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Community stability and regional economic development: the role of forest policy in the North Central… Byron, Ronald Neil 1976

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COMMUNITY S T A B I L I T Y AND REGIONAL ECONOMIC DEVELOPMENT; The R o l e o f F o r e s t P o l i c y i n t h e N o r t h C e n t r a l ^ . a t a r i o r o f B r i t i s h C o l u m b i a . by RONALD NEIL BYRON S c . ( F o r e s t r y ) ( H o n s . ) , A u s t r a l i a n N a t i o n a l U n i v e r s i t y , 1972. M.A., U n i v e r s i t y o f B r i t i s h C o l u m b i a , 1976. A THESIS SUBMITTED IN PARTIAL FULFILMENT Of THE HEO.UI BEMENT5 FOE THE DEGREE OF DOCTOR OF PHILOSOPHY i n t h e F a c u l t y o f F o r e s t r y . He a c c c e p t t h i s t h e s i s as c o n f o r m i n g r o t n :• r e q u i r e d s t a n d a r d s . THE UNIVERSITY OF B R I T I S H COLUMBIA. Se p t e m b e r 19 76. © Ronald Neil Byron 1976 In p r e s e n t i n g t h i s t h e s i s in p a r t i a l f u l f i l m e n t o f the r e q u i r e m e n t s f o r an advanced degree at the U n i v e r s i t y o f B r i t i s h C o l u m b i a , I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by the Head o f my Department or by h i s r e p r e s e n t a t i v e s . It i s u n d e r s t o o d that c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department o f The U n i v e r s i t y o f B r i t i s h Co lumbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date A B S T R A C T Community s t a b i l i t y i n the sense of the long run s u r v i v a l of f o r e s t i n d u s t r y c e n t r e s has o f t e n been declared an o b j e c t i v e of p u b l i c f o r e s t p o l i c y . I t has been widely a s s e r t e d t h a t "community s t a b i l i t y " can and does r e s u l t from the p r a c t i c e of su s t a i n e d y i e l d f o r e s t management. Sustained y i e l d a l s o g e n e r a l l y i n c l u d e s a requirement f o r an even annual flow of timber (egual t o the annual growth). The i m p l i c a t i o n i s t h a t s t a b i l i t y of employment o p p o r t u n i t i e s and incomes i n the f o r e s t i n d u s t r y over s h o r t e r p e r i o d s can a l s o be a t t a i n e d as a r e s u l t of the planned even flow of timber from the f o r e s t s . T h i s model of f o r e s t r e g u l a t i o n has r e c e n t l y been defended and j u s t i f i e d on t h i s b a s i s , p a r t i c u l a r l y when c r i t i c i s m has been f o c u s s e d on i t s obvious economic i n e f f i c i e n c i e s . I t i s argued here t h a t even-flow r e g u l a t i o n s £er se can not achieve the d e s i r e d and a n t i c i p a t e d e f f e c t s on employment and incomes when the f o r e s t i n d u s t r y of a region produces p r i m a r i l y f o r a v o l a t i l e export market and i s a l s o s u b j e c t t o economies of s c a l e and l o c a t i o n . However, i n B r i t i s h Columbia, c e r t a i n p u b l i c p o l i c i e s and procedures introduced i n the p u r s u i t of t e c h n i c a l o b j e c t i v e s may have had s u b s t a n t i a l i n d i r e c t e f f e c t s on r e g i o n a l development and community s t a b i l i t y through t h e i r i n f l u e n c e on the c o r p o r a t e s t r u c t u r e , geographic l o c a t i o n and c a p i t a l i n t e n s i t y of the f o r e s t i n d u s t r y . Q u a l i t a t i v e and q u a n t i t a t i v e , (econometric) methods are used t o analyse the socio-economic conseguences of these changes, f o c u s i n g p a r t i c u l a r l y on employment - i t s s t a b i l i t y , t r e n d s and i i l o c a t i o n - within a d e f i n e d r e g i o n . I t was found t h a t the loqging, p r o c e s s i n g , assembly-repair and s e r v i c e o c c u p a t i o n s a r e the most r e l a t i v e l y u n s t a b l e , and that the i n s t a b i l i t y of t o t a l unemployment has been much grea t e r i n a s i n g l e - i n d u s t r y town than a d i v e r s i f i e d c i t y . Furthermore, employment i n s t a b i l i t y i n the primary wood-using i n d u s t r i e s was found to be c o r r e l a t e d with changes i n the p r i c e of lumber d e s t i n e d f o r Export markets. The c o n c l u s i o n s emphasise that f o r a s t p o l i c i e s to r a q u l a t e the s h o r t - r u n supply of timber from the p r o v i n c i a l l o r e s t s are not the most r e l e v a n t to questions of s t a b i l i t y of employment i n the f o r e s t - r e l a t e d i n d u s t r i e s . The B r i t i s h Columbia f o r e s t S e r v i c e does not have e x c l u s i v e c o n t r o l over r e g i o n a l development or "community s t a b i l i t y " . This a n a l y s i s suggests t h a t not only r e a p p r a i s a l of F o r e s t S e r v i c e p r a c t i c e s and procedures, but a l s o of i t s o b j e c t i v e s and c a p a c i t y to f u l f i l them, i s indeed long overdue. While the f o r e s t i n d u s t r y remains dominant iu the r e g i o n a l economy, a wood products marketing agency or a p r i c e support scheme might c o n t r i b u t e to community s t a b i l i t y by b u f r e r i n g some of the exoganously induced shocks. However, f o r a number of reasons, i t i s considered that the most r e a l i s t i c p r o s p e c t s f o r a t t a i n i n g employment s t a b i l i t y l i e i n the d i v e r s i t i c a t i o n of the r e g i o n a l economy. Since t h i s cannot be accomplished c o s t l e s s l y , i t remains to be decided by the p o l i t i c a l process how much community i n s t a b i l i t y the people of B r i t i s h Columbia can a f f o r d and what steps they are prepared to take t o a t t a i n more s t a b i l i t y . T A B L E OF C O N T E N T S A b s t r a c t i Table of Contents . . . . i i i L i s t of Tables v L i s t of Maps . . . v i i i L i s t o f Figures i x Acknowledgements . . . . . . . . x i Common A b r e v i a t i o n s x i i I. I n t r o d u c t i o n 1 I I . Community s t a b i l i t y and Y i e l d Regulation .........5 Y i e l d Planning i n B r i t i s h Columbia ......14 I I I . The North C e n t r a l I n t e r i o r of B r i t i s h Columbia 28 The Study Area 28 A B r i e f Economic H i s t o r y of the B.C. I n t e r i o r Forest Industry ,.35 The Impacts of B.C.F.S. P o l i c i e s i n Shaping the Regional Economy ..47 IV. The Evidence 77 Con c e n t r a t i o n 78 Employment S t a b i l i t y 90 1. Employment s t a b i l i t y and i n d u s t r i a l s t r u c t u r e . iv 2. Study of unemployment .....................102 a) I n s t a b i l i t y by o c c u p a t i o n a l group .......103 b) Trends i n unemployment 116 c) The e f f e c t s of lumber p r i c e s on employment s t a b i l i t y .......................119 d) An economic base-type unemployment m u l t i p l i e r ..................131 S t a b i l i t y of P r o v i n c i a l Revenues ................133 V. S t r a t e g i e s to S t a b i l i s e the Regional Economy ......143 The Role and L i m i t a t i o n s of the B.C.F.S, i n Regional Development and S t a b i l i t y ..143 The Prospects f o r S t a b i l i t y .....................151 1. Short run s t a b i l i t y .......................156 2. Long run s t a b i l i t y or permanence ..........167 VI. Summary and Conclusions ........171 Areas f o r Future research ,,......175 L i t e r a t u r e • C i t e d ,. ....................177 Other L i t e r a t u r e Consulted ...184 Appendix I 183 V LIST OF TABLES 1. Population S t a t i s t i c s f o r Northern B.C. ...32 2. P r i n c e George Employment (1971) .....33 3. Percentage Employment by P r i n c i p a l Sectors i n Major Centres. ................. 34 4a. 1974 A.A.C.s and Forest Service Reserves f o r Ten Northern I n t e r i o r P. S.Y.U.s. ...... 60 4b. P r o v i n c i a l Reserves of Annual Allowable Cuts. 62 5a. Corporate Concentration i n Timbersheds • of North C e n t r a l B.C ... ...81 5b. Corporate Concentration i n North C e n t r a l B.C. 81 6. Geographic Concentration of Sawmilling i n North C e n t r a l B.C. ..................... 85 7 . Mean Months Worked and Number o f E m p l o y e e s i n L o g g i n g and S a w m i l l i n g i n N o r t h C e n t r a l B. C . . . . . . . 9 4 8 a . C o e f f i c i e n t o f V a r i a t i o n o f Unemployment by O c c u p a t i o n a l G r o u p s : 1 9 6 7 - 7 5 . . . . . . 108 8 b . S t a n d a r d D e v i a t i o n o f Unemployment by O c c u p a t i o n a l G r o u p s : 1 9 6 7 - 7 5 . . . . . . . . . . 1 0 9 9 a . O r d e r i n g o f O c c u p a t i o n a l G r o u p s by E m p l o y m e n t I n s t a b i l i t y I n d e x (and Mean Number U n e m p l o y e d : 1 9 6 7 - 7 5 ) . . . . . . . . . . . . . . . 114 9 b . Employment I n s t a b i l i t y - L o g V a r i a n c e I n d e x . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 5 10 . T r e n d s i n Number U n e m p l o y e d - V a c a n c i e s : 1 9 6 7 - 7 5 . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 1 1 . R e g r e s s i o n R e s u l t s - Q u e s n e l . . . . . . . . . . . . . . 126 12 . R e g r e s s i o n R e s u l t s - P r i n c e G e o r g e . . . . . . . . 127 13 . D i s t r i b u t e d L a g s R e s u l t s - Q u e s n e l . . . 1 3 4 v i i 14. D i s t r i b u t e d Lags Results - Prince George. .135 15. Sources of P r o v i n c i a l Revenues: 1964/65 to 1975/76 139 v i i i LIST OF MAPS 1. B r i t i s h Columbia Economic Regions. . 29 2a. Log Conversion U n i t s i n the Prince George Forest D i s t r i c t , 1925. ............. 38 2b. Log Conversion P l a n t s i n the North C e n t r a l I n t e r i o r , 1955. 39 2c. Log Conversion P l a n t s i n the North C e n t r a l I n t e r i o r , 1964. .40 2d. Sawmills i n B r i t i s h Columbia 41 3. Timbersheds of the North C e n t r a l I n t e r i o r of B r i t i s h Columbia 80 ix LIST OF FIGURES 1. A l t e r n a t i v e Harvest S t r a t e g i e s f o r a Forest Management Unit i n B.C. .....15 2a. Timber Harvest. ....20 2b. Monthly Production of Lumber and Ties from Northern I n t e r i o r M i l l s : 1967-1975. ....... 21 3. The O r i g i n a l P.S.Y.U. Concept. ...24 4. Lumber P r i c e - Wage Rate Comparison. ...... 46 5. Regional Agglomeration of Sawmilling and Timber S u p p l i e s . ...48 6. Expansion of Allowable and Act u a l Cuts f o r Five P.S.Y.U.s i n the North C e n t r a l I n t e r i o r of B r i t i s h Columbia ..............53 7. Number of Active Sawmills i n the Northern I n t e r i o r of B r i t i s h Columbia : 1920-1974. .. 88 8. Mean Months Worked and Number of Employees i n Logging and S a s m i l l i n g i n North C e n t r a l B.C. .95 9. Average Costs, P r o f i t s and the Number of S h i f t s f o r a Sawmill. 99 10a. Trends i n Unemployment - Prince George. ..104 10b. Trends i n Unemployment - Quesnel. ..105 11. T o t a l and S e c t o r a l Unemployment. ..........112 12. Trends i n Selected Lumber P r i c e s : 1967-75. 120 13a. B r i t i s h Columbia Revenues from Selected Sources: 1964/64 to 1975/76 140 13b. B r i t i s h Columbia Revenues: 1964/65 t o 1975/76 141 14. A l t e r n a t i v e Growth Paths 154 x i ACKNOWLEDGEMENTS. I wish t o acknowledge the advice and as s i s t a n c e of many people without whom t h i s t h e s i s would not have been p o s s i b l e . In p a r t i c u l a r , they are my a d v i s o r , Dr. D. Haley and the balance of my supervisory committee, Drs. D.D. Munro, J.L. Robinson, A.D. Scott and J.H.G. Smith, who have each co n t r i b u t e d generously to t h i s t h e s i s . My debt to my f r i e n d s and c o l l e g u e s , Duncan Davies, Lloyd McKay and Dave Roberts i s a l s o considerable. Employees of the B r i t i s h Columbia Forest Service and Canada Manpower were most courteous i n the p r o v i s i o n at data and a l s o o f f e r e d some valuable comments i n e a r l i e r d i s c u s s i o n s . The f i n a n c i a l , academic and moral support provided by the U.B.C. Facu l t y of Forestry i s a l s o g r a t e f u l l y acknowledged. F i n a l l y , much of the c r e d i t must go to my wife, Yvonne, f o r c o n s t a n t l y encouraging and sometimes c h a s t i s i n g me, f o r her s e c r e t a r i a l s e r v i c e s and f o r always being there. x i i Common A b b r e v i a t i o n s . A. A . C . Annual A l l o w a b l e Cut (cub ic f e e t / y e a r ) B. D.U. Bone dry u n i t o f wood c h i p s (2000 l b s ) B . C . P , S . B r i t i s h Columbia F o r e s t S e r v i c e C u n i t 100 c u b i c f e e t o f round wood LRATC Long run average t o t a l c o s t M .A . I . Mean annual increment (cub ic f e e t / a c r e / y e a r ) M f . b . m . Thousand f e e t board measure; volume of lumber or lumber e s t i m a t e d to be r e c o v e r a b l e P . S . Y . U . P u b l i c s u s t a i n e d y i e l d u n i t SRATC Short run average t o t a l c o s t T . F . L . Tree Farm L i c e n c e , f o r m e r l y F o r e s t Management L i c e n c e T . S . L . Timber S a l e L i c e n c e T . S . H . L . Timber S a l e H a r v e s t i n g L i c e n c e 1 I . INTRODUCTION My a t t e n t i o n was f i r s t drawn to the t o p i c of community s t a b i l i t y by a number of headlines and a r t i c l e s i n l o c a l newspapers i n 1974, documenting the p l i g h t - of numerous sm a l l towns i n the i n t e r i o r of B r i t i s h Columbia. The l o c a l s a wmill, the only major employer, had closed down a l l or part of i t s operations and the repercussions on employment and incomes throughout the d i s t r i c t were being f e l t . My questions were what p o l i c y measures had been or could be used t o prevent such apparent boom-bust c y c l e s ? Furthermore, what c o n d i t i o n s had l e d to the e v o l u t i o n of such s u s c e p t i b l e one company - one i n d u s t r y towns? Fortunately there i s q u i t e an amount of r e v e a l i n g and/or a n a l y t i c a l l i t e r a t u r e on B r i t i s h Columbia's p u b l i c f o r e s t p o l i c i e s and community s t a b i l i t y (defined i n part to i n c l u d e the above example). Further, daring the recent public hearings of the Royal Commission on Forest Resources, statements a l l u d i n g to the " i n d u s t r i a l s t a b i l i t y " and community s t a b i l i t y to be derived from c e r t a i n f o r e s t tenure p o l i c i e s , y i e l d r e g u l a t i o n s and timber d i s p o s a l procedures were made by almost every p a r t i c i p a n t from the f o r e s t i n d u s t r y . I t occured to me then that the a l l e g e d r e l a t i o n s h i p between p u b l i c f o r e s t p o l i c y and the much-vaunted o b j e c t i v e of community s t a b i l i t y - a c o n s i s t e n t theme of p u b l i c p o l i c y d i s c u s s i o n s - has not yet been r i g o r o u s l y d e f i n e d or analysed i n the B r i t i s h Columbia context, and t h a t such an a n a l y s i s was long overdue. 2 This study begins with a broad examination of the o b j e c t i v e of community s t a b i l i t y and the r o l e widely a t t r i b u t e d to p o l i c i e s of f o r e s t management and y i e l d r e g u l a t i o n e s p e c i a l l y , i n f u l f i l l i n g t h a t g o a l . The focus i s then narrowed to the p a r t i c u l a r case of B r i t i s h Columbia where the o b j e c t i v e of r e g i o n a l economic development has been added (sometimes e x p l i c i t l y but more often i m p l i c i t l y ) t o the purposes of f o r e s t management. The i n s t i t u t i o n s , p o l i c i e s and procedures which have evolved i n B.C. are then examined to a s c e r t a i n whether the conceptual r e l a t i o n s h i p s between r e g i o n a l economic development, community s t a b i l i t y and f o r e s t p o l i c y are l o g i c a l , f e a s i b l e and reasonable. In order to focus more c l e a r l y on the i s s u e s , a p a r t i c u l a r region of the province - the North C e n t r a l I n t e r i o r - has been chosen f o r case study. This i s a part of the province r e a d i l y i d e n t i f i a b l e as an economic r e g i o n , i n which economic development has been dramatic, changes i n the s t a b i l i t y of employment and incomes and i n the d i s t r i b u t i o n of the r u r a l population can be documented and the determinants of the changes (both f o r e s t r y - and non-f o r e s t r y - related) can be h i g h l i g h t e d . a f t e r a d e s c r i p t i o n of the reg i o n and i t s e v o l u t i o n , q u a n t i t a t i v e evidence i s presented on the corporate and geographic s t r u c t u r e of the f o r e s t i n d u s t r y , which can be r e l a t e d to the e x i s t i n g population d i s t r i b u t i o n and recent developments. Data from the B r i t i s h Columbia Forest Service (B.C.F.S.)on the number of employees and man-months worked, by ranger d i s t r i c t s w i t h i n the study r e g i o n , could provide r a t h e r crude evidence on trends over the l a s t ten years. These trends 3 become more apparent when the data are s t r a t i f i e d on the b a s i s of the present s t r u c t u r e (concentration and size) of the sawmilling i n d u s t r y i n each ranger d i s t r i c t . The p r o p o s i t i o n presented i s t h a t employment o p p o r t u n i t i e s , incomes and population density and d i s t r i b u t i o n are l a r g e l y determined by the l o c a t i o n , s i z e and s t r u c t u r e of the dominant f o r e s t i n d u s t r y . This i n t u r n may be dependent on t r a n s p o r t a t i o n l i n k s , market c o n d i t i o n s and many exogenous f a c t o r s , as w e l l as p r o v i n c i a l resource management and tenure d i s p o s i t i o n p o l i c i e s . In some ways, t h i s i n v e s t i g a t i o n overlaps that c u r r e n t l y undertaken by the Royal Commission on F o r e s t ' Resources, p a r t i c u l a r l y under item 5 of i t s Terms of Reference (issued i n Vancouver, May 1975). "5. The i m p l i c a t i o n s of these tenure arrangements f o r the s t r u c t u r e of the f o r e s t i n d u s t r y , having regard to i t s p a t t e r n of i n t e g r a t i o n , c o n c e n t r a t i o n , ownership and c o n t r o l ; and f o r the s t r u c t u r e of markets f o r f o r e s t products produced i n the Province." Narrowing the focus of the study s t i l l f u r t h e r , evidence on the s t a b i l i t y of employment i s presented by a n a l y s i n g the i n s t a b i l i t y of unemployment i n ten major groups of occupations, i n the c i t y of P r i n c e George and the town of Quesnel. Attempts are then made to s t a t i s t i c a l l y c o r r e l a t e unemployment i n t o t a l and i n the s e r v i c e s e c t o r with changes i n the l e v e l of a c t i v i t y or unemployment i n the dominant logging and (wood) processing s e c t o r s . The a n a l y s i s continues, seeking to document the source of f l u c t u a t i o n s i n these major f o r e s t i n d u s t r i e s , with the expectation that exogenous changes i n the export demand f o r lumber predominate. 4 A f t e r examining employment i n s t a b i l i t y i n two centres shown to be f o r e s t r y - dependent ( t y p i c a l of much of the region and, to a l e s s e r e x t e n t , of B.C.) the scope of the study broadens again to e x t r a p o l a t e the causes of i n s t a b i l i t y t o the whole province. From t h i s , a l t e r n a t i v e s t r a t e g i e s to a t t a i n community s t a b i l i t y i f i t i s s t i l l an o b j e c t i v e , can be considered. The i m p l i c a t i o n s f o r the "development" o b j e c t i v e and the p r o v i n c i a l economy i n general warrant i n t e n s i v e examination. 5 I I . COMMUNITY STABILITY AND YIELD REGULATION Much of the U.S. l i t e r a t u r e on p u b l i c f o r e s t p o l i c y , with p a r t i c u l a r regard t o community s t a b i l i t y through y i e l d r e g u l a t i o n , has been reviewed by Schallau (1974). Perhaps the most concise expression of the i n t e n t and purpose of y i e l d r e g u l a t i o n appears i n the prologue to the Sustained Y i e l d Forest Management Act (U.S.Congress,1944)... Be i t enacted ... that i n order to promote the s t a b i l i t y of f o r e s t i n d u s t r i e s , of employment, of communities, and of taxable f o r e s t wealth, through continuous s u p p l i e s of timber;... However the same i n t e n t can be traced back to the Pinchot L e t t e r of 1905 1 and others. While i t i s not p o s s i b l e to r e c o n s t r u c t i n d e t a i l a l l the arguments that shaped the h i s t o r y of B.C.'s f o r e s t p o l i c y , one can gain numerous i n s i g h t s i n t o the f o r e s t p o l i c y - s t a b i l i t y r e l a t i o n s h i p as i t was thought t o e x i s t . The most au t h o r a t i v e statements f o r B.C. are t o be found i n the Reports of the Royal Commissions on Forest Resources (Sloan,1945,1956). 2 For example, Sloan (1945, p.128) concluded, 1 L e t t e r from Secretary of A g r i c u l t u r e Wilson to G i f f o r d Pinchot, Feb 1, 1905, c i t e d by, i n t e r a l i a x R.M.Alston (1972). 