what percentage of your gross revenues in 1966 was realized from your business as a timber producer? Z 3. What were the principal raw timber products you handled in 1966? a. b. c. d. e. f. 4. Is your timber producing business typically a year-round business? Yes No If NO, why? If NO, what are the typical months of operation? 5. Under what form of business organization is your business conducted? a. b. c. Individual ownership Partnership Corporation 81 82 B. Employees 6. 10. 11. 13. 14. 15. 16. How many full-time and/or seasonal employees did you have in your timber producing business in 1966? Full-time Seasonal Employees Do you hire part-time or seasonal employees for peak production periods? Yes No If YES, what do these workers do after their period of employment with you? How many years have your employees been with you? Average Range What is the age of your employees? Average Range What was the average earnings for employees per week during 1966? per week Your indirect labor costs amount to what percentage of your payroll? How are employees paid? a. Piece rate c. Weekly e. Other b. Per hour d. Per cord How often are employees paid? Are employees flexible enough in skills to interchange most jobs if needed? Are there minimum standards of performance such as a specific number of cords per week that employees must meet? Yes No If YES, what are these standards? Where are the sources of your employees? a. Town or city b. Rural 83 17. What is the average distance employees travel from home to place of work? Average Range C. Equipment 18. What is your total equipment investment in your timber producing Operation? 19. Have employees received any prior training or experience before Operation of equipment, or do they receive on-the-job training? 20. Do you have your own machine shop for maintenance of equipment? Yes No If YES, are both major and minor repair work done in this shOp? If YES, who does the maintenance work? If YES, is equipment owned by employees also serviced in this shOp? D. Production and Costs 21. What was the total volume, by product and unit of measure, of your timber product sales in 1966? Product Volume a. b. c. d. e. f. 22. Does your production usually go over, under, or equal the amount you have contracted for? 23. What is your average output per man-day? cords per man-day 24. 25. 26. 27. 28. 29. 30. 31. 32. 84 What is the average number of weeks of work per year? weeks per year What is your average number of days of work per week? days per week What is your average number of hours of work per day? hours per day What costs per unit of output apply to the wood products in your present Operation? Cost Percent a. Labor cost b. Machine costs: 1) 2) 3) 4) c. Stumpage cost d. Miscellaneous and overhead costs What profit per cord or annual income do you need to stay in business profitably? What profit per cord do you make on your present Operation? What was the total labor cost for the timber products produced by you in 1966? What was your total equipment expenses for the timber products produced by you in 1966? Do you subcontract any part of your timber producing operations? Yes No If YES, did subcontracting apply to: a. Felling and bucking Yes No b. Skidding Yes No c. Hauling Yes No If YES, what percentage of the volume handled was subcontracted? a. Felling and bucking b. Skidding c. Hauling NNN 85 If YES, why didn't you handle all the logging Operations your- self? (If more than 1 reason, check in order of importance.) a. Lacked necessary equipment b. Lacked logging or hauling experience c. Inadequate labor available d. Believed subcontracting to be the cheaper method e. Producer's time more valuable for other purposes f. Other (specify) 33. Is there a minimum size tract or volume of timber that is necessary for the profitable Operation of your equipment? Yes No If YES, what volume or size of tract is considered a necessary minimum? 34. Do you have difficulty obtaining stumpage? 35. Who does the bookkeeping for your Operation? E. Business Aids 36. Do you receive any loans or prepayments from any product buyers in advance of time of payment specified in a standard contract to facilitate your logging or hauling responsibilities? Yes No If YES, which buyers? If YES, for what purposes? If NO, do you desire such aids? Is there a need for such aids? 37. Do you receive any other business aids from product buyers to facilitate your logging or hauling responsibilities? Yes No If YES, which buyers? If YES, for what purposes? If NO, do you desire such aids? Is there a need for such aids? 86 38. Do you receive financial or business aids from other sources to facilitate your operations? Yes No If YES, what sources and for what purposes? If NO, is there a desire and a need for such aids? F. Trends 39. To what product buyers or agents did you sell the wood products you handled in 1966? No. 2 of total volume a. Manufacturer b. Dealer c. Other (specify) 40. Do you encounter any difficulty getting regular and sufficient wood orders for the wood products you handle? 41. Do you desire long-term contracts or agreements with your wood buyers? Yes No If YES, how long? If YES, with what conditions? 42. What have been the significant changes in the organization and use of equipment in your operations in the years 1962-1966? What were the reasons or causes for these changes? (Rank in order of importance.) a. b. c. d. 43. 44. 45. 46. 87 What changes in the number of persons employed in the production of your timber products took place in the years 1962-1966? 1962 1963 1964 1965 1966 What fringe benefits do employees receive? Paid vacation and holidays Health and hospitilization Bonuses Sick leave Life insurance Other What changes in the annual volume of your timber product sales took place in the years 1962-1966? 1962 1963 1964 1965 1966 Do you plan to expand your Operations? Yes Would like to but can't No If you would like to but can't, why not? If NO, why not? If YES, how do you plan to expand? a. MOre independent workers or crews? b. Increased output per man? C. If YES, how will you finance your expansion and where will your increased production be sold? 88 47. How were you able to expand to your present Operations? (Financial backing, sale of products to more buyers, other help received, etc. ) 48. What do you feel pulp mills can do to help increase the production of wood to meet increasing demands? a. Raise prices b. Financial assistance c. Longer-term contracts d. Larger contracts e. Producer training f. Mechanization aids g. Other 49. What else do you feel is necessary to be done to help pulpwood producers? "I111111111111111S