2 Others who presented the argument here i n c l u d e H u l h o i l a n d (1931, 1937) Orchard (1945) and Gilmour (1949)., 6 "... A sustained y i e l d p o l i c y , perpetuating our f o r e s t stands, w i l l not only provide a c o n t i n u i t y of wood-supply e s s e n t i a l to maintain our f o r e s t i n d u s t r i e s , primary and secondary, with consequent r e g i o n a l s t a b i l i t y of employment, but w i l l a l s o ensure a continued f o r e s t - c o v e r adequate t o perform the i n v a l u a b l e f u n c t i o n s of watershed p r o t e c t i o n , stream-flow and run-off c o n t r o l , the prevention of s o i l e r o s i o n , and of p r o v i d i n g r e c r e a t i o n a l and scenic areas, and a home f o r our w i l d b i r d and animal l i f e . " He subsequently r e i t e r a t e d , (Sloan, 1957, p.90) "...The r e a l purpose of our f o r e s t p o l i c y ... i s s o c i a l and economic rather than t e c h n i c a l ; i t i s the use of B r i t i s h Columbia f o r e s t s f o r the maintenance of maximum and s t a b l e employment and p r o f i t a b l e production of manufactured commodities... " The concern f o r permanence or s t a b i l i t y of the f o r e s t i n d u s t r y i s evident i n the province's e a r l y h i s t o r y . M u l l h o l l a n d (1928) noted, "The d e s i r a b i l i t y of maintaining a permanent f o r e s t i n d u s t r y was r e a l i z e d twenty years ago, when a reserve was imposed upon a l l remaining crown timber. ... Sawmills are constructed to be w r i t t e n - o f f a f t e r a few years' c u t , with no thought of c r e a t i n g a permanent i n d u s t r y . Ondoubtedly there w i l l be many more temporary logging and m i l l camps before the i n d u s t r y i s properly s e t t l e d on a permanent basis i n the best economic l o c a t i o n s ... P r o t e c t i o n may be p e r f e c t and s i l v i c u l t u r e may be p e r f e c t , and yet without r e g u l a t i o n , we may some day / f i n d ourselves without a merchantable s t i c k to c u t . " S i m i l a r concerns had been expressed as e a r l y as 1871, i n a l e t t e r from S i r John A. MacDonald t o the Premier of Ontario, c i t e d by Orchard (1953, p.45). "The s i g h t of the immense masses of timber passing my windows every day ( r a f t i n g down the Ottawa River) c o n s t a n t l y suggest to my mind the absolute n e c e s s i t y there i s f o r l o o k i n g at the f u t u r e of t h i s great trade ... What i s to become of the Ottawa region g e n e r a l l y , a f t e r the timber i s cut away, one cannot foresee." 7 Orchard then argued t h a t . "... In Canada at l e a s t , we have come to depend on wood f o r such a l a r g e part of our l i v e l i h o o d (ranging up to 50% i n B r i t i s h Columbia) that any s e r i o u s f a i l u r e of the wood supply would be nothing short of d i s a s t r o u s to the Canadian economy." While the preceding statements were made by people who were w e l l informed and i n f l u e n t i a l i n determining government p o l i c i e s , there have been few p u b l i c l y issued p o l i c y statements by the B.C.F.S. The most recent was "The o b j e c t i v e of the B r i t i s h Columbia Forest Service as the f o r e s t a d m i n i s t r a t i o n agency f o r the government of B r i t i s h Columbia i s to develop and enforce p o l i c i e s which w i l l ensure f o r a l l time the p.rop.er balance of timber supply, f o r e s t r e c r e a t i o n , w i l d l i f e p r o t e c t i o n and environmental p r e s e r v a t i o n on the Crown f o r e s t lands of the p r o v i n c e . 1 , 1 However, there appears to be no way that the a d m i n i s t r a t i v e procedures fo l l o w e d i n a l l o c a t i n g l i c e n c e s to cut Crown timber f o r sawlogs or pulpwood, i n r e q u i r i n g adherence to minimum annual cuts or i n o f f e r i n g p r o t e c t i o n t o e s t a b l i s h e d o p e r a t o r s 2 can be a t t r i b u t e d to the o b j e c t i v e stated here. One can only conclude that the B.C.F.S.- has operated with other o b j e c t i v e s which have not been o f f i c i a l l y s t a t e d . Thus the B.C. s i t u a t i o n i s somewhat d i f f e r e n t t o that described by Le Master (1976) i n * Statement i n F o r e s t a l l ^ - a newsletter published by the Information D i v i s i o n of the B.C.F.S. ,1974. , (emphasis added.) 2 These are discussed i n d e t a i l i n the f i n a l s e c t i o n o f Chapter Three, along with other a d m i n i s t r a t i v e p o l i c i e s of the B.C.F.S. which appear to have i n f l u e n c e d the development and s t a b i l i t y of r e g i o n a l economies. 8 the United States. L e g i s l a t i o n has r e c e n t l y been proposed there (Senate B i l l 3091, sec.11) which appears to e s t a b l i s h i n law the p r i n c i p l e of non-declining even flow. Previous l e g i s l a t i o n r e q u i r e d sustained y i e l d management on National Forests as "The achievement and maintenance i n p e r p e t u i t y of a high l e v e l of annual or regular p e r i o d i c output of the various renewable resources of the Nati o n a l Forests without impairment of the p r o d u c t i v i t y of the l a n d , " In the pursuant r e g u l a t i o n s (Reg 36 CFR 221.3), each N a t i o n a l Forest timber management plan i s r e q u i r e d i n t e r ai-i§ to "provide, so f a r as p o s s i b l e , an even flow of National Forest timber i n order to f a c i l i t a t e s t a b i l i s a t i o n of communities and of o p p o r t u n i t i e s f o r employments" I t t h e r e f o r e seems tha t the U.S. l e g i s l a t i o n has e x p l i c i t l y s t a t e d the p o l i c y and underlying purpose of N a t i o n a l Forest management which have to date only been i m p l i c i t i n the a c t i o n s of the B.C.F.S. One i s l e d to conclude from t h i s review of the l i t e r a t u r e t h a t those who were re s p o n s i b l e f o r the d e c l a r a t i o n of sustained y i e l d as p u b l i c p o l i c y , were not persuaded by t e c h n i c a l i d e a l s of the normal f o r e s t , or because f o r e s t e r s of the day considered i t "good f o r e s t r y " . Rather they were convinced that sustained y i e l d was necessary t o perpetuate the resource, and s u f f i c i e n t to guarantee "community s t a b i l i t y " . T h e implementation of the p o l i c y has s i m i l a r l y been orie n t e d to the community s t a b i l i t y o b j e c t i v e , although only by i m p l i c a t i o n . As Haley concluded from h i s review of B.C. f o r e s t p o l i c y , Sustained y i e l d , which has been a cornerstone of B.C.'s f o r e s t p o l i c y s i n c e 1947, i s l a r g e l y predicated upon the b e l i e f that such a p o l i c y promotes r e g i o n a l economic growth and "community 9 s t a b i l i t y " . » However, i t has proven extremely d i f f i c u l t to f i n d any rigorous d e f i n i t i o n of " s t a b i l i t y " . S h i l e Schallau (1974) seemed to accept Kaufman's d e f i n i t i o n , "The term community s t a b i l i t y as used here, i m p l i e s o r d e r l y change ra t h e r than a f i x e d c o n d i t i o n " , ' i t i s not obvious that t h i s i s what was o r i g i n a l l y intended, i n the B.C. context at l e a s t . Sloan's di s c u s s i o n s of - and almost preoccupation with - ghost towns and the n e c e s s i t y of " s t a b i l i s i n g the i n d u s t r y " i . e . reducing m o b i l i t y , seem to i n d i c a t e that h i s i n t e r p r e t a t i o n was more one of long run s u r v i v a l . Such a concept seems to s t i l l have some impact on B.C.F.S. approaches to c e r t a i n problems, p a r t i c u l a r l y i n y i e l d r e g u l a t i o n and the t a c i t acceptance of the "non-declining flow" concept. Few of those w r i t i n g on the use of f o r e s t p o l i c y to s t a b i l i s e communities have thought about the reasons f o r the existence of a community ( v i l l a g e "or town) - a fundamental question f o r a l l economic*geographers. Given that a town serves the needs of i t s population and surroundings, i t s nature and even i t s existence s u r e l y change as the needs of the community change and i t s h i n t e r l a n d expands or c o n t r a c t s , p a r t i c u l a r l y as t r a n s p o r t a t i o n changes. This f a c t appears t o have been l a r g e l y i In Haley et a l x Unpublished Report to B.C.F.S. P r o d u c t i v i t y Committee, J u l y 1975. a H.F.Kaufman (1953) p.117. 10 ignored by those w r i t e r s hoping t o ensure the permanence of communities through y i e l d r e g u l a t i o n . Sloan a l s o recognised a problem of short run i n s t a b i l i t y -the boom-bust nature of the province's f o r e s t economy and re g i o n a l development. This too he a t t r i b u t e d t o la c k of y i e l d c o n t r o l (Sloan 1945, p.127). Kaufman (1953, p.117) a l s o argued that the absence of r e g u l a t i o n "has i n l a r g e measure produced the boom-bust c y c l e f o r f o r e s t i n d u s t r i e s " . Mulholland (1931) argued i n favour of sustained y i e l d r e g u l a t i o n t h a t , " I f i t i s d e s i r a b l e t o develop and keep a steady market; to provide steady employment year by year; t o secure a s t a b l e annual revenue; then the f o r e s t s which are to provide them must be worked on properly constructed plans..." One may reasonably conclude that these authors have indeed been using " s t a b i l i t y " i n two senses, i . e . , permanence (long run) and the absence of sudden unexpected f l u c t u a t i o n s (short run) although t h i s d i s t i n c t i o n was never e x p l i c i t l y recognised. I f i t had been, perhaps an a n a l y s i s of the p o t e n t i a l of y i e l d r e g u l a t i o n to accomplish "community s t a b i l i t y " would have appeared much sooner. In t h i s t h e s i s , short-term employment s t a b i l i t y i s taken as the f o c a l point of s o c i a l and p o l i t i c a l concern with reference t o short run r e g i o n a l economic i n s t a b i l i t y i n general. None of the authors c i t e d above (or t h e i r many supporters and defenders) seem t o have asked why y i e l d c o n t r o l was or i s necessary. Why was logging or sawmi l l i n g a c t i v i t y so v a r i a b l e ? At the time of t h e i r w r i t i n g s the major causes of boom-bust were (ju s t as they s t i l l are) f l u c t u a t i o n s i n i n d i v i d u a l ' s 11 expectations and i n the demand and p r i c e f o r lumber. 1 Saggener (1969, p.13) concluded t h a t , "The s o c i a l c o s t s of a migrating lumber i n d u s t r y i n the e a r l y days of t h i s century were l a r g e l y r e s p o n s i b l e f o r the emphasis placed on o b t a i n i n g s t a b i l i t y i n the f o r e s t products industry. Under economic c o n d i t i o n s of the times, p r i v a t e i n d u s t r y sought i n d i v i d u a l p r o f i t s and became highly mobile, l e a v i n g many towns' stranded i n i t s wake. Because of these s o c i a l c o s t s , community and market s t a b i l i t y became one of the primary o b j e c t i v e s of t r a d i t i o n a l f o r e s t management," That i s , the e x t e r n a l s o c i a l c o s t s of a migrating i n d u s t r y were recognised. Yet i f the r e s i d e n t s of the small l o g g i n g / m i l l i n g centres could have a n t i c i p a t e d r e l o c a t i o n as the resource became p h y s i c a l l y or economically exhausted, f a c i l i t i e s could have been b u i l t t o be depreciated by tha t time. The problem arose because p u b l i c e x p e c t a t i o n s of perpetual existence of such communities were not met. The s i t u a t i o n was aggravated by the widespread b e l i e f (e.g. Hulholland, 1931) tha t n a t u r a l resources are the only source of development, and once they are dep l e t e d , the community i s doomed; The simple r e c i t a t i o n of instances i n B r i t i s h Columbia's e a r l y development when m i l l s d i d cut out and get out, l e a v i n g a stranded community and f a c i l i t i e s , i n no way proves that 1 The problem of a t r a n s i e n t i n d u s t r y was much l e s s severe i n the 1940*s than i t had been i n the period 1880 to 1920«s. To dissuade l o g g e r s / m i l l e r s from moving on over the next h i l l e t c . two s t r a t e g i e s are obvious: r e a l l o c a t e logging a c t i v i t y through time by y i e l d r e g u l a t i o n , or l i m i t the resource base, i . e . convince the operators t h a t there was nowhere e l s e t o go, f o r c i n g them t o recognise the user co s t of t h e i r a c t i o n s . The removal of the open access c h a r a c t e r i s t i c s of f o r e s t s should have l e d to p r i v a t e readjustment i n the int e r t e m p o r a l a l l o c a t i o n of e x p l o i t a t i o n . 12 r e g u l a t i o n would have kept the m i l l and town there i n p e r p e t u i t y , nor that i t would have been s o c i a l l y d e s i r a b l e to do so. In those circumstances where m i l l s have closed down due to market or t e c h n o l o g i c a l changes, y i e l d c o n t r o l seems merely t o t r e a t the symptoms, not the causes, of the problem. Yet the argument that y i e l d c o n t r o l can and does provide f o r community s t a b i l i t y p e r s i s t s , as evidenced by statements made i n B r i e f s presented to- the P u b l i c Hearings of the Royal Commission on Forest Resources i n Prince George i n 1975, by prominent members of the f o r e s t i n d u s t r y . "Forest p o l i c y should be developed t o p r o t e c t the i n d u s t r i a l base of the community, with the dominant p o r t i o n of the i n d u s t r i a l base i n the Quesnel area i d e n t i f i e d as being the e x i s t i n g companies who are eguipped to use the e n t i r e f o r e s t p r o f i l e . . . A f o r e s t area f o r the Quesnel community ... should be e s t a b l i s h e d and managed so as t o e n s u r e t h e c o n t i n u i t y and permanence of the l o c a l resource base. The b r i e f warned against the s i m p l i s t i c approach of maximising economic rent by o v e r c u t t i n g i n good markets, a theory which many economists seem to support.,It s t r e s s e d that the economic base must be maintained through systematic annual c u t t i n g , i f the community i s to be maintained." 1 "Overcommitment of the timber resource could have s e r i o u s i m p l i c a t i o n s f o r community s t a b i l i t y and the region's economic wei l b e i a g ... (and urging a more i n t e n s i v e f o r e s t management program) ... the s t a b i l i t y of e x i s t i n g forest-based communities i s at stake, q u i t e apart from the need t o create a d d i t i o n a l 1 The preceding guotes are taken from a report on the Proceedings, prepared by I n d u s t r i a l Forestry S e r v i c e Ltd. of Prin c e George, No. 1, August 13, 1975.. 13 job o p p p o r t u n i t i e s i n the years ahead." 1 The obvious i m p l i c a t i o n s of the argument for s t a b i l i t y through y i e l d c o n t r o l are that the demand f o r f o r e s t products would f l u c t u a t e l e s s i f annual y i e l d s are equal, that the l o s s of p u b l i c revenue through not c u t t i n g more during good markets i s more than compensated f o r by the b e n e f i t s of " s t a b i l i t y " i n p r o c e s s i n g 2 or tha t l o c a t i o n a l f a c t o r s ( e s p e c i a l l y t r a n s p o r t a t i o n economics) would not encourage a plant to c l o s e or r e l o c a t e , as long as equal y i e l d s are a v a i l a b l e l o c a l l y . The p o p u l a r i t y of the contention that y i e l d c o n t r o l c o n t r i b u t e s to community s t a b i l i t y suggests t h a t many f o r e s t e r s (and some planners) f a i l t o consider r e g i o n a l development economics and l o c a t i o n theory ( i f they mean long run s u r v i v a l ) , or market c y c l e s and i n d u s t r i a l o r g a n i s a t i o n ( i f they mean short run s t a b i l i t y ) . As Lewis (1974) noted, s t a b i l i t y has been discussed i n terms of annual c u t s , employment and incomes. There i s ' no obvious d i r e c t r e l a t i o n s h i p between the three, they are not eq u i v a l e n t , and s t a b i l i t y i n any one may w e l l induce i n s t a b i l i t y i n another. 3 1 D.I. flclnnes, President of Weyerhauser Canada, quoted i n Vancouver Sun, Frid a y October 3, 1975, p.27. 2 Despite the f a c t that equal annual cuts are not r i g i d l y enforced but are allowed to vary w i t h i n 50% annually and 10% over 5 years. 3 For example, see Waqgener (1969) pp.13-18. 14 Y i e l d Planning In B r i t i s h Columbia^. The preceding review has e s t a b l i s h e d that B r i t i s h Columbia's f o r e s t p o l i c y i s f i r m l y committed to y i e l d r e g u l a t i o n of p u b l i c f o r e s t s with the i n t e n t of preventing d e p l e t i o n of the resource, promoting the permanence or s u r v i v a l of communities and minimising short run f l u c t u a t i o n s i n employment and incomes i n timber-based i n d u s t r i e s . I t t h e r e f o r e seems most r e l e v a n t to observe how these i n t e n t s have been t r a n s l a t e d i n t o p r a c t i c e . One may then analyse the appropriateness of B r i t i s h Columbia's p o l i c i e s and i n s t i t u t i o n s to the s o c i a l o b j e c t i v e s to which they have been addressed. Figure 1 examines the planned, preferred and feared trends i n harvests from B.C.*s f o r e s t s which are i m p l i c i t i n the procedures f o l l o w e d . From an examination of the y i e l d c a l c u l a t i o n procedures used by the B.C.E;S.1 one c o u l d i n f e r t h a t t h e i r long range y i e l d planning can be represented by Figure 1a. Annual allowable cuts (A.A.C.s) are c a l c u l a t e d such th a t a constant even flow of timber w i l l be p o s s i b l e f o r the e n t i r e old-growth conversion p e r i o d , a l l o w i n g (very c o n s e r v a t i v e l y ) 2 f o r a l l s o r t s of e v e n t u a l i t i e s (such as "land withdrawals" f o r parks and other uses during the remainder of the c u r r e n t r o t a t i o n , regeneration delay, roads and f i r e l o s s e s ) . The area-volume allotment check must i n d i c a t e that the 1 Royal Commission on Forest Resources Background Paper, (1975). 2 As noted by Smith (1975) . 15 50 100 50 100 Y e a r s . Y e a r s . I c . F e a r e d . I d . A c t u a l . F i g u r e 1. A l t e r n a t i v e H a r v e s t S t r a t e g i e s f o r a F o r e s t Management U n i t i n B.C. 16 i n d i c a t e d A.A.C. could be harvested every year to the age of culmination of mean annual increment (M.A.I.) plus/minus 1%. Thus i t can be concluded that the B.C.F.S. plans f o r a s t a b l e ( s t a t i c ? ) y i e l d , and i m p l i c i t l y assumes f i x e d f a c t o r p r o p o r t i o n s f o r l o g s and labor t o give constant production l e v e l s f o r 80 to 100 y e a r s . 1 Thus the o b j e c t i v e of community s t a b i l i t y i s " s a t i s f i e d " , because the same amount of labour w i l l always be required t o process" the annual cut. That i s , prospects f o r increased labour p r o d u c t i v i t y are ignored. : While the B.C.F.S. may be d e l i b e r a t e l y e r r i n g on the s i d e of conservatism i n c a l c u l a t i n g and planning the even flow of timber from p u b l i c f o r e s t s , one can i n f e r t h a t the B.C.F.S. a d m i n i s t r a t i o n considers that a growth t r e n d , or expanding y i e l d s as i n F i g . 1b, would be s o c i a l l y p r e f e r a b l e . Such growth could come through expansion of the extensive or i n t e n s i v e margin as more remote or i n a c c e s s i b l e stands are brought i n t o the "management f o l d " and' the p r o d u c t i v i t y of f o r e s t land i s v a r i e d through i n t e n s i f i e d s i l v i c u l t u r a l management. Since such a growth trend could provide the stimulus f o r r e g i o n a l development, i f one again naively assumes f i x e d f a c t o r proportions and output c o e f f i c i e n t s , the Forest Service's assumed r e s p o n s i b i l i t y for r e g i o n a l development would appear s a t i s f i e d . That i s , employment would have to expand t o process 1 However, somewhat p a r a d o x i c a l l y , the B.C.F.S. recognises the i n e v i t a b i l i t y of change i n that there are p r o v i s i o n s to r e v i s e A.A.C; c a l c u l a t i o n s every ten years. That i s , with each decade a new perpetual plan i s produced, i n which constant r a t e s of cut are assumed. 17 the increased annual c u t s . This assumption that the Forest Service has a major r o l e i n r e g i o n a l development and i t s apparent i n s e n s i t i v i t y to the complexity of the economic processes i n v o l v e d , i s evidenced by the statement: "Development of r a i l r o a d t r a n s p o r t a t i o n i n t o northern areas of the Province i s improving the f e a s i b i l i t y of e s t a b l i s h i n g new i n d u s t r i e s i n that area, thus c r e a t i n g a demand on the f o r e s t resource. Reviews are i n progress to e s t a b l i s h f u r t h e r sustained y i e l d u n i t s as demand develops." 1 The d e s i r a b i l i t y of b r i n g i n g f o r e s t management and har v e s t i n g to remote northern and, i n many cases, submarginal f o r e s t s i s i m p l i c i t i n t h i s statement, as i t has been i n many B.C.F.S. a c t i v i t i e s and procedures. That i s , i t has been assumed the expansion of the extensive margin of operations can be, and should be hastened, f o r s i l v i c u l t u r a l reasons and t o expand t o t a l p r o v i n c i a l production i n terms of volume, i f not i n terms of net value. The i n f o r m a l but s t r o n g l y held requirement f o r non-declining y i e l d s i n d i c a t e s again the supposed r e l a t i o n s h i p between wood harvest and (an immobile) labour f o r c e over a long period. A d e c l i n e i n fu t u r e y i e l d of any p a r t i c u l a r management u n i t i s presumed to be i n c o n f l i c t with the vaguely defined o b j e c t i v e of s t a b i l i t y about a growth trend. Perhaps f o r e s t managers' have •been unable to r e c o n c i l e the gra d u a l l y d e c l i n i n g importance of-some towns or areas, with o v e r a l l p r o v i n c i a l or r e g i o n a l development o b j e c t i v e s . Thus any y i e l d " f a l l d o w n " at i B.C.F.S. Annual Report (1972), p.48. 18 any f u t u r e date (as i n F i g . 1 c ) i s h e l d t o be u n d e s i r a b l e , though expected i n many c a s e s , and i s p r o v i d e d f o r by the t e n - y e a r l y r e v i s i o n s of A. A . C . s . Two g u e s t i o n s f o r d i s c u s s i o n e l s e w h e r e , are whether i t i s l i k e l y to o c c u r 1 and whether i t w i l l r e a l l y matter t o the i n d u s t r y , l a b o u r f o r c e a n d / o r r e g i o n a l economy, i f indeed a f a l l d o w n does occur i n some f o r e s t management u n i t s . 2 Concern f o r r e g i o n a l s t a b i l i t y , ba lance or n o n - d e c l i n i n g t imber f l o w s i s ' h i g h l i g h t e d by the enforcement of A . A . C . s on the b a s i s • o f ( r e l a t i v e l y smal l ) P.S.Y.U .s. Al though the t o t a l cu t from P i S . Y . D . s i n the p r o v i n c e i s c o n s i d e r a b l y l e s s than the c o n s e r v a t i v e l y e s t i m a t e d A . A . C . (10,728,109 c u n i t s of a p o s s i b l e 21,238,630 c u n i t s i n 1974), l o g g i n g a c t i v i t y i n some r e g i o n s has been s e v e r e l y c o n s t r a i n e d , wh i le b e i n g encouraged i n o ther a r e a s . . Robinson (1972, p. 5) noted t h a t , "As i n o t h e r mining r e g i o n s , i n d i v i d u a l mines c l o s e and new ones open but the c o a s t a l a rea a s a whole remains a p r o d u c e r . " T h i s i s i n complete c o n t r a s t t o the c a s e of f o r e s t r y , where 1 The U . S . F . S . F o r e s t R e g u l a t i o n Study (1973) i f i t e r a l i a suggested n o n - d e c l i n i n g t imber c u t s f o l l o w i n g an i n i t i a l drop i n a l l o w a b l e c u t s . Z ivnuska (1975, p.4) noted tha t an immediate r e d u c t i o n i n cut to avo id a f e a r e d f u t u r e r e d u c t i o n , would o n l y be r a t i o n a l i n an economy c h a r a c t e r i s e d by a l a r g e n e g a t i v e r a t e of s o c i a l t ime p r e f e r e n c e . The f u t u r e r e d u c t i o n i s not a v o i d e d , merely brought back to the p r e s e n t where i t s c o s t s a r e maximised. 2 See S c h a l l a u , Maki and Beuter (1969). Yet i f l o g supp ly d e c l i n e s , o u t p u t / l o g r i s e s and l a b o u r r e g u i r e d / o u t p u t f a l l s , a l l by u n c e r t a i n amounts, i s t h e r e a r e l i a b l e b a s i s f o r f o r e c a s t i n g f u t u r e r e g i o n a l t r e n d s i n employment or l o c a t i o n ? The c r u c i a l i s s u e i s whether any l a b o u r d i s p l a c e d from s a w m i l l i n g w i l l have l o c a l a l t e r n a t i v e employment o p p o r t u n i t i e s . 19 every maragement u n i t i s req u i r e d by l e g i s l a t i o n t o be perpetual, i n order t o keep the r e g i o n , as a whole, producing. The a c t u a l trend i n y i e l d from i n t e r i o r P.S.Y.O.s i s s t y l i s t i c a l l y i l l u s t r a t e d by F i g . I d . At any p a r t i c u l a r l e v e l of A.A.C., v a r i a t i o n s of plus or minus 50% are allowed i n any one year, though a c t u a l cut i s required to be within 10% over f i v e y e a r s . 1 Thus any major overciit must be fo l l o w e d by suc c e s s i v e years of "undercutting". With advances i n u t i l i s a t i o n standards, s i l v i c u l t u r a l p r a c t i c e s or a new inventory^ the a l l o w a b l e cut i s increased r e s u l t i n g i n a s e r i e s of e r r a t i c plateaus.? Reed and Associates (1975) presented data (reproduced here as F i g u r e 2a) on the volumes of timber harvested i n B.C.; on the Coast and i n the I n t e r i o r , which s t r i k i n g l y demonstrate the i n c r e a s i n g trend of timber harvests and p e r i o d i c f l u c t u a t i o n s about the t r e n d . 3 Yet the i r r e l e v a n c e of t h i r t y years of Sustained Y i e l d f o r e s t management and even-flow y i e l d planning has apparently been ignored, as long as the harvest has 'been expanding. Despite evidence such as t h i s , the B.C.F.S. continues to plan f o r even flow and, i n many cases, imposes s t r i c t c o n s t r a i n t s on that i Hoyal Commision Background Paper (1975) , op c i t t z The nature of the very l a r g e increases i n al l o w a b l e c u t s a t t r i b u t a b l e t o close-0 (up t o seven-fold i n eight years i n some i n t e r i o r P.S.Y.O.s) i s discussed i n Chapter 3. The: volume and method of d i s p o s i t i o n of t h i s new-found timber appear t o have had profound r a m i f i c a t i o n s on the i n t e r i o r f o r e s t i n d u s t r y ' s s t r u c t u r e . 3 This observation i s supported by Figure 2b which shows i n c r e a s i n g but widely f l u c t u a t i n g production of lumber i n the Northern I n t e r i o r . 20 Figure 2a. TIMBER HARVEST MILLIONS OF CU 8 IC FEE I 2 . 5 O 0 2 . 0 0 0 1 . 50C T O T A L B R I T I S H C O L U M B I A •i 1 . 0 0 0 0 0 0 / J I / A / y C O A S T I N T E R I O R I S i a 1 3 = 0 . 1 3 5 5 1 E B 0 I S G 5 1 5 7 0 t 3 7 5 Source: F.L.C. Reed and Assoc, (1975). 250 200 J 150 "100 . 1967 1968 1969 1970 . 1971 1972 .1973 1974 F i i ^ i r R 2b. M o n t h l y P r o d u c t i o n of Lumber and T i e s from N o r t h e r n I n t e r i o r M i l l s : 1967-1975 Source:. Compiled from " P r o d u c t i o n , shipments and s t o c k s on hand i n B r i t i s h C o l u m b i a . " S t a t i s t i c s Canada S c r i e s 35-003. 1975 22 ba s i s . The f a c t t h a t sustained y i e l d as implemented i n B.C. a l l o w s l i m i t e d f l e x i b i l i t y dees not r a t i o n a l i s e the o b j e c t i v e of even-flow £gr se. As Waggenar (1969, p.13) noted, " I f s ustained y i e l d was r i g i d l y p r a c t i c e d , the e n t i r e market adjustment would f a l l on p r i c e . P r i c e f l u c t u a t i o n s would be more severe than under more f l e x i b l e h a r v e s t i n g . Economic uncertainty would be increased, and the f i n a n c i a l i n c e n t i v e s to i n v e s t i n f o r e s t r y would be reduced." The r e l a t i o n s h i p of t h i s type of " y i e l d planning" to community s t a b i l i t y i s f a r from obvious, i n these circumstances. From t h i s b r i e f review, i t appears t h a t B r i t i s h Columbia's f o r e s t y i e l d planning bears l i t t l e r e l a t i o n to a c t u a l harvests. That i s , i t s usefulness i n meeting the socio-economic o b j e c t i v e of community s t a b i l i t y i s va r y l i m i t e d . I n - B r i t i s h Columbia the concept of the P u b l i c Sustained y i e l d Unit (P.S. ¥• U;) has evolved as the basic u n i t of f o r e s t y i e l d planning, from which r e g i o n a l economic development and community s t a b i l i t y are expected to f o l l o w . A l l the l o g s from the P.S.Y.U. would be processed i n the ( l i t t l e ) m i l l or m i l l s of the ( l i t t l e ) town, i n approximately equal volumes every year, thereby p r o v i d i n g s t a b l e employment o p p o r t u n i t i e s f o r the l o c a l r e s i d e n t s f o r a l l time. 1 Under what circumstances would t h i s scenario be appropriate? F i r s t l y , there should be uniform demand f o r the product - there should be no business or c o n s t r u c t i o n c y c l e s or 1 This was e x p l i c i t l y recognised and supported i n some of the b r i e f s to the Royal Commission on Forest Resources, e.g. that of the C i t y of Prince Rupert, September 12, 1975. 23 changes i n export markets. Thus e i t h e r a world of no trade and l o c a l s e l f - s u f f i c i e n c y 1 or p a r t i c i p a t i o n i n s t a b l e export markets would be appropriate.- Secondly, there should be no t e c h n o l o g i c a l changes i n processing and no s u b s t a n t i a l changes i n r e l a t i v e f a c t o r p r i c e s , since changes i n f a c t o r p r o p o r t i o n s or output c o e f f i c i e n t s i n logging and processing would, among other t h i n g s , upset the requirement f o r a s t a t i o n a r y labour force (or i f the population of the v i l l a g e i s t o grow, then t e c h n i c a l change should lead~ to greater labour i n t e n s i t y ) . T h i r d l y , to maintain t h i s s c e n a r i o , there should be no changes i n t r a n s p o r t a t i o n technology or c o s t s , or i n the l o c a t i o n of t r a n s p o r t routes. Any of these could i n f l u e n c e the economies of l o c a l i s a t i o n or u r b a n i s a t i o n 2 to be gained through r e l o c a t i o n of the v i l l a g e m i l l . There are, no doubt, other c o n d i t i o n s which could be s p e c i f i e d , but b r i e f l y the above c h a r a c t e r i s e sustained y i e l d i n i t s o r i g i n a l c ontext, as a s t a t i o n a r y , 3 s e l f - s u f f i c i e n t r e g i o n a l economy constr a i n e d by t r a n s p o r t a t i o n p o s s i b i l i t i e s , under which circumstances i t seems qu i t e appropriate.: Yet t h i s concept, i l l u s t r a t e d i n Figure 3, has apparently bean the b a s i s of B.C.'s 1 This was the case i n many fourteenth and f i f t e e n t h century European communities from which the sustained y i e l d concept o r i g i n a l l y evolved. See Haley (1966). 2 See H.Alonso (196U) or H. B.Richardson (1969),pp 70-87. 3 The concept of endogenously induced t e c h n o l o g i c a l change as an i n n o v a t i v e response t o f a c t o r s c a r c i t y , appears to have completely eluded f o r e s t r e g u l a t i o n models, d e s p i t e ample evidence that i t i s o c c u r r i n g and ongoing. Figure 3. The Original P.S.Y.U. Concept. 25 y i e l d r e g u l a t i o n s , a l though almost a l l economic c h a r a c t e r i s t i c s , e s p e c i a l l y t r a n s p o r t a t i o n and r e l a t i v e f a c t o r p r i c e s , are q u i t e d i f f e r e n t i n the two c a s e s . I t must a l s o be noted tha t a l l these c r i t e r i a f o r the c i r c u m s t a n c e s under which s u s t a i n e d y i e l d i s a p p r o p r i a t e , r e l y e x p l i c i t l y or i m p l i c i t l y on the assumpt ion tha t t imber i n d u s t r i e s * w i l l ' r e m a i n a dominant , i f not the o n l y , b a s i c s e c t o r i n the r e g i o n a l economy. T h i s aga in need not n e c e s s a r i l y app ly i n a l l r e g i o n s o f B r i t i s h C o l u m b i a . The b e l i e f t h a t n a t u r a l r e s o u r c e s ( p a r t i c u l a r l y f o r e s t s i n the c a s e of B r i t i s h Columbia) are the s o u r c e o f a l l development and s o c i a l wealth i s ex t remely p e r v a s i v e ' i n the s u s t a i n e d y i e l d l i t e r a t u r e . "Without i t s n a t u r a l r e s o u r c e s , a community w i l l s u r e l y fade away and development w i l l c e a s e . " The p o s s i b i l i t y of moving s o c i e t y ' s a s s e t s from the form of t imber i n t o a l t e r n a t i v e f o r m s , was r a r e l y c o n s i d e r e d . " . . . s a w m i l l s c o n v e r t t r e e s i n t o pay -cheques which are spent i n B r i t i s h C o l u m b i a . Every l i v i n g t r e e i s unspent money. T h i s n a t u r a l wealth i s shared by everyone when the treexs c o n v e r t e d i n t o s a l e a b l e p r o d u c t s . However, we shou ld not touch the c a p i t a l , but use t h e i n t e r e s t , which i s annual g r o w t h . " " A p p a r e n t l y , once a n a t i o n has f i n a l l y d e s t r o y e d i t s f o r e s t s , i t never has the hard ihood o f c h a r a c t e r t o s t r u g g l e th rough 100 y e a r s o f r e h a b i l i t a t i o n . E r o s i o n and o t h e r a t t e n d a n t e v i l s of d e f o r e s t a t i o n weaken the economy, and the p o s s i b i l i t i e s , i n s t e a d of i m p r o v i n g , g e t p r o g r e s s i v e l y more h o p e l e s s . " " . . . t o b a l a n c e , income a g a i n s t e x p e n d i t u r e , growth a g a i n s t h a r v e s t , i s the on ly way to keep out of the p o o r - h o u s e , u n l e s s we have a n o t h e r sure source of income to which we can t u r n a f t e r we have d i s s i p a t e d our e x i s t i n g c a p i t a l . " In these s ta tements and many o t h e r s . Orchard (194 5, 1949) 26 c o n t i n u a l l y r e f e r s to the d i s s i p a t i o n of the f o r e s t wealth, never to r e a l l o c a t i o n to more productive or more necessary assets such as schools and roads. Neither d i d he consider whether the f o r e s t inventory must be p e r p e t u a l l y maintained at i t s pre-settlement l e v e l s . T h u s , i t i s a l s o noteworthy here, that the B r i t i s h Columbia Forest Service has long endeavoured t o bri n g a l l land capable of supporting a f o r e s t crop under a c t i v e (although extensive) f o r e s t management. Unl i k e many other j u r i s d i c t i o n s , B.C. does not seem to recognise the concept of "vacant crown l a n d " , being that which does not economically warrant management f o r a p a r t i c u l a r purpose. When Orchard (1945, 1949) expounded the four b a s i c p r i n c i p l e s of f o r e s t management, they included "1. A l l productive lands must be kept continuously under growing crop. ... 3. The crop must be so handled and harvested so as to get the maximum recovery." I t has been widely held that only " i n t h i s way can the maximum wood y i e l d / y e a r be obtained from the province's f o r e s t s . Yet both o b j e c t i v e s lack any economic dimensions or c r i t e r i a . Thus, " a l l the lands of the province t h a t w i l l f i n d t h e i r highest use under f o r e s t crop s h a l l be c l a s s i f i e d as 'Forest Lands'" (Orchard, 1945, p.25), although the value »in that use may be l e s s than the returns obtainable from a l t e r n a t i v e management e f f o r t s . That i s , i t i s p o s s i b l e t h a t the B.C.F.S. has d i s s i p a t e d part of i t s funds and perhaps more impo r t a n t l y , much of i t s energies, i n a d m i n i s t e r i n g , i n v e n t o r y i n g and attempting t o market the timber from marginal f o r e s t s , when i t could have concentrated i t s e f f o r t s on h i g h l y 27 productive s i t e s c l o s e to markets. . , , . The questions of "How many acres of commercial f o r e s t land should B r i t i s h Columbia have?" and "How . i n t e n s i v e l y can we a f f o r d to manage each acre, qiven our l i m i t e d f i n a n c i a l and manpower resources?" have s c a r c e l y been asked, 1 l e a s t of a l l analysed. While the st o c k i n g d e n s i t y and species composition of the o r i g i n a l f o r e s t s have been recognised as non-optimal, the i n i t i a l acreage- of f o r e s t i s presumed to i n d i c a t e the optimal inventory of standing timber. In t h i s chapter i t has been shown th a t B r i t i s h Columbia's f o r e s t s are managed f o r socio-economic and c o n s e r v a t i o n i s t o b j e c t i v e s , i . e . , i n d u s t r i a l and community s t a b i l i t y and s u r v i v a l and prevention" of de p l e t i o n r e s p e c t i v e l y . Yet the p o l i c i e s and procedures used were more appropriate i n v a s t l y d i f f e r e n t eras and c o u n t r i e s , and can c o n t r i b u t e l i t t l e to the "community s t a b i l i t y " o b j e c t i v e so often proclaimed i n B r i t i s h Columbia. I t i s p o s s i b l e " t h a t the i m p o s i t i o n of these p o l i c i e s has severely c o n s t r a i n e d and confused d i s c u s s i o n of where, how much and when t o harvest B r i t i s h Columbia's f o r e s t s , with consequences on the l o c a l labour force and population which have been undetermined to date. 1 The answer to the second question l i e s i n i n v e s t i n g i n each f o r e s t u n i t t o the point that the values of the marginal product from each are equal. 28 I I I . THE NORTH CENTRAL INTERIOR OF BRITISH COLUMBIA. For the purpose of i l l u s t r a t i n g the general r e l a t i o n s h i p s between government p o l i c i e s towards the use of f o r e s t resources and r e g i o n a l economic development and s t a b i l i t y , an area of the province was chosen f o r d e t a i l e d case study. The North C e n t r a l I n t e r i o r - Region 7 i n Map 1 - was s e l e c t e d , as i t appeared most s u i t a b l e f o r the d i s c u s s i o n of the f o l l o w i n g i s s u e s : r a p i d population growth and r e g i o n a l economic development based on the i n d u s t r i a l use of f o r e s t resources; the dependence of a r e g i o n a l economy on one major i n d u s t r i a l group (logging and wood processing); the i n s t a b i l i t y of employment and incomes i n the short run which could r e s u l t from such dependence, i f the demand f o r l o c a l production f l u c t u a t e s i n response to exogenous f a c t o r s ; and changing patterns of population d i s t r i b u t i o n as the f o r e s t i n d u s t r y r e l o c a t e s i n response t o l o c a t i o n a l f a c t o r s and a d m i n i s t r a t i v e d i r e c t i o n . The Stud_y Area Region 7 as defined i n Map 1 i s i n f a c t the sum of three Census D i v i s i o n s which correspond to the three Regional D i s t r i c t s of Bulkley - Nechako, Fraser - Fort George and Cariboo. These Regional D i s t r i c t s , with t h e i r o f f i c e s i n Burns Lake, P r i n c e George and Williams Lake r e s p e c t i v e l y , were defined by the P r o v i n c i a l government i n 1965 to incor p o r a t e e x i s t i n g school and h o s p i t a l d i s t r i c t s , which "presumably have a common Source: D E P A R T M E N T O F I N D U S T R I A L D E V E L O P M E N T . T R A D E . A N D C O M M E R C E 30 i d e n t i t y , s i m i l a r socio-economic patterns and communications networks". 1 Economic Development Region 7 l i e s w i t h i n three Resource Management Regions, v i z . Skeena, Ominica - Peace and Cariboo, which approximate the Forest D i s t r i c t s of Pr i n c e Bupertj P r i n c e George and Cariboo used p r i o r t o January, 1975. However, these a d m i n i s t r a t i v e r e g i o n a l boundaries of the Forest Service and the Environment and Land Use Committee, which cover the e n t i r e province north of 53* North l a t i t u d e , ' are inadeguate f o r examining the r e g i o n a l economic i m p l i c a t i o n s o f f o r e s t p o l i c y . & smaller r e g i o n , such as Economic Region 7, of r e l a t i v e economic homogeneity and independence, i s required. The towns and v i l l a g e s of t h i s r e g i o n , with the possible exception of the South Cariboo- and Williams Lake, are predominantly r e l i a n t o n the f o r e s t i n d u s t r i e s , and dependent on Prince George - the only l a r g e c i t y i n the region - f o r higher order goods and s e r v i c e s . This region was found to be c o n s i s t e n t with the " c i t y - region theory", i n which an economic region i s defined by the i n t e r r e l a t i o n s h i p s between the major c i t y ; i t s s a t e l l i t e s and t h e i r h i n t e r l a n d s , i n terms of i n f r a s t r u c t u r e and the flow of goods and s e r v i c e s . 2 Whether these "economic r e g i o n s " are c o r r e c t l y defined i s a most i n t e r e s t i n g - problem i n economic geography. Yet whether r e a l cr a r b i t r a r y , they are i£so f a c t o the regions f o r which data e x i s t , the source of our knowledge and problems, and the regions to which major p o l i c y d e c i s i o n s 1 Parker (1968) p.18. 2 Haley et a l (1975) p. 10. 31 w i l l be a p p l i e d . 1 The c e n t r a l l o c a t i o n of Prince George at the j u n c t i o n of the B r i t i s h Columbia and Canadian N a t i o n a l Railways and of the Yellowhead and Cariboo Highways, has c o n t r i b u t e d s u b s t a n t i a l l y to i t s development as the s e r v i c e and d i s t r i b u t i o n centre of the r e g i o n , with a h i e r a r c h i a l s t r u c t u r e o f - towns and v i l l a g e s focused towards i t . Recent population s t a t i s t i c s f o r the centres i n the region are presented i n Table 1 and the h i e r a r c h y of f u n c t i o n s performed by each i s r e f l e c t e d i n Tables 2 and 3. In a d d i t i o n , the f o l l o w i n g estimates by the Prince George Chamber of Commerce (March 31, 1975) i l l u s t r a t e the s i z e of P r i n c e George's f o r e s t i n d u s t r i e s r e l a t i v e to i t s population. Population of Prince George C i t y 65,000 Population of Metro Prince George 71,700 Population of Trading Area 160,000 Employees i n the l o g g i n g i n d u s t r y 2,6 00 Employees i n sawmills 5,000 Employees i n the pulp and paper i n d u s t r y 2,4 00 While i t i s undoubtedly a major resource processing c e n t r e , i t s r o l e as a d i s t r i b u t i o n and s e r v i c e centre does seem at l e a s t as s i g n i f i c a n t . 1 The f a c t that the Environment and Land Use Committee, charged with " s o c i a l and economic development c o n s i s t e n t with the p r o t e c t i o n and p r e s e r v a t i o n of a d e s i r a b l e environment" (Stokes, 1971, p.7), excluded u n t i l 1975 the B.C. Department of Economic Development, has not g r e a t l y f a c i l i t a t e d r e g i o n a l a n a l y s i s and p o l i c y implementation. 32 Table 1. • Population Statistics for Northern B r i t i s h Columbia. Census Division 1951 1961 1971 Annual Growth Rate( ? o) 1951-71 1. Bulkley-Nechako 12,075 17,437 27,145 4.13 2. Cariboo 13,086 27,103 39,357 5.66 3. Fraser-Fort George 14,801 31,726 64,364 7.63 4. Peace River-Laird 14,625 31,352 43,996 5.66 5. Kitimat-Stikine 9,669 23,031 37,326 6.99 6. Stikine 804 1,224 1,470 3.06 7. Skeena A 13,295 17,592 22,299 2.62 Source: Statistics Canada - 1971 Census. Table 2. Employment by Major Occupational Groups i n Quesnel and Prince George, 1971. Male QUESNEL Female Total METRO PRINCE Male Female GEORGE Total 1. Management, Teaching, Medical and Technical 200 155 355 1325 1015 2340 2. C l e r i c a l 60 240 300 600 1775 2375 3. Sales 155 100 255 1250 440 1690 4. Service 160 130 290 835 945 1780 5. Farming 0 0 0 25 30 55 6. Primary* 155 0 155 305 20 325 7. Processing, Machining 300 5 305 785 15. 800 8. Assembly, Repair 160 . 0 160 1005 15 1020 9. Construction 220 0 220 1310 10 1320 .0. Transportation, U n c l a s s i f i e d , Not Stated 410 80 490 2175 555 2670 TOTAL 2530 14375 * Occupational Group 6 i s dominated by Logging and Forestry. Source: S t a t i s t i c s Canada - Economics Population Labour Force F i l e 1971. Table 3. Percentage Employment by Principal Sectors In Major Centres, 1971. Centre Primary Manuf. Service Houston 18.1 30.2 44.1 Kitlmat 2.3 52.9 38.6 MacKenzie 10.3 34.8 41.1 Terrace 13.1 13.3 63.9 Quesnel 7.6 24.2 61.0 Smlthers 8.2 6.0 76.0 Williams Lake 5.1 14.3 80.0 Burns Lake 6.2 8.2 79.4 Fort St. James 20.7 20.7 42.2 McBride 9.5 7.1 73.8 100 Mile House 7.4 16.5 63.5 Valemont 14.5 23.6 61.8 Vanderhoof 8.2 12.2 71.6 Prince George 4.9 17.3 69.8 Source: Statistics Canada - Economics, Population, Labour Force F i l e 1971 35 A B r i e f Economic History, Of The B.C. I n t e r i o r Forest I-ndustry... From an examination of the h i s t o r y of the I n t e r i o r f o r e s t i n d u s t r y , the appropriateness of the P.S.Y.U. model discussed i n Chapter I I above can be f u r t h e r considered. The North C e n t r a l I n t e r i o r provides an e x c e l l e n t i l l u s t r a t i o n and the p o l i c i e s and events i n the years p r i o r to the 1950s seem very r e l e v a n t to the is s u e . i P r i o r to 1908, the North C e n t r a l f o r e s t i n d u s t r y c o n s i s t e d of q u i t e a number of vary small m i l l s s c a t t e r e d along what i s now the CNR r a i l l i n e ; producing mainly t i e s . (There was a l s o a good d e a l of s p e c u l a t i v e holding of f o r e s t land.) Through to 1939, m i l l l o c a t i o n was determined p r i m a r i l y by raw m a t e r i a l supply and access. Because of the poor q u a l i t y of roads and the f a c t that the expense of the p r e v a i l i n g t r a n s p o r t technology was not warranted f o r the e x t r a c t i o n of low-value logs (and because of the general absence of cheap water transport) the a r e a l spread of the in d u s t r y was r e s t r i c t e d . Of n e c e s s i t y ; l o g g i n g and m i l l i n g were very c l o s e l y a s s o c i a t e d , with an average l o g haul l e s s than two miles. M i l l s were s m a l l , although some a n a l y s t s , i n c l u d i n g M u l l i n s (1967) argued that they were o v e r c a p i t a l i s e d c o n s i d e r i n g the small and v o l a t i l e export markets. The low lumber p r i c e s of the 1928-40 period g e n e r a l l y l a d to c o n t r a c t i o n or stagnation of d i f f e r e n t components of the i n d u s t r y . i This h i s t o r i c a l a n a l y s i s draws h e a v i l y from M u l l i a s ( 1 9 6 7 ) . Among the many other authors are Eckardt ( 1 9 6 7 ) , Haley ( 1 9 7 1 ) , Hardwick ( 1 9 6 3 ) , Lewis ( 1 9 7 4 ) , Nagle ( 1 9 7 0 ) , Orchard ( 1 9 5 9 , 1 9 6 4 ) , Robinson (1971) and Siemens ( 1 9 7 2 ) . 36 The p e r i o d 1 9 4 0 - 5 7 was c h a r a c t e r i s e d by a r e a l d i s p e r s i o n due t o t h e u n e x p e c t e d b u t s u s t a i n e d i n c r e a s e i n demand f r o m t h e O . S . A . and B r i t a i n f o r w a r t i m e f a c i l i t i e s f o l l o w e d by t h e p o s t - w a r b u i l d i n g a n d h o u s i n g b o o m . 1 O v e r s i x h u n d r e d new p o r t a b l e m i l l s ; w i t h 3-8 e m p l o y e e s e a c h , a p p e a r e d i n t h e N o r t h C e n t r a l I n t e r i o r , m a i n l y a l o n g t h e new (1952) PGE r a i l w a y 2 and t h e H a r t h i g h w a y . F o r e x a m p l e , i n 1948 t h e r e were 33 m i l l s w i t h i n t h i r t y m i l e s o f Q u e s n e l ; i n 1954 - 180 m i l l s (and now t h e r e a r e f i v e , a l l i n Q u e s n e l ) . W h i l e l o g g i n g a n d s a w m i l l i n g r e m a i n e d s p a t i a l l y and f r e g u e n t l y c o r p o r a t e l y l i n k e d , t h e i r r o u g h p r o d u c t was t r a n s p o r t e d t o c e n t r a l l y l o c a t e d (but u s u a l l y s e p a r a t e l y owned) p l a n e r m i l l s , p r o c e s s i n g t h e o u t p u t o f up t o t h i r t y i n d e p e n d e n t m i l l s . F o r e x a m p l e , on P r i n c e G e o r g e ' s " P l a n e r Bow" i n 1 9 5 4 , s e v e n t e e n p l a n e r m i l l s d r e s s e d 7 5% o f t h e r e g i o n ' s o u t p u t and s h i p p e d i t o u t by r a i l . W h i l e t h e r e was w i d e d i s p e r s i o n o f t h e s e s m a l l e r m i l l s o u t i n t o t h e r e s o u r c e b a s e , 1 The O . K . m a r k e t i s no l o n g e r o f m a j o r i m p o r t a n c e t o t h e I n t e r i o r i n d u s t r y a l t h o u g h some l u m b e r i s e x p o r t e d v i a V a n c o u v e r . However M u l l i n s (1967) d o c u m e n t e d t h e i m p o r t a n c e o f t h e O . K . ' s w a r t i m e l u m b e r demand i n t h e e a r l y e x p a n s i o n o f t h e i n t e r i o r s a w m i l l i n g i n d u s t r y . 2 The P a c i f i c G r e a t E a s t e r n R a i l w a y , now t h e B r i t i s h C o l u m b i a R a i l w a y was c o n s t r u c t e d a s f a r n o r t h a s Q u e s n e l i n t h e 1 9 2 0 s , b u t w i t h t h i s e x t e n s i o n t o i n t e r s e c t t h e CNR a t P r i n c e G e o r g e , i t s e f f e c t on t h e f o r e s t i n d u s t r y was e n h a n c e d . 37 and s m a l l towns appeared, 1 "growth nodes" were already becoming apparent, i n these r e g i o n a l processing centres. At t h i s stage, there probably was a m i l l , of s o r t s , and a settlement of some k i n d , even i f only a l o g g i n g / m i l l i n g camp, i n each P.S.Y.U. or p r o v i n c i a l f o r e s t , A 20 year o l d map of the province i l l u s t r a t e s the wide a r e a l d i s p e r s i o n of small communities i n t h i s r e g i o n , most of them focused on sawmills. The spread of the i n d u s t r y i n the f i f t i e s and e a r l y s i x t i e s (and i t s subseguent c o n t r a c t i o n ) i s ' documented i n Maps 2a - 2d (the f i r s t three being reproductions from M u l l i n s , 1967). The determinants of these changes are analysed below. They i n c l u d e changes i n the costs of t r a n s p o r t a t i o n , i n c r e a s i n g q u a l i t y of the products s o l d i n export markets, t e c h n o l o g i c a l change which produced s i g n i f i c a n t economies of s c a l e and changing labour f o r c e reguirements. 1. Transportation was r e v o l u t i o n i s e d ; e s p e c i a l l y with the improved general q u a l i t y of the roads. A l s o , with the i n v e n t i o n of the d i e s e l logging t r u c k , logs were no longer much more expensive to haul than lumber (and the volumes and values recoverable were i n c r e a s i n g simultaneously). As a r e s u l t , the (portable) m i l l s no longer had-to l o c a t e at the source of logs (as would be p r e d i c t e d by l o c a t i o n theory on the basi s of value/ weight or bulk r a t i o s ) . I t has been estimated by M u l l i n s (1968, p.102) t h a t i n the * Some of these s m a l l towns were l i t t l e more than logging camps. However Webber (1960) documented the c r e a t i o n of the v i l l a g e of Bear Lake, on the Hart highway with i n the Crooked fiiver P.S.Y.U. This was to e s t a b l i s h a s t a b l e and a t t r a c t i v e s i t e f o r the labour force of e i g h t new m i l l s i n the immediate v i c i n i t y . Although many of these m i l l s have si n c e c l o s e d , the v i l l a g e of Bear Lake s t i l l p e r s i s t s . LOG CONVERSION PRINCE 1925 GEORGE UNITS IN THE FOREST D {STRICT, © Sawmill-41 Map 2d.- SAWMILLS IN BRITISH COLUMBIA. Number of Operating Sawmills and Total Rated Daily Capacity i n Thousands of Board Feet, 1973 •^-^  (Hy Forest D i s t r i c t s ) 4 K o j -• ,-^oi Prince Rupert »^ if/Vf £.M Forest D i s t r i c t f> ,2,008 M f.b.m.1 (I " - " - . u / Prince George / Forest D i s t r i c t c( 1 5 6 / \6,148 M f.b.m. .' / / ~0-». . ^ v - » ; Daily Capacity (8 hr. Shift) 250,000 f.b.ra. - 249,999 f.b.m. - 149,999 f.b.m. - 49,999 f.b.m. Cariboo^, -V£ Forest? D i s t r i c t ^ S ? \ rt '£3,536 M f.rb-.ra. , L' V''- ^ y V> \ Kamloops Forest D i s t r i c t 176 4,843 M f.b.m. Vancouver-, • Forest D i s t r i c t 176 -;• 11,251 M f.b.m." ^ Nelson Forest D i s t r i c t \ 112 3,343\M f.b.m. PROVINCIAL TOTAL Number of Operating Sawmills 810 Rated Eight-Hour Daily Capacity 31,129 M f.b.m. Source; B r i t i s h Columbia Forest Service, V i c t o r i a . 42 e a r l y s i x t i e s , i t cost $7/M f.b.m. more to move logs than f o r lumber, over a f o r t y mile haul. 1 Information on the c u r r e n t p r i c e d i f f e r e n t i a l between l o g - and lumbar- t r a n s p o r t a t i o n r a t e s was provided by the A p p r a i s a l s D i v i s i o n of the B.C.F.S. In the Prince George area, the cost allowance f o r lumber t r a n s p o r t over a f i f t y mile round t r i p , empty one way and i n c l u d i n g l o a d i n g and unloading, i s approximately $4.00/M f.b;m. A comparable haul of l o g s i s estimated t o cost approx. $15.00/M f.b.m. Thus, while the d i f f e r e n t i a l seems to have widened since 1964 (in apparent c o n t r a d i c t i o n t o the accepted theory) i t could be assumed th a t economies of agglomeration more than compensate. (Otherwise there would be a t r e n d of sawmills r e l o c a t i n g i n t o the f o r e s t s r a t h e r than i n processing centres.) Of course, i t must be noted t h a t most of the l o g hauling c o s t s are absorbed by the Forest Service through the a p p r a i s a l system. Thus even small economies could be s u f f i c i e n t t o o f f s e t any haulage cost d i f f e r e n t i a l . As Farley (1972, p;95) concluded, "Logging continued t o be s p a t i a l l y a s s o c i a t e d with s a w m i l l i n g but the i n t r o d u c t i o n of newer means of t r a n s p o r t permitted a g r e a t e r s e p a r a t i o n , so t h a t logging camps were e s t a b l i s h e d at some distance from m i l l i n g s i t e s ... This growing s p a t i a l d i s s o c i a t i o n c o n t r i b u t e d to the development of l a r g e - c a p a c i t y f i x e d • m i l l s that could draw upon a l a r g e resource h i n t e r l a n d f o r t h e i r c o n t i n u i n g operation ... M i l l i n g has tended to become i While other parts of North America were using logging r a i l w a y s to t r a n s p o r t logs p r i o r to the development of cheap road t r a n s p o r t , t h i s d i d not occur i n the North C e n t r a l I n t e r i o r . The volumes and value of (small sized) logs t r i b u t a r y to a r a i l w a y were too s m a l l to warrant the high c a p i t a l expenditure p a r t i c u l a r l y when b e t t e r l o g s were a v a i l a b l e elsewhere, as on Vancouver I s l a n d . 43 c e n t r a l i z e d but l o g g i n g has expanded a r e a l l y . " 2. Expor t markets g e n e r a l l y r e q u i r e d h i g h e r grade l u m b e r , n e c e s s i t a t i n g the i n s t a l l a t i o n of e x p e n s i v e p l a n i n g , d r y i n g and f i n i s h i n g machinery . I t became apparent tha t s u b s t a n t i a l economies e x i s t e d because of i n d i v i s i b i l i t i e s o f these i n s t a l l a t i o n s , a s ' w e l l as i n marke t ing the p roduc ts f o r e x p o r t . The f a c t tha t the c o u n t r i e s i m p o r t i n g B r i t i s h C o l u m b i a ' s lumber found t h e m s e l v e s ' w i t h o u t the c a p a c i t y t o f i n i s h rough lumber (at a p r i c e l e s s than the B . C ; product ) was an impor tan t s t i m u l u s t o the B . C . f o r e s t economy. While i m p o r t i n g c o u n t r i e s f r e q u e n t l y want to import goods i n t h e i r l e a s t p rocessed s t a t e i n o rder to p r o t e c t domest ic employment, t h e i r sudden s u r g e ' i n demand f o r f i n i s h e d lumber meant t h a t they were not o n l y prepared to a c c e p t i t , but r e q u i r e d i t and would pay w e l l fo r i t . 3. A f t e r f i n d i n g tha t economies o f s c a l e ( i n d i v i s i b i l i t i e s ) e x i s t e d and c o u l d be e x p l o i t e d by c o n s o l i d a t i o n of a number of m i l l s , "the q u e s t i o n was f r e q u e n t l y where to l o c a t e the new m i l l . L o c a t i o n theory p r e d i c t s that t h e r e may b e " s u b s t a n t i a l economies t o be made by " l o c a l i s a t i o n " and " u r b a n i s a t i o n " . ; L o c a l i s a t i o n economies are i n t e r n a l to the i n d u s t r y ; a r i s i n g f o r example, from be ing a b l e to t r a d e i n raw m a t e r i a l s or from the p r o d u c t i o n of complementary - p r o d u c t s . U r b a n i s a t i o n economies a re e x t e r n a l to the i n d u s t r y , e . g . , ' t h r o u g h a c c e s s to a s t a b l e s u p p l y of s u i t a b l y s k i l l e d l a b o u r . Sawmi l l managers have s t a t e d t h a t the g r e a t e s t c o s t s a v i n g i n l o c a t i n g i n a c i t y comes through lower l a b o u r t u r n o v e r r a t e s , whi le d i r e c t c o s t s of t r a n s p o r t i n g and hous ing employees i n bunk houses have a l s o been s i g n i f i c a n t l y 44 reduced. L o c a t i o n theory a l s o p r e d i c t s t h a t r e a l s a v i n g s i n t r a n s p o r t c o s t s may be made through l o c a t i n g the p r o c e s s i n g p l a n t a t any p o i n t of transhipment between d i f f e r e n t media. A c u r s o r y glance r e v e a l s t h a t most, i f not a l l , of the major sawmills i n the B.C. I n t e r i o r are l o c a t e d at such a transhipment p o i n t , u s u a l l y between road t r a n s p o r t of l o g s and r a i l export of lumber. 1 ...... 4 . The requirements of the i n d u s t r i a l labour f o r c e have a l s o had major impacts on the r e l o c a t i o n and aqglomeration of the f o r e s t i n d u s t r y . I t i s g e n e r a l l y accepted t h a t : a. a "more s k i l l e d " labour f o r c e i s r e q u i r e d f o r a s o p h i s t i c a t e d modern o p e r a t i o n , although the measurement of r e l a t i v e s k i l l s i s m o s t - d i f f i c u l t . T h i s r e a l l y a p p l i e s o n l y t o the employees who c o n s t r u c t and maintain the plant r a t h e r than to the r o u t i n e o p e r a t o r s ; b. with g e n e r a l " p r o g r e s s " and changes i n s o c i a l mores and e x p e c t a t i o n s , r e l a t i v e l y fewer people seem to want to l i v e "the rugged l i f e s t y l e " , f a r from a l l the f a c i l i t i e s f o r a "good l i f e " ; c. the labour f o r c e has become more uni o n i z e d (although s t i l l 1 The d e c i s i o n r e g a r d i n g the l o c a t i o n of the s a w m i l l s and the town of Mackenzie i l l u s t r a t e s t h i s p o i n t . Most l o g s a r r i v e by water and lumber l e a v e s by r a i l f o r market. The same m i l l at P r i n c e George; f o r example, would r e q u i r e transhipment of l o g s to l a n d , 100 miles of road or r a i l h a u l , p r o c e s s i n g , and then export by r a i l . Presumably, the savings from t r a n s p o r t i n g lumber r a t h e r than l o g s , and through reduced t r a n s p o r t c o s t s , s u b s t a n t i a l l y compensate f o r the c o s t s of c o n s t r u c t i n g an i n s t a n t town. 45 much l e s s so than on the coast of B . C . ) ; and d. the money co s t of labour a p p a r e n t l y rose r e l a t i v e to other f a c t o r c o s t s and product p r i c e s . (See F i g u r e 4 ) . M u l l i n s (1967) considered the l a s t t o be a major cause o f the changes i n i n d u s t r i a l - s t r u c t u r e h a v i n g noted that the p r i c e of spruce lumber h a d r i s e n by 10% and wage r a t e s by 80% i n the pe r i o d 1953-1965. However, s i n c e her a n a l y s i s does not d i s c u s s the r e l a t i v e p r o p o r t i o n s of labour c o s t s to value of p r o d u c t i o n , or account f o r changes i n * the p r o d u c t i v i t y of l a b o u r as the i n d u s t r y became more c a p i t a l - i n t e n s i v e , her assumption of one way c a u s a l i t y i s weakly based. That i s , higher wage r a t e s d i d not n e c e s s a r i l y f o r c e c o n c e n t r a t i o n and t e c h n i c a l change. The labour component of t o t a l p r o duction c o s t s c o u l d s t i l l be the same as i n 1964 or-even l e s s i f other c o s t s have • r i s e n f a s t e r . I t must a l s o be - noted that i f B.C. wages caused the i n d u s t r y to become'more c a p i t a l - i n t e n s i v e ; then i n n o v a t i o n should have begun i n B.C; In f a c t , i n c r e a s i n g c a p i t a l - i n t e n s i t y and t e c h n o l o g i c a l change i s world-wide and i n c r e a s e s i n wage r a t e s c o u l d be the r e s u l t , r a t h e r than the cause of i n c r e a s e d labour p r o d u c t i v i t y . 1 The s c a r c i t y of l a b o u r f o r more remote sawmills, d i s c u s s e d above, may a l s o have been i n s t r u m e n t a l i n bidding up wage r a t e s i n s a w m i l l i n g and l o g g i n g . The net r e s u l t of these i n f l u e n c e s has been the agglomeration of sawmills i n t o p r o c e s s i n g c e n t r e s along r a i l w a y 1 T h i s has a l s o been observed r e c e n t l y i n Scandinavia where Banders (1976) argued that i n c r e a s e d s c a l e had l e d to h i g h e r l a b o u r p r o d u c t i v i t y and a b i l i t y to pay competitive wages. 46 1955 . 1960 1965 1970 1975 Figure 4. Lumber Price - Wage Rate Comparison. Note: Logarithmic Scale used. Sources: 1. Average Value of Spruce Lumber: Dominion Bureau of Statistics, cited by Mullins (1967).. 2. Price of Kiln-dried Interior Spruce 2x4, (delivered to N.Y.): • • Madison Annual (1975). 3. Rasic Hourly Wage Rate: I.W.A. - N.I.L.S. Master Agreements, 1953-66 cited by Mullins (1967). 47 l i n e s , • d r a w i n g l o g s u p p l i e s from l o g g i n g o p e r a t i o n s i n a number of P.S.Y.U.s. 1 T h i s i s i l l u s t r a t e d by F i g u r e 5, i n c o n t r a s t to the o r i g i n a l concept of a P.S.Y.U. (Figure 3 on page 24). The • • Impacts Of B.C.F.S. P o l i c i e s In Sharping The Regional Economy.. Thus f a r , the r o l e of B.C.F.S. or government p o l i c i e s i n the i n d u s t r y ' s t r a n s i t i o n from many sm a l l s c a t t e r e d p o r t a b l e sawmills to a few l a r g e i n t e g r a t e d complexes has not been mentioned. Many a n a l y s t s 2 have i n c l u d e d these p o l i c i e s as c a u s a l f a c t o r s i n the observed developments but from the preceding d i s c u s s i o n , one might i n f e r t h a t t h i s c o n c l u s i o n can be questioned. Government p o l i c i e s seem t o have been e i t h e r an encouragement to the agglomeration process; or p e r m i s s i v e i n the sense o f i r r e s i s t a b l e f o r c e s f o r i n e v i t a b l e change b e i n g merely accommodated through p o l i c y or p r o c e d u r a l changes, or both, 1 Teeguarden (1974) has d i s c u s s e d the s u c c e s s i v e enlargements or agglomeration of U.S.F.S working c i r c l e s i n C a l i f o r n i a . T h i s seems t o be a d i r e c t and r a t i o n a l response t o the r e g i o n a l nature of timber sup p l y , as i n d u s t r y r e l o c a t e s and c o n c e n t r a t e s . Changes i n B.C.'s a d m i n i s t r a t i v e boundaries have o c c u r r e d s i n c e they were e s t a b l i s h e d i n the 1950s. These were g e n e r a l l y i n r e c o g n i t i o n of the changing i n d u s t r i a l s t r u c t u r e and t r a n s p o r t a t i o n c a p a b i l i t y . The t o p i c i s again under i n v e s t i g a t i o n by the B.C.F.S. 2 M u l l i n s (1967), f o r example. Nagle (1971), Haley (1971), and Lewis (1974), Figure 5. Regional Agglomeration of Sawmilling and Timber Supplies. 49 i . e . p o l i c i e s may have accelerated i n e v i t a b l e changes. 1 I t i s therefore the i n t e n t of t h i s chapter to document those changes i n f o r e s t p o l i c y and a d m i n i s t r a t i o n which have d i r e c t l y a f f e c t e d the s i z e , l o c a t i o n and s t r u c t u r e of the f o r e s t i n d u s t r y , thereby a l s o a f f e c t i n g the type, l o c a t i o n , s t a b i l i t y and amount of employment a v a i l a b l e t o the region's workforce. These f o r e s t a d m i n i s t r a t i o n p r a c t i c e s may have been complementary to the s t a t e d o b j e c t i v e of community s t a b i l i t y or may have been c o n t r a d i c t o r y i n t h e i r impacts. The f a c t o r s which are being considered here i n c l u d e : the r e c o g n i t i o n of e s t a b l i s h e d operators, and guarantees of wood supply (guota) to them; the p o l i c y of a l l o w i n g these i n f o r m a l "quotas" to be traded and accumulated as c a p i t a l assets; the i m p o s i t i o n of non-refundable bidding fees f o r non-guota holders, to f u r t h e r discourage new competition; the i m p o s i t i o n of c l o s e u t i l i s a t i o n standards; the c r e a t i o n of a new form of tenure (Timber Sale Harvesting Licences) i n 1968 to encourage conversion t o c l o s e -u t i l i s a t i o n standards and f a c i l i t a t e p r i v a t e planning o f logging a c t i v i t y through lengthening the tenure period; the stumpage a p p r a i s a l system used, e s p e c i a l l y i n the i n t e r a c t i o n between minimum stumpage and the absorption of haulage c o s t s ; 1 The f a c t that agglomeration i n the f o r e s t i n d u s t r y i s not unique to B.C. - r a t h e r i t i s almost u n i v e r s a l - suggests t h a t B.C. f o r e s t p o l i c y can hardly be a d i r e c t c a u s a l f a c t o r . 50 the d i r e c t a l l o c a t i o n of T.S.H.L.s i n new areas and of l i c e n c e s f o r "Third Band" timber, to new; and e s t a b l i s h e d companies, (which s u b s t a n t i a l l y a l t e r e d corporate and geographic concentration of the i n d u s t r y ) , on the c r i t e r i a of "need" and "performance"; and the i m p o s i t i o n of an over l a y tenure, the Pulpwood Harvesting Agreements, i n 1963, to encourage a pulp economy (which would i n turn u t i l i s e more of the p r e v i o u s l y "wasted" wood r e s i d u e s ) . A l l of these have been widely described and analysed i n d e t a i l i n the past, but the population d i s t r i b u t i o n and employment impacts have received l i t t l e emphasis i n those d i s c u s s i o n s . Seven f u r t h e r comments on some of the above seem warranted, to expand and strengthen the understanding of the r o l e played by the B.C.F.S. i n the e v o l u t i o n of the r e g i o n a l economy. 1. Sloan (1956) and Orchard (1953) argued that the sma l l e r independent operators should be afforded " p r o t e c t i o n " a g a i n s t being forced out of business by the l a r g e i n t e g r a t e d companies which obtained Tree 'Farm Licences or Pulpwood Harvesting Agreements. Under P.H.A. 1, the Canfor / Takla / P r i n c e George Pulp and Paper group were p r o h i b i t e d from competing with e s t a b l i s h e d operators i n the area covered by t h e i r P.H.A. Only a f t e r approximately 8 years did they begin to concentrate th'eir s a wmilling e f f o r t s around F o r t St. James (and at Chetwynd outside the P.H.A.). A d i f f e r e n t response was di s p l a y e d by Northwood, which promptly bought out and amalgamated the s i x Tree Farm Licences i n t h e i r P.H.A. and proceded t o purchase and 51 combine sawmills with the i n t e n t of e s t a b l i s h i n g a P r i n c e George complex. The p e r t i n e n t point i s that the PiH.fi. c o n t r a c t s were not uniform - the r i g h t s , r e s p o n s i b i l i t i e s and c o n d i t i o n s vary between c o n t r a c t s , 1 presumably as the concept evolved. The " p r o t e c t i o n of e s t a b l i s h e d operators" clause of the f i r s t agreement gave way to one wherein the e s t a b l i s h e d m i l l s were, i n e f f e c t , given an asset ( t h e i r quotas). The s a l e of these quotas was g e n e r a l l y approved; 2 f a c i l i t a t i n g agglomeration and i n t e g r a t e d processing. Neither the n e c e s s i t y f o r p r o t e c t i o n nor the best form f o r any such p r o t e c t i o n to take were s e r i o u s l y analysed at the time of the i n t r o d u c t i o n of quota, although there was a sustained and heated debate; 3 I t seems t h a t any repercussions on the f o r e s t i n d u s t r y ' s s t r u c t u r e or the socio-economic conseguences did not weigh heavily i n the d e c i s i o n t o r a p i d l y e s t a b l i s h a pulp industry which would u t i l i s e low-grade timber. 2. The i n t r o d u c t i o n of compulsory close u t i l i s a t i o n standards i n the l a t e 1960s may have had major e f f e c t s on the aggregate s i z e and composition of the sawmilling i n d u s t r y , as w e l l as s t i m u l a t i n g the development of the pulp and paper 1 Pearse et a l , (1974b),p.99. 2 Nagle (1970) reported t h a t guota had been s o l d i n B r i t i s h Columbia at $10 t o $40 per c u n i t during the 1960s.,Thus the quota system provided an a t t r a c t i v e e x i t from the i n d u s t r y to many of the operators who were i n c l i n e d to d i s c o n t i n u e t h e i r operations. 3 See Eckhardt (1967). i n d u s t r y . I t can be argued that the compulsory close-U p o l i c y (and the p r i c e i n c e n t i v e s given as p a l l i a t i v e s ) hastened i n e v i t a b l e t e c h n o l o g i c a l advance i n s a w m i l l i n g . 1 However, enormous in c r e a s e s i n usable f o r e s t i n v e n t o r i e s a l s o r e s u l t e d immediately, and t h e i r d i s p o s i t i o n through " c l o s e u t i l i z a t i o n i n c r e a s e s " and T h i r d Band Sales, i s i l l u s t r a t e d by F i g u r e s 6a to 6e, The lower s o l i d l i n e (CU Quota allowed) shows the increase of approximately o n e - t h i r d with the change - from intermediate to c l o s e u t i l i s a t i o n standards i n each P.S.Y.U. By comparing t h i s l i n e with the lower dashed l i n e (CU Quota c u t ) , one may observe whether the existence of quota r i g h t s ' h a s been a s s o c i a t e d with even-flow harvesting i n each u n i t (although i t i s enforced on a b a s i s of each c u t t i n g permit f o r each fi r m operating i n each P.S.Y.U.). A l t e r n a t i v e l y , i t may be taken as i l l u s t r a t i n g the e f f e c t i v e n e s s with which the A.A.C. c o n s t r a i n t s have been imposed. The upper s o l i d l i n e ( Total A.A.C.) i s the sum of a l l o c a t e d quotas, t h i r d band r i g h t s , miscellaneous permits and Forest Service reserves; and i l l u s t r a t e s the r a p i d expansion of the (calculated) resource base with c l o s e u t i l i s a t i o n . The increases i n the Interior'were l a r g e i n comparison to the Coast, because of the very l a r g e volumes and areas of small (7" to 10" d.b.h.) lodgepole pine i n p a r t i c u l a r , which suddenly became 1 This i s o b v i o u s l y c o n s i s t e n t with the t r a d i t i o n a l c o n s e r v a t i o n i s t p o s i t i o n that raw m a t e r i a l s should not be wasted. However, since much of t h i s technology was labour-saving, the s o c i a l o b j e c t i v e of job c r e a t i o n - j o b s e c u r i t y was apparently secondary to the t e c h n i c a l - c o n s e r v a t i o n o b j e c t i v e . F i g u r e s 6a t o 6e. E x p a n s i o n o f A l l o w a b l e and  A c t u a l Cuts f o r 5 P.S.Y.U.s i n t h e N o r t h  C e n t r a l I n t e r i o r o f B r i t i s h C o l u m b i a . Note 1. A l l o w a b l e C u t s : The o r i g i n a l q u otas i n t r o d u c e d i n t h e e a r l y 1960s were i n c r e a s e d by - o n e - t h i r d i f l o g g i n g changed from " i n t e r m e d i a t e " t o " c l o s e " u t i l i z a t i o n s t a n d a r d s ( g e n e r a l l y between 1967 and 1969). T h i r d Band (T.B.) a l l o c a t i o n s o f a d d i t i o n a l wood s u p p l i e s were made ( i n 1970 - 71) on t h e b a s i s o f " p e r f o r m a n c e " a n d / o r need, t o new o r e s t a b l i s h e d o p e r a t o r s . The d i f f e r e n c e between t h e t o t a l n e t A n n u a l A l l o w a b l e Cut and T.B. + C U . Quota i s m a i n l y F o r e s t S e r v i c e R e s e r v e . Note 2. A c t u a l C u t s : The d i f f e r e n c e between T o t a l Cut and T.B.+C.U.Quota r e p r e s e n t s l o g g i n g by m i s c e l l a n e o u s p e r m i t / l i c e n c e h o l d e r s . ! ; I 1 !-!•:!-!•!:• !-L11-!-i i; i r IM j. !!•!;[ rrlilttm. • 1 • t -I •• ..! .;. II I.I. :.-ITOTRL 'flflp ; i I I ! I ; !' l.i.i -I ! j ! I i TB CU QUOTA; ALLOWED j TOTAL CUT -iTB +. CU QUOTA. CU CU QUOTA: ALLOWED j :CU QUOTA: CUT: 1972 1973 1974. 1975 •P-1955 1966 1967 1968 1969 YEAR 59 "commercial". 1 The questions of what to i n c l u d e i n a f o r e s t inventory and the techniques used by the B.C.F.S. to c a l c u l a t e A. A.C.s are important, but somewhat beyond the scope of t h i s study. Nevertheless, i t i s e s s e n t i a l t o emphasise that the stock of n a t u r a l resources i s not s t a t i c , while technology advances and r e l a t i v e p r i c e s change, while t h i s may be obvious to a resource economist, i t has been c o n s i s t e n t l y ignored by B. C.F.S. planners. However, i t must be noted that most of the A.A.C. expansions are derived from the same dated inv e n t o r y . For example, i t was known i n 1962 that when the Hestlake P.S.Y.U. reached f u l l close-0 standards, the A.A.C. would r i s e from 50,000 to 160,000 c u n i t s / y e a r . Thus these graphs may i l l u s t r a t e the gradual expansion of the i n d u s t r y as the cut c o n s t r a i n t s were re l a x e d each time the t e c h n i c a l o b j e c t i v e of close-U was met. Along with t h i s expansion of a l l o c a t i o n s , the B.C.F.S. i s holding at present, a very l a r g e part of the netA.A.C. as "Forest Service reserves" i n some of these P.S.Y.U.s, as i l l u s t r a t e d i n Figures 6a to 6e and Table 4a. This may j u s t be another margin*of conservatism on the part of the B.C.F.S., against f u t u r e 'reductions i n a l l o c a t e d cuts. There have been s i g n i f i c a n t withdrawals from the commercial f o r e s t - a r e a i n some P.S.Y.U.s with the advent of Environmental P r o t e c t i o n F o r e s t s , which were discussed by Levy (1976). He concluded that while 1 The extension of t r a n s p o r t routes to provide logging access to new f o r e s t areas a l s o seems to have played a major r o l e , but not i n the sense i m p l i e d i n the B.C.F.S. quote on page 15 above. 60 Table 4a,. 197^ - AACs and Forest. S e r v i c e Reserves f o r Ten Northern " I n t e r i o r P.S..i'.U»s. psra T o t a l C-U AAC Reserve ( c u n i t s / y e a r ) ( c / y r ) B.C.F.S. P l a n s Purden S t u a r t Lake B i g V a l l e y Willow R i v e r Monkman Parsn i p West lake Robson Carp Ta k l a 178,120 1H,773 No more a l l o c a t i o n s u n t i l ' "Environmental P r o t e c t i o n F o r e s t s " i s s u e i s r e s o l v e d , 37 l +5660 lb'1+,660 p o t e n t i a l f o r new s a l e s . 81,1+30 3,^00 No more-to be a l l o c a t e d . 116 ,700 1+,1+50 No more t o be a l l o c a t e d . 200,000. 53,707 Undecided. 215,000 9,700 No more to be a l l o c a t e d . 160,000 6,016 No more to be a l l o c a t e d . 122,000 32,8^0 W a i t i n g new i n v e n t o r y . 331,500 ' 61,360 P o s s i b l e emergency pulpwood s a l e s . (Reserve i n c l u d e s deciduous . f o r e s t s . ) 62l+,!+80 28^,580 Undecided. (Depends on B.C. R a i l and Indian l a n d claims.) Source: B.C.F.S. personnel, P r i n c e George D i s t r i c t O f f i c e , P e r s o n a l i n t e r v i e w , J u l y 1975* 61 g e n e r a l l y the l e s s productive s i t e s are withdrawn, there are s i g n i f i c a n t volumes of mature and immature timber i n v o l v e d . Although gross A.A.C.s are thereby reduced, i t has not been determined whether or not previous allowances i n a r r i v i n g at a net A.A.C. g e n e r a l l y exceeded this•requirement.. A l t e r n a t i v e l y , these reserves might represent submarginal timber which i t i s believed w i l l become commercial w i t h i n the next r o t a t i o n period ( i n which case the e n t i r e net A.A.C. should be ' a l l o c a t e d and the presently commercial stands h a r v e s t e d ) . 1 Yet again, they may be " r e a l " contingency reserves held pending a request f o r increased a l l o c a t i o n s , by a new or e x i s t i n g m i l l . T h i s conservative b i a s i n a l l o c a t i o n of the c a l c u l a t e d and approved net Annual Allowable Cut suggests that the non-declining flow concept (and i t s economic i r r a t i o n a l i t y ) i s i m p l i c i t i n B.C.F.S; p o l i c i e s . To the extent that sawmill c a p a c i t y i n the I n t e r i o r responds t o "timber a v a i l a b i l i t y " (suggested by these data), t h i s p o l i c y of withholding reserves may have e f f e c t i v e l y constrained the s i z e and a r e a l d i s t r i b u t i o n of the log g i n g and sawmilling i n d u s t r i e s . This i s not only true of the P.S.Y.U.s of the North C e n t r a l I n t e r i o r , but a l s o on a much wider s c a l e , as i n d i c a t e d i n Table 4b below. I t can be concluded t h e r e f o r e , t h a t while the c l o s e 1 Because of the "reserves" (whether they are submarginal or not) the net AAC, conservative as i t i s , i s not a l l o c a t e d and therefore r a r e l y cut. As a r e s u l t , the reserves w i l l accumulate over time, and grow p h y s i c a l l y as w e l l . Thus the old-growth w i l l not be f u l l y removed by the end of the c a l c u l a t e d conversion period - the p o t e n t i a l cut from the f o r e s t w i l l not be taken. 62 T a b l e 4b.. P r o v i n c i a l Reserves of Annual A l l o w a b l e C u t s . . Z2E§st D i s t r i c t Reserves a s | o f Net Vancouver 17% P r i n c e Rupert 61% P r i n c e George 52% C a r i b o o 35% Nelson 24% Kamloops 38% S o u r c e : Der ived from u n p u b l i s h e d B . C . F . S . Data . 63 u t i l i s a t i o n standards d r a m a t i c a l l y increased the estimated s i z e of the commercial resource, the a d m i n i s t r a t i v e arrangements f o r a l l o c a t i o n of the inc r e a s e s may have had gre a t e r s o c i a l s i g n i f i c a n c e . The holding of reserves l i m i t e d aggregate expansion of the logging and saw m i l l i n g s e c t o r s , the requirement f o r chippers and barkers excluded seme of the smaller m i l l s with l e s s c a p i t a l backing from sharing i n the expansion and the increase i n wood residues to provide raw mater i a l s f o r pulp mills"encouraged that i n d u s t r y . 3. The sa l e of quota r i g h t s i n B.C. has an i n t e r e s t i n g p a r a l l e l i n the State of Queensland, A u s t r a l i a . There too, e s t a b l i s h e d sawmill operators held quota r i g h t s to logs from State F o r e s t s , but the r i g h t s were not t r a n s f e r a b l e by sa l e u n t i l 1969. A fragmented t e c h n o l o g i c a l l y obsolete sawmill ind u s t r y e v e n t u a l l y persuaded the Department of F o r e s t r y to allow ( l i m i t e d ) amalgamation of m i l l s and t h e i r appurtenant quotas i n the i n t e r e s t s of economic v i a b i l i t y and p h y s i c a l e f f i c i e n c y . 1 As happened i n the B.C. I n t e r i o r , many bush m i l l s and a s s o c i a t e d v i l l a g e s are disappearing, as r e g i o n a l processing c e n t r e s evolve. An i n t e r e s t i n g difference'between sawlog guotas i n B.C. and i n Qld., i s that i n Qld., increases i n log ent i t l e m e n t s are not a l l o c a t e d (without charge) on the b a s i s of "need" or "performance". Rather they are s o l d at competitive auctions. Since quotas have been a c a p i t a l a s s e t , t h e i r s a l e by the 1 Straker (1970) 64 Crown would r e t a i n f o r the p u b l i c a share of t h e i r value. I t has also- been suggested that the Third Band timber a l l o c a t i o n s i n B.C. were i n e q u i t a b l e i n the sense t h a t some m i l l s bouqht guota while others {who had not) were "given 1 1 an opportunity t o purchase Crown timber. However, these Third Band s a l e s are on a l e s s secure b a s i s , s i n c e the T.S.L.s are f o r shorter p e r i o d s and the holder i s not protected from competitive bidding. Nevertheless, i t could be argued that the B.C.F.S. should have s o l d a l l or none of the (valuable) r i g h t s to medium term s e c u r i t y of wood supply. Of course the f a c t o r s i n h i b i t i n g the use of competitive auctions f o r s e l l i n g timber i n B.C.,' would s i m i l a r l y i n h i b i t the use of competition i n a l l o c a t i n g h a r v e s t i n g r i g h t s . - . . . . .... However, i n evidence to the Royal Commission on Forest Resources, the Deputy M i n i s t e r of F o r e s t s , John Stokes, acknowledged that . -"... I t has been the government which has el i m i n a t e d competition through various past r u l i n g s ... He confessed himself to be worried by the present s i t u a t i o n , l e s t i t lead t o stagnation and i n d u s t r i a l i n e f f i c i e n c y . .. The s e r v i c e s t i l l f o l l o w s the o l d form and a d v e r t i s e s p u b l i c auctions at which only one b i d w i l l be r e c e i v e d . Stokes s a i d f o r e s t s e r v i c e concern about the e l i m i n a t i o n of competition and the e f f e c t that t h i s might have on e f f i c i e n c y l e d to performance i n c e n t i v e s being introduced. These took the form of d i s c r e t i o n a r y awards of s o - c a l l e d t h i r d band c u t t i n g r i g h t s , on the basis of e f f i c i e n t performance." 1 Some b i t t e r n e s s and d i s t r u s t between the industry and the B.C.F.S. r e s u l t e d from the d i s c r e t i o n a r y nature of awarding 1 As reported i n The Province, October 30, 1975, p.2 0 . 65 these valuable c u t t i n g r i g h t s on such vague c r i t e r i a . I t i s not at . a l l obvious t h a t the t h i r d band i n c e n t i v e s have "kept the i n d u s t r y e f f i c i e n t " , nor that any worthwhile compensation has been received by the Crown, f o r the competitive "bonus bi d s " foregone. 1 4, Crown stumpage charges are i n d i r e c t l y derived from the 3-month moving average of p r i c e s f o r lumber and other wood products i n the nearest appropriate markets. Therefore, stumpage f l u c t u a t e s i n the short run with market demand.2 I t can be argued that the Crown thus shares much of the r i s k i n the f o r e s t i n d u s t r y with the o p e r a t o r s - l i c e n c e e s although the two p a r t i e s do not share the rent i n ' a c o n s t a n t • p r o p o r t i o n . 3 A r a p i d change i n lumber p r i c e s would create " w i n d f a l l gains" or economic rents (or losses) but these do not a l l accrue t o the Licencee. In t h i s sense, through absorbing some market r i s k , the a p p r a i s a l system r e i n f o r c e s any other measures encouraging "steady production". 1 Any l o s s e s i n revenues from timber sales may have been p a r t i a l l y o f f s e t by logging and p r o v i n c i a l income tax revenues. The magnitude of these i s dependent upon the extent to which lower stumpages have con t r i b u t e d to increased p r o f i t a b i l i t y , the tax r a t e s , and the f e d e r a l / p r o v i n c i a l arrangemeiits f o r sharing of income tax revenues. 2 For d e t a i l s such as the changes i n product p r i c e s t o l e r a t e d before stumpages are r e c a l c u l a t e d , the lags between lumber and log p r i c e changes and the mechanics of the a p p r a i s a l c a l c u l a t i o n , see Pearse et a l (1974a). 3 As the lumber s e l l i n g p r i c e r i s e s above that at which the minimum stumpage i s imposed, the stumpage payable to the Crown increases at a f a s t e r r a t e than does the allowed p r o f i t t o the operator, unless a maximum stumpage i s a l s o set. This i s a c h a r a c t e r i s t i c feature of the (modified) Bothery method which i s used i n B.C. For the o r i g i n a l method, see Bothery (1945). 66 Some economists have c r i t i c i s e d t h i s aspect of the a p p r a i s a l system, on the f o l l o w i n g grounds:-a. Market p r i c e mechanisms are d i s t o r t e d . The producer w i l l tend to continue working as u s u a l , although the market i s depressed, u n t i l the point of minimum stumpage i s reached. At lower lumber p r i c e s , the i n c e n t i v e to continue operating i s q u i c k l y reduced, as p r o f i t s approach zero. b. Subseguent producers or merchants can s t o c k p i l e the inventory of low p r i c e d wood for l a t e r c a p i t a l gains, and c. Timber can be stored much cheaper on the stump than a f t e r processing (although t h i s i s debatable). In the context of t h i s study, i f one presumes the d e s i r a b i l i t y of continuous production from logging and m i l l i n g operations (because of the s t a t e d goal of continuous s t a b l e employment) the disadvantages above may be v i r t u e s . T h i s would be p a r t i c u l a r l y so i f the c a p i t a l gains r e f e r r e d t o i n b., accrue to the producer himself, a cooperative or a government agency (which might represent the producers). The question i s at which stage of processing should the i n v e n t o r i e s be h e l d , given t h a t f i n a l demand i s f l u c t u a t i n g . Should "the s l a c k i n demand" be taken up by holding i n v e n t o r i e s of d r i e d lumber, logs or standing timber? I f the f l u c t u a t i o n s are absorbed by accumulation of i n v e n t o r i e s of lumber, logging and m i l l i n g employment could be e f f e c t i v e l y buffered from the exogenous demand shocks; This system of stumpage a p p r a i s a l can be c o n t r a s t e d with one i n i t i a l l y proposed by Orchard (1945, p.54-5),wherein "The p r i c e b i d f o r the timber by the s u c c e s s f u l tenderer w i l l be t r a n s l a t e d i n the timber s a l e c o n t r a c t i n t o terms of a percentage of the Department's published average s a l e values of lumber or other product." Under t h i s scheme, stumpage is„aTways p o s i t i v e , beiag a d i r e c t 67 f r a c t i o n of lumber s e l l i n g p r i c e s , thereby placing the burden of lumber p r i c e i n s t a b i l i t y onto p r o f i t s . The opposite i s the case under the modified Rothery method, although negative stumpages are prevented by l e g i s l a t e d minimums. The adoption of Orchard's 1945 suggestion would have made p r o f i t s i n the lumber i n d u s t r y even more v o l a t i l e than they have been, i n the event of lumber p r i c e changes. His method a l s o ignores changes i n operating costs during the term of the timber s a l e c o n t r a c t , unless there was some p r o v i s i o n f o r r e v i s i n g the percentage taken as stumpage with changing c o n d i t i o n s over short periods. • I t i s t h e r e f o r e concluded t h a t the modified Rothery method of stumpage a p p r a i s a l t h e o r e t i c a l l y s h o u l d - c o n t r i b u t e more to s t a b i l i t y of employment than would a f i x e d timber p r i c e or a stumpage l e v i e d as a f i x e d percentage of lumber s e l l i n g p r i c e s . Since stumpage f a l l s a f t e r a d e c l i n e i n s e l l i n g p r i c e s , a sawmill should be able t o continue t o operate longer i n a receding market. Conversely, i f stumpage d i d not i n c r e a s e during boom markets, production and employment might w e l l exceed the e q u i l i b r i u m or trend l e v e l s . 5. Another major e f f e c t of the stumpage a p p r a i s a l system has been the absorption of the l o g purchaser's haulage c o s t s , i f there are no other c l o s e r , s u i t a b l e m i l l s . 1 This has f a c i l i t a t e d sawmill r e l o c a t i o n t o centres of urbanisation/agglomeration and made-the economies of s c a l e there appear even greater, s i n c e the B.C.F.S. absorbs the extra hauling costs through stumpage 1 and i f stumpage i s not already at i t s l e g i s l a t e d minimum. 68 a p p r a i s a l , i f a l l s u i t a b l e m i l l s between the f o r e s t and the c i t y have c l o s e d down. This has been o f f i c i a l l y recognized i n at l e a s t one i n s t a n c e . Because average conversion c o s t s are estimated by B.C.F.S. a p p r a i s a l o f f i c e r s to be $5/cunit lower wit h i n a defined area around the c i t y of Prince George, l o g s from 40-50 miles away appraise better t o P r i n c e George than to a c l o s e r m i l l ! That* i s , ' the B.C.F.S. considers t h a t i t i s economically more a t t r a c t i v e t o haul logs past a m i l l which could p h y s i c a l l y use them but which does not experience the economies of u r b a n i s a t i o n found i n Prince George. Thus we can conclude from t h i s survey that i n c r e a s e d i n d u s t r i a l concentration can lead t o : greater returns to the province as owner of the f o r e s t , and presumably to sawmills a l s o ; more business f o r the l o g - h a u l i n g i n d u s t r y ; a greater l i k e l i h o o d of amenities being provided f o r labour; improved prospects f o r community s t a b i l i t y , p a r t i c u l a r l y i f i n d u s t r y and employment are d i v e r s i f i e d i n that c e n t r e , r a t h e r than being c l o s e l y t i e d to one i n d u s t r y ; and the p o s s i b i l i t y of some of the smaller towns becoming "ghost towns" or s a t e l l i t e d o r m i t o r i e s f o r the population of the i n d u s t r i a l centres; 6. As the lumber market weakens, appraised stumpage i s adjusted downwards* to a minimum l e v e l . T h e o r e t i c a l l y t h i s adjustment should enable a l o g g i n g / m i l l i n g operator of average e f f i c i e n c y to maintain h i s "allowed" p r o f i t margin, but only while the appraised stumpage i s not l e s s than the minimum. At 6 9 t h i s p o i n t , the operator should be c o n s i d e r i n g c l o s i n g down i f the a p p r a i s a l mechanism i s accurate (although operations w i l l g e n e r a l l y continue at a l o s s f o r some time i f f i x e d (depreciation-and overhead) c o s t s can be met). The c h o i c e i s then to e i t h e r pay minimum stumpage and continue l o g g i n g , or to stop logging and perhaps s t i l l have to pay, because of the minimum A.A.C. r e g u l a t i o n s , although these are g e n e r a l l y waived i n severe d e p r e s s i o n s . 1 Why then are there minimum A.A.C.s and why would they ever be enforced? a. Because"the government i n s i s t s that m i l l s should operate year round. This • i s predicated on the b e l i e f that s u b s t a n t i a l "downstream b e n e f i t s " are to be derived a f t e r l o g g i n g and m i l l i n g , and that'whole towns are dependent upon t h e i r s a w m i l l s , f o r t h e i r economic wellbeing (though not n e c e s s a r i l y f o r o s u r v i v a l ) . I t i s d i f f i c u l t t o imagine how the B.C.F.S. can convince members of the f o r e s t i n d u s t r y t h a t thay should operate at a l o s s because of an e x t e r n a l i t y while the B.C.F.S. i s not prepared (for a number of r e a s o n s ) 2 to s e l l timber at l e s s than 1 E i t h e r way, the p u b l i c omers of the f o r e s t d e rive much l e s s d i r e c t revenue than they would i f the f o r e s t was logged , say a year e a r l i e r or l a t e r , i n a healthy lumber market. However, the costs of paying welfare when the i n d u s t r y i s depressed may p a r t i a l l y o f f s e t the d i r e c t i ncreases i n stumpage revenues i f cuts were allowed to f l u c t u a t e f r e e l y . 2 These i n c l u d e the argument t h a t the Crown's timber snould not be sold at a very low p r i c e or given away, the f a c t t h a t timber thus s o l d could have been kept and s o l d l a t e r f o r a much higher p r i c e i n a b e t t e r market, and the economist's argument t h a t any f a c t o r charged at l e s s than i t s r e a l value w i l l be over used, d i s t o r t i n g the r e l a t i v e i n t e n s i t i e s of labour, c a p i t a l and resources used i n production. 70 minimum or at negative stumpage, to achieve the same ends. b. Because of the t e c h n i c a l o b j e c t i v e of c o n v e r t i n g to a normal f o r e s t i n one r o t a t i o n . This argument i s t r i v i a l . I t w i l l hardly matter, i n 100 years, whether the f o r e s t has 1,000 acres of 100 year o l d +1,000 acres of 99 year o l d or 2,0 00 acres of 100 year o l d + none of 9 9 year o l d or even none aged 95-100 years + 6,000 acres aged 101 years. This i s e s p e c i a l l y i r r e l e v a n t i f the r o t a t i o n age meanwhile changes to 50 years. As l e w i s (1974) noted, any cost i n 100 years of c u t t i n g the "wrong age" stand now i s almost zero at any r e a l i s t i c ( p o s i t i v e ) discount r a t e . 7. I t was the d e l i b e r a t e p o l i c y of the p r o v i n c a l government from the l a t e ' s i x t i e s to 1972 to encourage v e r t i c a l and h o r i z o n t a l corporate i n t e g r a t i o n . 1 This was motivated or j u s t i f i e d by a d e s i r e to prevent p h y s i c a l waste of wood raw m a t e r i a l s . That i s , there was a s t r o n g l y held b e l i e f t h a t high u t i l i s a t i o n standards could only be achieved by l a r g e i n t e g r a t e d complexes. 2 This may w e l l be c o r r e c t . I t i s a l s o extremely l i k e l y that an i n t e g r a t e d (perhaps m u l t i n a t i o n a l ) c o r p o r a t i o n has e x p l o i t e d economies of s c a l e (thus r a i s i n g r e s i d u a l stumpage payable to the province, perhaps) and r e q u i r e s a much more st a b l e workforce, because of i t s high f i x e d c o s t s , s t a r t - u p 1 See H i l l i s t o n (1971a, p. 4 ; 1971b, pp.8-11) and Stokes (1971). 2 This c o n v i c t i o n was expressed by Sloan (1945) and others who t e s t i f i e d before him. In h i s second report (1956, p.191) Sloan i n e f f e c t concluded that i t would be p r e f e r a b l e to have one t e c h n i c a l l y e f f i c i e n t " s u r v i v o r " m i l l than competition between 4 or 5 m i l l s which could lead to the f a i l u r e of each of them. 71 c o s t s , e t c . The net r e s u l t s of pursuing the t e c h n i c a l o b j e c t i v e of c l o s e u t i l i s a t i o n logging and maximum recovery i n conversion (because wood i s a l l important and must never be wasted!) have apparently i n d i r e c t l y advanced the s o c i a l / p o l i t i c a l o b j e c t i v e s , of r e g i o n a l development with employment s t a b i l i t y , although the amount - of labour reguired per u n i t production w i l l have dec l i n e d . 1  Sloan (1945, p.128) argued that l a r g e v e r t i c a l l y i n t e g r a t e d companies would o f f e r the greatest s t a b i l i t y and p r o s p e r i t y to communities as w e l l as t e c h n i c a l advancement and l a r g e r payments to the Crown. While the bases f o r h i s conclusions seem simply i n t u i t i v e , some of h i s f o r e c a s t s have proven c o r r e c t . However, i t seems that he overlooked the v u l n e r a b i l i t y of s i n g l e i n d u s t r y communities to labour d i s p u t e s , t r a n s p o r t a t i o n problems and market f l u c t u a t i o n s . Moreover, the undesirable aspects of v e r t i c a l i n t e g r a t i o n and o l i g o p o l y presented by economists i n regard t o competitive theory, v i z . l o s s of rents t o the owner of the resource s e l l i n g to an o l i g o p o l i s t , were overlooked i n favour of the a n t i c i p a t e d " s o c i a l b e n e f i t s " . However, because the p r o v i n c i a l government i s both the resource owner and the t a x i n g agency, some f r a c t i o n of any l o s s e s i n resource rents can 1 Close u t i l i s a t i o n standards and woodchip s a l e s t o pulp m i l l s almost c e r t a i n l y a l t e r e d the economics of l o g t r a n s p o r t a t i o n . Since more of a log would be recovered as a s a l e a b l e product, a m i l l e r could a f f o r d t o haul i t f a r t h e r to the u t i l i s a t i o n point. This suggests that c o n s e r v a t i o n i s t i d e a l s l e d to the close-D p o l i c y , c r e a t i n g s i g n i f i c a n t t r a n s p o r t a t i o n and u r b a n i s a t i o n economies, which f a c i l i t a t e d (the almost i n e v i t a b l e ) agglomeration. 72 be recovered through logging and income taxes, depending upon the extent to which those rents appear i n taxable incomes.. I t would be most d i s c r i m i n a t o r y , however, i f the s i t u a t i o n evolved where the B.C. f o r e s t i n d u s t r y was r e c e i v i n g one of i t s primary i n p u t s at reduced p r i c e s and paid the same tax r a t e s as a l l other i n d u s t r i e s across Canada. The o b j e c t i o n s of economists to v e r t i c a l i n t e g r a t i o n r e l y p r i m a r i l y on equity c o n s i d e r a t i o n s , i . e . i n the sharing of the r e n t s between the Crown and the processors. There have been few suggestions of * a l l o c a t i v e i n e f f i c i e n c y r e s u l t i n g from i n t e g r a t i o n . Rather i t i s probable t h a t the p h y s i c a l and economic e f f i c i e n c y of the i n d u s t r y i s improved a f t e r v e r t i c a l i n t e g r a t i o n . Given that there i s not perfect c o m p e t i t i o n f o r s u p p l i e s of wood, labour or c a p i t a l , one cannot p r e d i c t on t h e o r e t i c a l grounds that the presence of o l i g o p o l y or monopoly at the logging and sawmilling l e v e l s w i l l c o n t r i b u t e to a l l o c a t i v e i n e f f i c i e n c y . Perhaps the e s s e n t i a l i n g r e d i e n t f o r i n d u s t r i a l i s a t i o n and agglomeration, e s p e c i a l l y i n pulp m i l l s and the l a r g e i n t e g r a t e d complexes, i s s e c u r i t y of wood supply as argued f o r example, by wayman (1973) and most of the i n d u s t r y p a r t i c i p a n t s at the recent Royal Commission hearings. The Northern I n t e r i o r Lumber Sector's b r i e f s a i d , "The o v e r i d i n g reason f o r having s e c u r i t y of raw m a t e r i a l i s that i t c o n t r i b u t e s h e a v i l y to s t a b i l i t y of employment and community s t a b i l i t y . " In response, Dr. Pearse commented, "Me have observed over the l a s t two or thcee decades very r a p i d changes i n the northern i n t e r i o r lumber i n d u s t r y , not only i n i t s 73 s t r u c t u r e but also i n i t s geographical d i s t r i b u t i o n and I am wondering how much e f f e c t tenure p o l i c y has had on that r a p i d e v o l u t i o n . Would i t be d e s i r a b l e to t r y t o s t a b i l i z e a i l these communities that used to have m i l l s , but now don't, and c u r t a i l the growth of others t h a t have grown r a p i d l y , such as Prince George, wi t h the enormous s u b s t i t u t i o n of c a p i t a l for: l a b o r that we have seen? ... I guess I'm r e a l l y asking you whether you want a s t a b l e i n d u s t r y or a dynamic i n d u s t r y and the growth that goes with it.»i I f s e c u r i t y of wood supply has been s i g n i f i c a n t , the change i n f o r e s t p o l i c y may have been an e s s e n t i a l p r e r e g u i s i t e t o the agglomeration and developments of the-past 20 years, given the s p e c i a l l a n d l o r d r o l e of the B.C.F.S. While many a n a l y s t s and b r i e f s concluded that "raw m a t e r i a l supply must be assured i n order to j u s t i f y large s c a l e m i l l s " and t h a t t h i s would "help to s t a b i l i z e : the' i n d u s t r y " , a p r e c i s e d e f i n i t i o n of "assured" has never been o f f e r e d . Whether i t means p e r p e t u a l l y , f o r the mortgage l i f e - of the m i l l or f o r a few years, and whether i t means at any p r i c e , or f o r the p r i c e the m i l l e r would l i k e to o f f e r , are c r u c i a l to any meaningful a n a l y s i s of the p o l i c y ' s success. This argument of guaranteed raw m a t e r i a l supply i s one which an economist can only understand by acknowledging the absence of a r e a l or f r e e market f o r raw (wood) m a t e r i a l s . After the apparently unsuccessful use of competitive markets f o r timber a l l o c a t i o n , because of s p i t e b i d d i n g , b l a c k m a i l , e t c . , followed" by a system of government a l l o c a t i o n based on p r i n c i p l e s which were not widely known or understood, one can 1 The Vancouver Sun, Tuesday Sept. 16, 1975. p23. 74 recognise some basi s f o r the demand by i n d u s t r y and i t s bankers f o r long term guaranteed wood s u p p l i e s . This "need" i s n a t u r a l l y heightened by high r a t i o s of f i x e d to v a r i a b l e c o s t s , as accompany s o p h i s t i c a t e d conversion p l a n t s . M u l l i n s accepted the argument that r a p i d i n c r e a s e s i n labour c o s t s i n a period of s t a b l e p r i c e s l e d t o a search f o r economies of s c a l e and automation. From t h i s she concluded t h a t , " i f no f u t u r e guarantees of continued operation had been made, i t i s u n l i k e l y that the i n d u s t r y could have met the market and labour demands".1 That i s , s e c u r i t y of supply was seen as e s s e n t i a l f o r investment i n planers and chippers and f o r long term planning. S h i l e there i s , no doubt, some t r u t h i n t h i s argument, such a neat c a u s a l r e l a t i o n s h i p between quotas and i n d u s t r i a l i s a t i o n i s not obvious. This argument does not counter the evidence t h a t the i n d u s t r y i s now much more f o o t l o o s e , that i s , l e s s t i e d to i t s l o c a l resource base, than i n the past. Chips f o r pulp m i l l s ( e s p e c i a l l y under the present r e g u l a t e d p r i c i n g scheme which absorbs up to $10/BDO i n tr a n s p o r t costs) can be and are moved hundreds of miles. There are very few examples of a conversion plant (or a whole town) dependent on one neighboring P.S.Y.U., f o r i t s wood s u p p l i e s , i n t h i s age of agglomeration. Thus any requirements that each or every P.S. Y.O". must i n d i v i d u a l l y 1 M u l l i n s (1967) p.115. She supported t h i s argument with a labour cost - lumber p r i c e comparison, discussed with reference to Figure 4 above. 75 provide an even annual flow of l o g s , t o s u s t a i n l o c a l employment and incomes, seem to be q u i t e a n a c h r o n i s t i c . In a d d i t i o n , any fears t h a t the B.C.F.S. would suddenly refuse to make wood a v a i l a b l e , or that a l l c o n t r a c t s with sawmills for the purchase of wood chips would be abrograted, are d i f f i c u l t to understand now. The sawmilling i n d u s t r y seems t o have underestimated the extent to • which the timber s e l l e r (the Crown) r e l i e s on the purchasers. From the preceding analyses, i t becomes apparent t h a t even-flow (and perhaps even modulated expanding y i e l d ) r e g u l a t i o n of the r a t e of harvest can have no necessary d i r e c t e f f e c t s on short term l o c a l employment s t a b i l i t y or long run community s u r v i v a l . The B r i t i s h Columbia s i t u a t i o n i s very s i m i l a r i n t h i s regard t o that i n the P a c i f i c Northwest, where S c h a l l a u , Maki and Beuter (1968) addressed a very s i m i l a r question. "Do permanent f o r e s t s , producing a sustained even flow of timber, assure economic s t a b i l i t y of timber dependent communities?" Their conclusions (p.104) included;- ~ "What the economic impact study of a l t e r n a t i v e l e v e l s of l o q production i l l u s t r a t e s most c l e a r l y i s the d i f f i c u l t y of r a t i o n a l i z i n g a sustained y i e l d f o r e s t management p o l i c y i n terms of l o c a l community s t a b i l i t y . Not only modern timber technology but a l s o the s t r u c t u r a l features of a r e g i o n a l economy i n h i b i t use of a community s t a b i l i t y c r i t e r i o n . " However, the repercussions and responses of the companies i n the f o r e s t i n d u s t r y to c e r t a i n p u b l i c p o l i c i e s i n B.C. have been s u b s t a n t i a l . I f the B.C.F.S. has been f o l l o w i n g a c o n s i s t e n t theme i n i t s p o l i c i e s and a d m i n i s t r a t i v e p r a c t i c e s , t h i s theme i s p r i m a r i l y r e l a t e d to t e c h n i c a l and c o n s e r v a t i o n i s t o b j e c t i v e s 76 i n resource management. I t bears l i t t l e resemblance to the other st a t e d o b j e c t i v e s of community s t a b i l i t y (of employment) and s u r v i v a l . What may seem to be ad hoc t i n k e r i n g with i n d u s t r i a l o r g a n i s a t i o n and l o c a t i o n may f o r t u i t o u s l y have helped achieve those goals which cannot be achieved through the declared approach of sustained y i e l d . 77 IV. THE EVIDENCE The argument which'has been developed thus f a r i s tha t the B.C.F.S. i n s t i t u t e d a conservative p o l i c y of sustained y i e l d f o r e s t management i n order t o achieve s t a b i l i t y and permanence of communities and to promote r e g i o n a l development, of the resource base to i t s f u l l s u s t a i n a b l e c a p a c i t y . While the o b j e c t i v e has been p o l i t i c a l l y approved and i s t h e r e f o r e assumed to be s o c i a l l y d e s i r a b l e i n a broad sense, the r e g u l a t o r y technique has been found to be in a p p r o p r i a t e f o r the attainment of the goals. However, many concurrent developments over the past t h i r t y years have borne s i g n i f i c a n t l y cn the prospects of a t t a i n i n g these goals. Some have been exogenously supplied (e.g., processing technology), some have r e s u l t e d i n d i r e c t l y from the a d m i n i s t r a t i o n of the sustained y i e l d p o l i c y , and some have come from general development, p a r t i c u l a r y with regard to t r a n s p o r t a t i o n and i n f r a s t r u c t u r e . These have a f f e c t e d the s i z e , l o c a t i o n , scale and labour i n t e n s i t y of the wood processing i n d u s t r i e s , and thereby a f f e c t e d the s t a b i l i t y of l o c a l employment, p o t e n t i a l f o r permanence' of communities and the rural - u r b a n d i s t r i b u t i o n of population. This chapter documents the changes which have occurred and analyses the consequences, with regard to concent r a t i o n of ownership of timber r i g h t s ( o l i g o p o l y ) , a r e a l concentration or urban agglomeration and the nature and s t a b i l i t y of employment o p p o r t u n i t i e s i n parts of the North C e n t r a l I n t e r i o r . 78 Concentration Evidence on the c o n c e n t r a t i o n of timber holdings i n B r i t i s h Columbia has been presented by Stanbury and HcLeod (1972). Their data show, i n t e r a l i a x that i n the Prince George "timber market"; 1 two companies held the only two remaining T.F.L.s, 2 the four l a r g e s t firms held HQ% of the allowable cut from T.S.L.s and T.S.H.L.s, the eight l a r g e s t f i r m s held 62.1% of the a l l o c a t e d A. A.C, and the ten l a r g e s t f i r m s held 69.8% of the A.A.C. from T.S.L.s and T.S.H.LwS i n 1972. In i n v e s t i g a t i n g corporate c o n c e n t r a t i o n , the geographic u n i t used was a "timbershed" defined by Haley et a l (1975) as an area from which logs are moved to a r e c o g n i s a b l e major processing centre. The boundaries of a-timbershed are the r e s u l t of the i n t e r p l a y of economic, l o c a t i o n a l and e s p e c i a l l y , i n s t i t u t i o n a l f a c t o r s (tenure p a t t e r n s , B.e.F.S. D i s t r i c t boundaries e t c . ) . 3 The region of study - the seven timbersheds * These "timber markets" were defined by adding and s u b t r a c t i n g P.S.Y.U.s from the 5 Forest D i s t r i c t s , on the b a s i s of geographic l o c a t i o n of conversion p l a n t s , topography and t r a n s p o r t a t i o n c o s t s , and species mix, age and stand g u a l i t y . 2 One of these i s an amalgamation of 6 e a r l i e r T.F.L.s, ( a c t u a l l y Forest Management Licences 5b,7,12,13,15 and 16). 3 The data b a s i s f o r the d e l i n e a t i o n of the timbersheds was a set of P.S.Y.U. records of a l l o c a t i o n s and 1974 harvests, and the Sawmill R e g i s t e r s f o r the P r i n c e Rupert, P r i n c e George and Cariboo Forest D i s t r i c t s , s u p p l i e d by the B.C.F.S. 79 shown i n Hap 3 - represents the timber supply area f o r Economic Region 7 centred upon Pri n c e George, and i s the aggregate of t h i r t y P.S.Y.U.s.1 While i t i s d i f f e r e n t from Stanbury and Mcleod's Prince George timber market, the r e s u l t i n g estimates of corporate c o n c e n t r a t i o n , presented as Tables 5a t 5b, are s i m i l a r . 2 . In commenting on the r e s u l t s of h i s e a r l i e r study on the lumber i n d u s t r y i n the D o u g l a s - f i r region of the U.S., Mead (1975, p.34:3) stated that there "are hundreds of small companies i n lumber and plywood production that are one-product companies. while entry i n t o the lumber and plywood i n d u s t r i e s i s easy when product p r i c e s are a t t r a c t i v e and e x i t i s easy when markets are weak, the long-term h i s t o r y of these two i n d u s t r i e s shows that very small firms and very l a r g e , f u l l y i n t e g r a t e d f i r m s c o e x i s t . Small firms are c l e a r l y e f f e c t i v e competitors with l a r g e f i r m s i n both lumber and plywood production." The key f a c t o r here, f o r the i n d u s t r y ' s l e v e l of output and employment, i s the easy e x i t and entry. The large companies have r e l a t i v e l y s t a b l e production with the small e n t e r p r i s e s coming and going with market demand. In B r i t i s h Columbia i n d u s t r i a l c o n c e n t r a t i o n and the removal of the smaller f i r m s , r e s u l t i n g from b a r r i e r s to o b t a i n i n g guota and the requirement f o r 1 The t o t a l area ( f o r e s t and non-forest land) covered by the seven timbersheds i s 50,854,585 acres, compared to the p r o v i n c i a l t o t a l of 126,101,700 acres. (Derived from B.C.F.S. Annual Report, 1974.) 2 Note that Table 5 concerns a c t u a l 1974 h a r v e s t , whereas Stanbury and McLeod used A.A.C, ent i t l e m e n t s . Map 3. Timbersheds of the North Central Interior of B.C Table 5a. Corporate Concentration i n Timbersheds of North Central B.C. Timbershed Percentage of 1974 Harvest by Largest: 1 Firm 2 Firms 4 Firms 1. Houston 64% 76% 85% 2. Quesnel 40% 68% 94% 3. Williams Lake 20% 40% 70% 4. Fort St. James 34% 54% 73% 5. Mackenzie 60% 100% — ' • 6. Prince George 23% 42% 63% 7. McBride/Valemount 36% 70% 89% Table 5b. Corporate Concentration i n North Central B.C. Company Northwood B.C.F.P. % of 1974 Harvest 13.3% + T.F.L. 30 5.5% 8.7% + T.F.L. 5 8.5% Weldwood West Fraser Takla 7.9% The Pas 5.5% That i s , the s i x largest companies i n t h i s region cut approx-imately 50% of the t o t a l 1974 cut from Public Sustained Y i e l d Units. Source: Derived from B.C.F.S. Annual Reports and unpublished D i s t r i c t Annual Reports (1974). 82 deposits p r i o r to a timber s a l e , may w e l l have removed t h i s element of f l e x i b i l i t y i n the i n d u s t r y . Thus the burden of changes i n market demand may w e l l have been s h i f t e d onto the large companies with higher f i x e d costs and greater s k i l l requirements f o r labour, and the unstable employment o p p o r t u n i t i e s i n "gypo" operations have disappeared., The guota system, l i m i t i n g competition f o r timber s a l e s and favouring e s t a b l i s h e d operators, may have had important consequences f o r Crown revenues, despite the f a c t that p o l i c i e s were introduced f o r p o l i t i c a l - s o c i a l reasons. Although data f o r B.C. are u n a v a i l a b l e . Mead (1966) found t h a t s m a l l f i r m s obtained 74.5% of t h e i r N a t i o n a l Forest timber supply at competitive b i d d i n g , while the f i g u r e f o r l a r g e firms was 65.8%. At these competitive auctions, the s m a l l firms paid an average premium of 68% over appraised p r i c e s , while f o r the l a r g e firms i t was 4 3%. Combining these two aspects, the small f i r m s paid an average premium of 51% and the l a r g e f i r m s 28% over appraised p r i c e s . To determine the net e f f e c t on U.S. F o r e s t S e r v i c e revenues, these premiums would have to be weighted according to the value of a l l s a l e s going to the s m a l l e r f i r m s , r e l a t i v e to the value of s a l e s t o l a r g e f i r m s . Mead d i d not present any evidence as to the accuracy of the a p p r a i s a l process i n each category, but assumes that i n each case the a p p r a i s a l i s the best estimate of the r e a l value of the stand. However, t h i s suggests that the higher u t i l i s a t i o n standards and labour s t a b i l i t y accompanying corporate i n t e g r a t i o n i n B r i t i s h Columbia may not have been c o s t l e s s to the p u b l i c purse. Moreover, i f one considers the c o n s t r u c t i o n of a new 83 s a w m i l l i n an area c u r r e n t l y s u p p l y i n g the i n d u s t r y , t h i s a c t i o n c o u l d f o r e s e e a b l y l e a d to h i g h e r p r i c e s f o r l o g s and l a b o u r , which would b e n e f i t the owners of these r e s o u r c e s . T h i s s u g g e s t s t h a t the B . C . F . S . p o l i c y of r e s t r i c t i n g e n t r y i n an a t tempt t o guarantee the s u c c e s s (and t h e r e f o r e , i t i s assumed, the permanence) of the e x i s t i n g i n d u s t r y has been at the expense of d i r e c t government r e v e n u e s . The c o u n t e r argument from the B . C . F . S . (or Sloan) i s ' t h a t i f t h e r e are too many m i l l s , a number o f t h e s e w i l l f a i l . There w i l l be ghost towns and very l i t t l e i n d u s t r i a l a c t i v i t y ( i . e . , no market f o r B . C . F . S . l o g s i n the f u t u r e ) . Thus i t has been assumed t h a t the l o s s o f c u r r e n t revenues (no bonus b ids ) i s more than compensated f o r by the knowledge (or f a i t h ) t h a t the i n d u s t r y w i l l be p e r p e t u a t e d . Yet the r e s t r i c t i o n o f e n t r y has not been proven t o be n e c e s s a r y t o ensure a f u t u r e market f o r l o g s or s u f f i c i e n t (with s u s t a i n e d y i e l d ) t o assure the permanence of communi t ies . :A t r a d e - o f f of c u r r e n t incomes f o r expected f u t u r e b e n e f i t s has been made, w i th l i t t l e a n a l y s i s of p r o b a b i l i t i e s of the problem a r i s i n g , or of the r e l a t i v e magnitudes of the b e n e f i t s . " R u l e s of thumb have been deve loped f rom e m p i r i c a l s t u d i e s (of i n d u s t r i a l s t r u c t u r e ) o v e r the l a s t two decades. These r u l e s ho ld t h a t monopoly p r o f i t s begin when the b i g - f o u r f i r m s account f o r .more than 50% of the output i n a g iven i n d u s t r y or the b i g - e i g h t f i r m s a c c o u n t f o r more than 7 01 of i n d u s t r y o u t p u t . " 1 In the a p p l i c a t i o n o f - t h e s e c r i t e r i a , the a r b i t r a r y d e f i n i t i o n of g e o g r a p h i c boundar ies i s o b v i o u s l y c r i t i c a l . 1 Mead (1975, p.34:4) 84 Factors i n log t r a n s p o r t economics ( i n c l u d i n g , f o r example, value/weight r a t i o s f o r logs) make each spot timber market smaller than an economic r e g i o n , f o r example, although l a r g e r than a'P.S.Y.U., such as the timbershed defined here. At t h i s "timbershed" l e v e l - w i t h i n the areas i n which each f i r m has agglomerated - monopoly power i n t h e - a c q u i s i t i o n of timber seems obvious, and o l i g o p o l y appears to e x i s t at the r e g i o n a l l e v e l . Although Mead (1966, p.96) found that the weighted average l o g haul f o r timber s o l d from the D o u g l a s - f i r region's N a t i o n a l Forests was 42.8 m i l e s , i t i s f e a s i b l e that i n the Northern I n t e r i o r of B.C., m i l l agglomeration has been'more widespread and road costs and volumes per acre are low. Consequently l o g hauls are longer. This a r e a l concentration of the sawmi l l i n g i n d u s t r y i s of perhaps greater i n t e r e s t i n d i s c u s s i n g r e g i o n a l development, community s t a b i l i t y and the r o l e of B.C.F.S. timber a l l o c a t i o n p o l i c i e s . Many i n t e r e s t i n g points which can only be explained with reference to the a d m i n i s t r a t i v e procedures of the B.C.F.S., emerge from the data presented i n Table 6. F i r s t l y , w i t h i n each of the timbersheds (or timber supply ar e a s ) , there i s one major processing centre towards which most of the surrounding Crown'timber i s transported. In some of the timbersheds, there are smaller centres nearby which a l s o account f o r much of, but not a l l of, the remaining timber supply. There are yet smaller centres i n three of the timbersheds to which a very small f r a c t i o n of the annual cut i s a l l o c a t e d or transported. 85 Table 6. Geographic Concentration of Sawmilling in North Central B.C. Timbershed Municipality 1. Houston Burns Lake Smithers Total 1974 Cut 1 1974 Allocation 2 63.8% 5.8% 12.1% 46.1% 29.0% 24.4% 338,100 cunits 687,700 cunits 2. Quesnel Total 100.0% 97.5% 659,800 cunits 784,900 cunits 3. Williams Lake Canim Lake Total 79.7% 72.2% 20.3% 23.0% 841,100 cunits 1,033,490 cunits Fort St. James Vanderhoof Fraser Lake Total 45.9% 19.4% 12.8% .47.0% 14.7% 9.4% 738,200 cunits 1,113,600 cunits Mackenzie Total 100.0% 100.0% 523,600 cunits 1,333,300 cunits 6. Prince George Hixon Upper Fraser Summit Lake Total 52.0% 8.5% 11.0% 15.7% 50.7% 10.0% 11.9% 16.2% 1,431,300 cunits 1,544,200 cunits 1 Percentages of the 1974 harvest of that timbershed which went to mills located i n or near these towns. 2 Percentages of the total AAC of the PSYUs of that timbershed which is allocated to mills in or near these towns. Source: Derived from unpublished B.C.F.S. D i s t r i c t Annual Reports(1974) 86 S e c o n d l y , the r e c e n t dramat ic development o f H o u s t o n 1 as a p r o c e s s i n g c e n t r e can be t r a c e d to the amalgamation of seven s a w m i l l s by a company which sought and ob ta ined a Pulpwood H a r v e s t i n g A g r e e m e n t . 2 The c h o i c e of Houston as the s i t e of the agglomerate m i l l i s - an example of the i n t e r p l a y of l o c a t i o n theory and the p r i v a t e p r e f e r e n c e s of owners /managers . By l o c a t i n g - a t Houston , most of the l o g h a u l s from the s a l e a reas were d o w n h i l l , i n c o n t r a s t to Burns Lake and Smit i iers which a l s o l i e w i t h i n the t imber supp ly a re a and on the C . N . r a i l l i n e . In a d d i t i o n , the p r o p r i e t o r ' s f a m i l y were long time r e s i d e n t s o f Houston . The d i f f e r e n c e between the 1974 cut and a l l o c a t i o n d i r e c t e d towards m i l l s i n Burns Lake and S m i t h e r s ' l a r g e l y r e p r e s e n t s r e c e n t government p o l i c y i n a c t i v e l y d i r e c t i a g new s a w m i l l expans ion to these c e n t r e s ; t imber a l l o c a t i o n s had been made i n 1974 but the new s a w m i l l s were not yet o p e r a t i n g {or o p e r a t i n g at c a p a c i t y ) . 3 T h i s type o f government d i r e c t i o n has been f u r t h e r used i n the a l l o c a t i o n o f c u t t i n g r i g h t s f o r a n e w l y - c r e a t e d P . S . Y . U . ( K l u s k u s ) . B i d s were i n v i t e d from companies p repared to c o n s t r u c t a new m i l l i n a p a r t i c u l a r town ( in t i m b e r s h e d 4 ) . As 1 see T a b l e 1. 2 Documented i n I n d u s t r i a l P r o g r e s s of the North*, (pp. 21-22) , 1969. 3 D e l i b e r a t e d i r e c t i o n of new m i l l s i n t h i s a rea was d i s c u s s e d and the impacts on the communit ies a n a l y s e d by G i l g a n (1974). 87 i t happened, t h e r e was one company whose m i l l t h e r e had r e c e n t l y been d e s t r o y e d by f i r e and which was p l a n n i n g t o c o n s t r u c t another to r e p l a c e i t . I t was s u b s e q u e n t l y awarded the c u t t i n g r i g h t s o f f e r e d i n the new P . S . Y . O . The B . C . F . S . has been a c t i v e i n p l a n n i n g and d i r e c t i n g the l o c a t i o n of i n d u s t r y (and c o n s e q u e n t l y o f the l a b o u r f o r c e ) through i t s t imber d i s p o s a l p o l i c i e s . The complete g e o g r a p h i c c o n c e n t r a t i o n of s a w m i l l s i n Mackenzie ( t imbershed 5) i s o b v i o u s g iven tha t the town was p r i m a r i l y c r e a t e d f o r the purpose of p r o c e s s i n g the l o g s from the l a r g e F i n l a y P . S . Y . U . Again the importance of i n s t i t u t i o n a l c o n s t r a i n t s must be emphas ised . whi le there a r e b e t t e r l o g s c l o s e r t o Mackenzie t o the s o u t h , t h e s e had been p r e v i o u s l y a l l o c a t e d e l s e w h e r e . whi le t h i s s tudy has not c o v e r e d the P e a c e - L i a r d r e g i o n , n o r t h e a s t of the R o c k i e s , the same type of a g g l o m e r a t i o n i s o b v i o u s t h e r e . A p a r t i c u l a r case i s C a n f o r ' s Chetwynd complex formed by combin ing 1 1 ' m i l l s and t h e i r quota r i g h t s , from numerous s u r r o u n d i n g t o w n s . 1 The o v e r a l l c o n c e n t r a t i o n i n s a w m i l l i n g i n the Nor thern I n t e r i o r i s f u r t h e r i l l u s t r a t e d by F i g u r e 7. Combined with the i n c r e a s i n g h a r v e s t s and p r o d u c t i o n shown i n F i g u r e s 2a and 2b, i t i s o b v i o u s t h a t the average s i z e of sawmi l ls has i n c r e a s e d g r e a t l y . T h i s has been a n a l y s e d by Dobie (1971). The census i n f o r m a t i o n p r e s e n t e d i n Table 3 y i e l d e d i The i n c l u s i o n o f t h i s area George t imber market , e x p l a i n s predominance of t h i s company i n t e r i o r . i n StanburY and McLaod 's P r i n c e t h e i r r e s u l t of the o v e r a l l i n B r i t i s h C o l u m b i a ' s n o r t h e r n No. of activ e sawmills 700 600 500 400 300 200 100 1920 1925 1930 1935 1940 1945 1950 Figure 7. NUMBER OF ACTIVE SAWMILLS IN THE NORTHERN INTERIOR OF BRITISH COLUMBIA: 1920 - 1974. Source: B r i t i s h Columbia Forest Service Annual Reports, 1921 - 1975. Prince George, Cariboo and (Interior) Prince Rupert Forest D i s t r i c t s . Prince George Forest D i s t r i c t . oo oo 1970 1975 89 considerable i n s i g h t i n t o the f u n c t i o n a l i n t e g r a t i o n or h i e r a r c h i a l s t r u c t u r e between the towns of the North C e n t r a l I n t e r i o r , as i t e x i s t e d i n 1971. while more recent data are not yet a v a i l a b l e , there are s o l i d grounds to suspect that s u b s t a n t i a l changes i n the f u n c t i o n s performed by some of the developing towns have occurred s i n c e , as a r e s u l t of governments' "development p o l i c i e s " (which are u s u a l l y manifested through e x p l i c i t or i m p l i c i t d i r e c t i o n of components of the f o r e s t i n d u s t r y ) . However, Robinson (1972, p.5) observed that "The f o r e s t 'industry of the i n t e r i o r i s now e s t a b l i s h i n g geographical patterns of c o n c e n t r a t i o n , and corporate i n t e g r a t i o n of processing, s i m i l a r to t h a t which developed on the coast p r i o r to 1940." This i m p l i e s that post-1950 changes i n f o r e s t p o l i c y and a d m i n i s t r a t i o n p r a c t i c e s d i d not, i n i s o l a t i o n , cause co n c e n t r a t i o n , but r a t h e r i t was probably due to developments i n t r a n s p o r t a t i o n and economies of s c a l e . There are t h e r e f o r e two arguments that need-to be r e c o n c i l e d . On one hand, the conscious d i r e c t i o n of components of the I n t e r i o r f o r e s t i n d u s t r y by the B.C.F.S. over the past ten t o f i f t e e n years has c l e a r l y been oriented-towards determining the s i z e and l o c a t i o n of the i n d u s t r y . On the other hand, the end r e s u l t s observed by Robinson are s i m i l a r t o those which evolved e a r l i e r on the coast without B.C.F.S. d i r e c t i o n and are a l s o s i m i l a r to the experience i n such diverse j u r i s d i c t i o n s as Sweden (Randers, 1976) and A u s t r a l i a (Straker, 1970). I t may t h e r e f o r e be concluded that the f o r e s t p o l i c i e s discussed above were not uniguely c a u s a l but might wel l have f a c i l i t a t e d the changes, as 90 the area was "developed". Employment S t a b i l i t y Although " s t a b i l i t y " or "community s t a b i l i t y " has been very widely discussed i n general, a p r e c i s e d e f i n i t i o n i s imperative i n order to measure i t , t h e o r i s e about i t , or suggest p o l i c i e s to deal with i t . As noted i n Chapter 2, " s t a b i l i t y " has been used i n the sense of " s e c u r i t y , r e l i a b i l i t y , s t e a d i n e s s and e q u i l i b r i u m " as w e l l as "permanence, entrenchment or i m m u t a b i l i t y " . In t h i s t h e s i s , employment s t a b i l i t y i s taken as the f o c a l point of s o c i a l and p o l i t i c a l concern with respect to r e g i o n a l economic i n s t a b i l i t y i n general. (This i s c o n s i s t e n t a l s o with the i n t e r p r e t a t i o n s of many previous authors on community s t a b i l i t y and f o r e s t p o l i c y . ) Thus the d e f i n i t i o n of s t a b i l i t y as " o r d e r l y change" and the absence of unexpected, sudden changes seems appropriate. Thus both c o n t i n u a l but slow growth cr d e c l i n e i s acceptable, but frequent trend r e v e r s a l s are not. I t can be expected that employment i n s t a b i l i t y w i l l approximate i n s t a b i l i t y i n production and i n incomes, at both i n d u s t r y and r e g i o n a l l e v e l s , i f inventory adjustments w i t h i n the l o g g i n g - m i l l i n g phases are r e l a t i v e l y s m a l l . This r e l i e s on the assumption t h a t the labour component of production does not vary g r e a t l y i n the short r u n . 1 i Andrews (1969) discussed the strengths and weaknesses of such measures as employment, p a y r o l l , value added and p h y s i c a l production, i n the context of economic base a n a l y s i s ^ , 91 I t has proven impossible to get comprehensive and completely r e l i a b l e data to i n v e s t i g a t e the present s t a t e of employment s t a b i l i t y i n the North C e n t r a l Interior.-Two types of data from two d i f f e r e n t sources have been used i n t h i s study, f i r s t l y , to analyse crude trends i n employment and employment s e c u r i t y over a broad area and secondly, to analyse the nature and s t a b i l i t y of unemployment i n the c i t y of P r i n c e George and the town of Quesnel. •• • • 1a Employment S t a b i l i t y And I n d u s t r i a l Structure... Data on employment and man-months worked, i n l o g g i n g and s a w m i l l i n g i n each ranger d i s t r i c t of northern B.C.'s three Forest D i s t r i c t s were s u p p l i e d by the B.C.F.S. 1 From these data one can only observe trends i n the average number of months worked/ year/man i n each d i s t r i c t , and then attempt t o c o r r e l a t e these with the changes i n i n d u s t r i a l o r g a n i z a t i o n (number, s c a l e , l o c a t i o n and ownership) w i t h i n t h a t ranger d i s t r i c t . I t has f r e q u e n t l y been asserted that the c r e a t i o n of a s o p h i s t i c a t e d conversion complex has been accompanied (in t h i s area) by a change from winter to year round l o g g i n g 2 i . e . short term s t a b i l i s a t i o n of labour * Some was c i r c u l a t e d through Canada Manpower as a memorandum to f o r e s t i n d u s t r y c o u n s e l l o r s , dated 2 May 1975. The c o l l e c t i o n method and r e l i a b i l i t y of these data are undetermined but they probably merely represent the l o c a l ranger's best guess.. The data appear i n each Forest D i s t r i c t ' s (unpublished) Annual Report and are used i n Reports by the B.C. Dept. of Economic Development. 2 For example, i n I n d u s t r i a l Progress of the Norths June 1969, p.22. 92 force requirements. 1 Figures c i t e d by Gilgan {1974) and W i l l i s t o n (1971a) i n d i c a t e the changes i n seasonal and short run employment s t a b i l i t y as the f o r e s t i n d u s t r y ' s s t r u c t u r e changed. For example, i n 1960, the average output per man was 128 c u n i t s per annum while i n 1973 i t was 432 c u n i t s per annum. Simultaneously, the average number of months worked rose from 4.5 to over 10 months/year i n logging and s a w m i l l i n g i n the Bulkley-Nechako Regional D i s t r i c t . The a s s e r t i o n t h a t the changing i n d u s t r i a l s t r u c t u r e i n the North C e n t r a l I n t e r i o r reduced the e f f e c t s of s e a s o n a l i t y on employment i n logging and s a w m i l l i n g i s the e s s e n t i a l hypothesis of t h i s stage:of the q u a n t i t a t i v e a n a l y s i s . I t seemed th a t the B.C.F.S. data could be used to i l l u s t r a t e , though not v e r i f y , t h i s a l l e g e d r e l a t i o n s h i p between changes i n i n d u s t r i a l o r g a n i s a t i o n and i n short run employment s t a b i l i t y . I t was therefore n e c e s s a r y t o define an index of i n d u s t r i a l s t r u c t u r e , which would d i f f e r e n t i a t e between those geographic u n i t s (ranger d i s t r i c t s ) c h a r a c t e r i s e d by many small portable m i l l s - the primary phase of development of the f o r e s t i n d u s t r y - and those i n which there are fewer, much l a r g e r m i l l s . The 21'ranger d i s t r i c t s f o r which complete s e r i e s were a v a i l a b l e were t h e r e f o r e s t r a t i f i e d on the b a s i s of the combined sawmill c a p a c i t y (as estimated by B.C.F.S.) of the four l a r g e s t 1 This i s only a step forward, presumably, when the employees had no summer a l t e r n a t i v e s . k change such as t h i s may be detrimental to employers of seasonal (summer) help. 93 m i l l s i n 1974. 1 This s t r a t i f i c a t i o n proved very s i m i l a r to the hierarchy of m u n i c i p a l i t i e s presented i n Table 6 (and a l s o quite c o n s i s t e n t with the data i n Table 3). This i s hardly s u r p r i s i n g s i n c e those towns towards which most l o g s move are the c e n t r e s of l a r g e conversion complexes, which are being indexed here. The estimated number of employees and man-months worked were t o t a l l e d to derive a mean months worked per man f o r each of the 5 c l a s s e s , - f o r both logging and sawmilling. These data are a l s o presented i n Table 7, and g r a p h i c a l l y i n Figures 8a t o 8d. Although no p o s i t i v e conclusions can be drawn, the f i g u r e s do suggest some trends; a. Mean months worked per man i n sawmilling rose between 1964 and 1969, except i n c l a s s 1, which s t i l l has a very rudimentary s a w m i l l i n g i n d u s t r y . G e n e r a l l y , the more agglomerated i s the l o c a l sawmilling i n d u s t r y , the greater i s the mean months worked per man there. That i s , employment and hence production i n the l a r g e s c a l e agglomerated pla n t s seems to be l e s s s u b j e c t to the e f f e c t s of seasonal d i f f i c u l t i e s . This might iae due to t h e i r t e c h n o l o g i c a l advancement, t h e i r greater c a p i t a l resources enabling the holding of l a r g e i n v e n t o r i e s or the f a c t that the management cannot a f f o r d to c l o s e down and leave such a c a p i t a l asset f o r the "freeze up" or "break up" months. b. Mean months worked per man i n logging has remained s t a t i c i n c l a s s e s 2 and 3 over the 10 year p e r i o d , which (along with Figure 8a) suggests that employment c h a r a c t e r i s t i c s i n these two c l a s s e s have been a f f e c t e d r e l a t i v e l y l i t t l e by any i n d u s t r i a l 1 T&e c l a s s l i m i t s we^e chosen somewhat a r b i t r a r i l y , but there are " n a t u r a l " c l a s s e s and i t i s doubtful whether r e d e f i n i t i o n would s u b s t a n t i a l l y a l t e r the r e s u l t s . Table 7^ Mean Months Worked and Number of Employees i n Logging and Sawmilling in North Central B.C. Ranger Districts Class Combined Capacity of 4 Largest M i l l s * Sawmilling: Mean Months Worked/Man - Logging: Mean Months Worked/Man Average Number of Employees Average Number of Employees 1964 1969 1973 1974 1964 1969 1973 1974 1. Less than 50 Southbank and Lower Post/Atlin. 5.4 126 4.6 70 6.7 34 4.9 39 5.6 77 4.9 167 8.9 318 . 10.2 233 2. 50 - 149 Burns Lake, McBride, Valemount, Daw7son Creek, Fort Nelson and (part of) Prince George. 7.3 927 9.6 • 1579 7.5 763 8.0 817 5.6 513 5.5 734 4.7 685 .4.2 724 3. 150 - 249 Smithers, Summit Lake and Hixon. 7.4 885 9.8 830 9.5 619 9.5 668 5.5 662 4.7 1245 5.7 917 5.6 795 4. '• 250 - 449 Houston, Fort St. James, Upper Fraser, Vanderhoof, Fort St. John, Fort Fraser. Chetwynd and (part of) Prince George. 9.2 2427 10.3 1963 11.1 2896 10.5 2581 6.7 1246 5.5 2198 7.5 1973 5.9 2300 5. More than 450 Mackenzie and (part of ) Prince George. 7.2 490 10.8 907 11.0 1619 12.0 1694 4.8 561 5.2 711 8.7 959 9.9 468 * 1974 Capacity measured in M f.b.m. of production per 8 hour shift. -p-95 Figure 8a. Mean Months Worked / Man i n Sawmilling. 12 10 • 8 w • S w 4 2 Class Combined capacity of 4 largest m i l l s , 1974. L. < 50 M f.b.m. • 2 50 - 149 M f.b.m. 3. 150 - 249 M f.b.m. 4 250 - 449 M f.b.m. 5-._ > 450 M f.b.m. 1964 1969 \ \ 1 1973 1974 Figure 8b.. Mean Months Worked / Man i n Logging, 12 10 « 8 •»-•> P! • s 6 4 2 1 * 5 1964 1969 1973 1974 Figure 8c. . Number of Employees i n Sawmilling. 96 3000 2000 o 0) o r-i (X w 1000 Class 3. .—5 Combined capacity of  4 largest m i l l s , 1974. < 50 M f.b.m. 50 - 149 M f.b.m. 150 - 249 M f.b.m. 250 - 449 M f.b.m. > 450 M f.b.m. 1964 1969 1973 1974 •Figure 8d. Number of Employees i n Logging. 3000 2000 10 « O CU w 1000 ' ^ ' X - 3 — — 1 1961 1969 1973 197-1 97 changes which may have occurred. On the other hand, there have been major changes i n the most and l e a s t developed c l a s s e s . The change to year-round logging i n the Southbank d i s t r i c t (Class 1 of Table 7) may be a t t r i b u t a b l e to the f a c t that l o g g i n g there has been mainly t o supply the major conversion plant at K i t i m a t , on- the coast, rather than f o r the l o c a l small scale s a w m i l l i n g i n d u s t r y . c. The t o t a l labour force requirements i n sawmi l l i n g i n these ranger d i s t r i c t s have apparently increased s l i g h t l y between 1969 and 1973, but a l l of t h i s was i n those d i s t r i c t s c h a r a c t e r i s e d by f a i r l y concentrated, l a r g e s c a l e m i l l s . Any i n c r e a s e s i n the labour f o r c e seem very small i n comparison to the known growth of output. That i s , labour required per u n i t output has apparently f a l l e n . d. The number of employees i n log g i n g does not seem to have responded markedly t o any i n d u s t r i a l developments since 1964. I t appears that there was a general increase ( i n l i n e with i n c r e a s e d l e v e l s of production i n processing) p a r t i c u l a r l y i n c l a s s 4 - the centres of reasonably agglomerated s a w m i l l i n g . There i s an apparent anomaly i n Figures 8c and 8d. Between 1973 and 1974, the number of l o g g i n g employees i n the ranger d i s t r i c t s of c l a s s e s 3 and 5 d e c l i n e d , while the number i n sawmil l i n g rose s l i g h t l y . In c l a s s 4, the opposite was t r u e . One p o s s i b l e explanation i s an increased flow of" l o g s from the ranger d i s t r i c t s of c l a s s 4, t o supply the m i l l s i n Pri n c e George'and Mackenzie, where l a s s logging but more sa w m i l l i n g a c t i v i t y was o c c u r r i n g . A second p o s s i b i l i t y i s an i n c o n s i s t e n c y i n c l a s s i f i c a t i o n - some employees p r e v i o u s l y c l a s s e d i n logging 98 may h a v e b e e n c o u n t e d as s a w m i l l i n g e m p l o y e e s and v i c e v e r s a . A s p r e v i o u s l y n o t e d , t h e s e d a t a a r e n o t h i g h l y r e g a r d e d f o r t h e i r a c c u r a c y o r c o n s i s t e n c y , and i t may be t h a t c o m p a r i s o n s b e t w e e n two c o n s e c u t i v e y e a r s c a n n o t be made r e l i a b l y . E v e n a t t h i s l e v e l o f a g g r e g a t i o n (of r a n g e r d i s t r i c t s e a c h c o v e r i n g a number o f - s u s t a i n e d y i e l d u n i t s ) , i n s t a b i l i t y o v e r t h e 10 y e a r p e r i o d i n t h e number e m p l o y e d and i n m o n t h s worked p e r y e a r i s - a p p a r e n t . W h i l e t h i s i s a n a t u r a l c o n s e q u e n c e o f t h e i n s t a b i l i t y i n l o g h a r v e s t and l u m b e r p r o d u c t i o n shown i n F i g u r e s 2a a n d 2 b , t h i s s e c t i o n o f t h e t h e s i s has p r e s e n t e d f u r t h e r e v i d e n c e t h a t y i e l d r e g u l a t i o n o f i n d i v i d u a l P . S . Y . U . s i s i r r e l e v a n t t o q u e s t i o n s o f s h o r t - and m e d i u m - t e r m e m p l o y m e n t s t a b i l i t y , p a r t i c u l a r l y when t h e n a t u r e o f t h e f o r e s t i n d u s t r y has b e e n c h a n g i n g . I t i s s t i l l n o t c l e a r , h o w e v e r , w h e t h e r t h e g o v e r n m e n t o r t h e B . C . F . S . i n any way a n t i c i p a t e d s u c h c h a n g e s when t h e a d m i n i s t r a t i v e and p o l i c y d e c i s i o n s d i s c u s s e d a b o v e ( w h i c h had s u c h d i r e c t and i n d i r e c t i n c i d e n c e on t h e i n d u s t r y ) were made. T h e r e i s a s e c o n d a s p e c t t o t h e r e l a t i o n s h i p b e t w e e n e m p l o y m e n t s t a b i l i t y and t h e s t r u c t u r e o f t h e f o r e s t i n d u s t r y , p a r t i c u l a r l y t h e s i z e a n d c a p t i a l i n t e n s i t y o f s a w m i l l s , w h i c h i s a s s o c i a t e d w i t h t h e m a n a g e r i a l d e c i s i o n t o l a y - o f f a s h i f t i n a s a w m i l l i n t h e e v e n t o f a m a r k e t d o w n t u r n . A b r i e f ' t h e o r e t i c a l d i s c u s s i o n o f t h i s f o l l o w s . A s e r i e s o f s h o r t r u n a v e r a g e t o t a l c o s t s c u r v e s o f a m i l l o f g i v e n s i z e i s p r e s e n t e d i n F i g u r e 9 a . W h i l e t h e m i l l ' may be o p e r a t e d w i t h up t o t h r e e e i g h t - h o u r s h i f t s p e r d a y , t h e most e f f i c i e n t ( c o s t m i n i m i s i n g ) l e v e l f o r a s o p h i s t i c a t e d c a p i t a l i n t e n s i v e m i l l i s g e n e r a l l y t h o u g h t t o be 99 —. 1 — — 1 . Output/Week Q 2Q 2.8Q 3Q 9b. (No Lay-offs). Average Cost Average Revenue — i >—i • Output/Week 2Q 2.8Q 3Q 9c. (Lay-offs) Figure 9. Average Costs, Profits and the Number of Shifts for a Sawmill. 100 approximately 2.5 t o 2.8 s h i f t s per day. This a l l o w s f o r maintenance and down time, but a l s o reduces the u n i t c o s t of the s u b s t a n t i a l overhead and d e p r e c i a t i o n charges. Thus Figure 9a shows the point of minimum short run average t o t a l c o s t s where output per week i s 2.8 times the output per week of one s h i f t . This leads to a SHATC such as 9b, where the number of s h i f t s worked and throughput/shift are the d e c i s i o n v a r i a b l e s . I f the producer faces an almost p e r f e c t l y e l a s t i c demand curve, as i s fre q u e n t l y claimed, the d i s m i s s a l of a s h i f t i n response to a f a l l i n g demand f o r lumber r e s u l t s i n higher average t o t a l c o s t s ; i . e . , lower p r o f i t margin as w e l l as reduced l e v e l of output. Dismissing a s h i f t i s only r a t i o n a l i f the slope of the demand curve i s greater than the average slope of the SHATC. One would expect that f o r a modern and s o p h i s t i c a t e d c a p i t a l i n t e n s i v e s awmill, the reduction i n average costs (because of the high percentage f i x e d costs) with 2 or 2.8 s h i f t s would be s i g n i f i c a n t . Thus, as the average revenue curve s h i f t s down (weakening demand), the l a s t p o i n t at which t h i s c a p i t a l i n t e n s i v e m i l l would operate p r o f i t a b l y i s at the point of minimum SRATC (or approximately 2.5 to 2.8 s h i f t s per day. Unless demand * i s extremely i n e l a s t i c , i t i s i r r a t i o n a l to dismiss a s h i f t . 1 On the other hand, f o r a sm a l l bush m i l l whose average costs are not s u b s t a n t i a l l y decreased with e x t r a s h i f t s (or are 1 Assuming t h a t the company i s not subject to s i g n i f i c a n t short; term l i q u i d i t y problems and that inventory c o s t s are r e l a t i v e l y ( s m all. 101 even i n c r e a s e d ) , then even with a moderately e l a s t i c demand curve, a d e c l i n e i n p r i c e would induce management to c u t back a s h i f t , as i n 9c. The l a s t p r o f i t a b l e l e v e l of o p e r a t i o n f o r t h i s m i l l i s when one s h i f t i s working at i t s optimal l e v e l of output. More g e n e r a l l y , i n making the d e c i s i o n to c l o s e a l l or p a r t of a m i l l , the sum of the lumber storage (inventory) c o s t s and the p r i c e depressing e f f e c t s ( i f any) of an accumulation of product i n v e n t o r i e s must be weighed a g a i n s t the sum of the f i x e d ( c a p i t a l ) c o s t s and the c o s t s of labour r e c r u i t m e n t and r e t r a i n i n g . while the net r e s u l t i s dependent upon the e l a s t i c i t y of supply o f s u i t a b l y s k i l l e d labour and the p r i c e e l a s t i c i t y of demand f o r sawn lumber, i t can be concluded t h a t , c e t e r i s £aribus x the c a p i t a l i n t e n s i t y of the new i n t e g r a t e d complexes provides f o r more s t a b i l i t y of employment i n the f a c e of market shocks than was p r e v i o u s l y the case (although the number of employees/unit output i s l e s s ) . However, i t has been observed t h a t many m i l l s , a p p a r e n t l y f a c i n g g u i t e e l a s t i c lumber demand s c h e d u l e s , 1 do reduce output, l a y o f f a s h i f t and s i m u l t a n e o u s l y i n c u r higher average c o s t s . These f i r m s a c t as though they b e l i e v e they have some monopoly power, t h a t through withholding or reducing production they can prevent p r i c e s f a l l i n g t o o f a r i n a r e c e s s i o n . I t would appear that t h e r e are too many a l t e r n a t i v e lumber s u p p l i e r s ( e s p e c i a l l y 1 Mead (1975, p.34:5) commented that i n a l l h i s i n t e r v i e w s , each;' sawmill operator agreed that there would be no s i g n i f i c a n t ^ average p r i c e e f f e c t f o r standard items, of a 100% i n c r e a s e or a 50% decrease i n the l e v e l of production of h i s m i l l . 102 to the U . S . A . markets) f o r t h i s to be the c a s e . A s a w m i l l wi th a l a r g e f i x e d c o s t component s h o u l d , l i k e a p u l p m i l l , o p e r a t e at c a p a c i t y and minimise average t o t a l c o s t s or e l s e c l o s e down c o m p l e t e l y . T h e r e f o r e , any exogenously s u p p l i e d t e c h n o l o g y which i s c a p i t a l i n t e n s i v e , or any f o r e s t a d m i n i s t r a t i o n p o l i c i e s which f a c i l i t a t e o r encourage the implementat ion o f t h i s t e c h n o l o g y , s h o u l d c o n t r i b u t e towards more s t a b l e employment o p p o r t u n i t i e s f o r a s m a l l e r number of p r o d u c t i o n employees . 2j. S t u d i o f unemployment, with a c c e s s to Canada Manpower Cent re r e c o r d s from Quesnel and P r i n c e George , a monthly s e r i e s (Ju ly 1967 - August 1975) o f r e g i s t e r e d unemployed and r e g i s t e r e d v a c a n c i e s f o r each of t en o c c u p a t i o n a l g r o u p s 1 f o r each c e n t r e has been c o m p i l e d . Canada Manpower i s r e a l l y the on ly source of unemployment s t a t i s t i c s i n any way s u i t a b l e f o r the purposes o f t h i s a n a l y s i s . Moreover , s i n c e these data a re t h e source of the s t a t i s t i c s used and r e l e a s e d by governments , they seem very r e l e v a n t t o s o c i a l and p o l i t i c a l c o n c e r n s r e g a r d i n g employment s t a b i l i t y . Monthly data were c o n s i d e r e d most s u i t a b l e ( i . e . c o r r e s p o n d i n g to the problem addressed) s i n c e t h a t s e r i e s c a p t u r e s s e a s o n a l and s e c t o r a l f l u c t u a t i o n s t h a t are r e p o r t e d and s i g n i f i c a n t f o r p o l i c y . Weekly data are not a v a i l a b l e and 1 De f ined by " O c c u p a t i o n a l C l a s s i f i c a t i o n Manual - Canadian D i c t i o n a r y of O c c u p a t i o n s " , D . B . S . , 12 -537 . The change i n c l a s s i f i c a t i o n from 1971 n e c e s s i t a t e d adjustment of t h e e a r l i e r r e c o r d s . These f i g u r e s i n c l u d e males and f e m a l e s . A specimen f r o n the Canada Manpower Cent re r e c o r d s and the r e l e v a n t d e t a i l s o f the O c c u p a t i o n a l C l a s s i f i c a t i o n Manual are i n c l u d e d as Appendix I. 103 would be h i g h l y unstable, recording f l u c t u a t i o n s not g e n e r a l l y deemed relev a n t by most observers.' Annual data would obscure many underlying changes. Seasonal v a r i a t i o n i s r e a l and important i n that v a l i d reasons underly the f l u c t u a t i o n s . In many occupations, seasonal v a r i a t i o n i n employment cannot be considered "undesirable" i n s t a b i l i t y . That i s , " u n d e s i r a b l e " i n s t a b i l i t y ( i f any) must be i s o l a t e d from that which i s necessary, before any p o l i c y measures can be suggested to cope with "unnecessary", "und e s i r a b l e " or exogenously induced i n s t a b i l i t y . A) I n s t a b i l i t y by occupational groups. The f i r s t question to be analysed was the degree of employment i n s t a b i l i t y e x h i b i t e d by each occ u p a t i o n a l group, i n order to gain some i n s i g h t s i n t o p o s s i b l e sources of i n s t a b i l i t y and c a u s a l i n t e r r e l a t i o n s h i p s between s e c t o r s i n each centre. Figures 10a and 10b i l l u s t r a t e the l e v e l s and v a r i a b i l i t y of the number unemployed, i n t o t a l and i n logging + processing, f o r each c e n t r e . 1 ' The p a r t i c u l a r measure of employment to be used i n analysing i n s t a b i l i t y i n these data s e r i e s r e q u i r e d some c o n s i d e r a t i o n . I f only the number unemployed was used, changes i n the number of vacancies with the fortunes of the r e g i o n a l economy would only appear i n d i r e c t l y , as seme of those vacancies i The c i t y of P r i n c e George i s not only much l a r g e r than Quesnel, but has a much more d i v e r s i f i e d economic base and much l a r g e r s e r v i c e and d i s t r i b u t i o n s e c t o r s . - S t i l l , those areas which use P r i n c e George's s e r v i c e and d i s t r i b u t i o n s e c t o r s are l a r g e l y dependant on the f o r e s t i n d u s t r y (e.g. Quesnel). 6000 5000 4000 3000 2000 1000 A Figure 10a. Trends in Unemployment: PRINCE G E O R G E Total Registered Unemployed. Registered Unemployed ' n Logging, Processing and Mi l l i n g . 1973 1974 1975 Source: Canada Manpower Centre Monthly Reports. 2500 2000 Figure 10b. Trends i n Unemployment: Q U E S 1500 1000 500 Total . Registered Unemployed. Registered Unemployed i n Logging, Processing and M i l l i n g . 1967 1968 1969 1970 1971 Source: Canada Manpower Centre Monthly Reports. 1972 1973 1974 1975 106 were subsequently f i l l e d . A l s o , i n any months i n which vacancies exceeded the number unemployed, important i n f o r m a t i o n would be l o s t . "Net unemployment" (unemployed - vacancies) t h e r e f o r e seemed a u s e f u l concept, implying the number of unemployed remaining ( i f any) i f every vacancy was f i l l e d . That t h i s measure becomes negative f o r c e r t a i n occupations during periods of shortage of those s k i l l s i s valuable i n f o r m a t i o n about f l u c t u a t i o n s i n the r e g i o n a l economy. An a l t e r n a t i v e measure could be the r a t i o of r e g i s t e r e d unemployed per vacancy. Yet i t seemed that while t h i s could be quite u s e f u l and i n t e r e s t i n g , i t i s not as r e l e v a n t t o s o c i a l and p o l i t i c a l concerns, as the absolute number of people who can not f i n d work. In a d d i t i o n , a small change i n the number unemployed w i l l a f f e c t the r a t i o i n a small s e c t o r much more than i n an occupation with many employees. 1 Such an obvious source of b i a s , where the occupational groups with fewest employees (or more a c c u r a t e l y , with fewest unemployed) appear most s t a b l e , should be avoided. Thus the "net unemployment" measure was used i n a l l subsequent a n a l y s i s . The variance about the mean or trend l i n e has f r e g u e n t l y been used i n i n t e r n a t i o n a l trade l i t e r a t u r e , 2 as an index of 1 Using the unemployed / vacancy r a t i o as a measure, these data show A g r i c u l t u r e and F i s h i n g (where unemployment ranges from 3 to 12, with 2 to 4 vacancies) to be much more unstable occupations than Logging or Processing (where the number unemployed f l u c t u a t e s by up to 200 and vacancies range at various times from 10 to 70). 2 For example, U.N.C.T.A.D. (1964) and MacBean (1968). 107 (export) i n s t a b i l i t y . However, f o r t h i s study, an index l i k e the c o e f f i c i e n t of v a r i a t i o n (standard d e v i a t i o n d i v i d e d by mean or t r e n d value of unemployment) was one a l t e r n a t i v e . 1 Another might be v a r i a n c e times mean. Then t h a t occupation with the h i g h e s t index would seem the l e a s t d e s i r a b l e , i f low unemployment with s t a b i l i t y i s the g o a l . However, s i n c e a high v a r i a n c e may merely r e f l e c t s c a l e , i . e . a l a r g e mean, i t was thought t h a t t h i s index would weigh very h e a v i l y a g a i n s t those occupations with high unemployment numbers, d e s p i t e the f a c t t h a t the number employed has not been taken i n t o account. There are i n f a c t two components of t h i s problem of comparing s t a b i l i t y . The f i r s t i s which o c c u p a t i o n a l groups are r e l a t i v e l y u nstable, i . e . , the frequency and magnitude of d i s p e r s i o n about the trend l i n e can be expressed as a percentage of the trend number unemployed. The c o e f f i c i e n t of v a r i a t i o n i s such an index. These r e s u l t s are presented as Table 8 a . The second component i s the a b s o l u t e v a r i a b i l i t y of each o c c u p a t i o n a l group - the a c t u a l changes i n the number o f people unemployed - where no adjustment i s made f o r the 1 s i z e of each s e c t o r . These r e s u l t s ; which t h e r e f o r e r e f l e c t the importance or s i z e o f each s e c t o r and i t s r e l a t i v e d i s p e r s i o n , are presented as standard d e v i a t i o n s i n Table 8 b . The u n i t s of standard d e v i a t i o n are the same as the o r i g i n a l u n i t s , i . e . number of people. 1 The c o e f f i c i e n t of v a r i a t i o n or " r e l a t i v e d i s p e r s i o n " i s a w e l l known s t a t i s t i c a l measure of r e l a t i v e v a r i a b i l i t y of two d i s t r i b u t i o n s with d i f f e r e n t means but of a s i m i l a r order of magnitude. 108 Table 3a. C o e f f i c i e n t o f V a r i a t i o n of Unemployment by Occupational Groups: 1967-75. QUESNEL Assembly-Repair Miscellaneous Agriculture-Fishing Forestry-Logging Administration, H.E.W. Processing Service Sales C l e r i c a l Total Construction .81 ,78 .57 .54 .39 .38 .38 .37 .34 .33 .31 PRINCE GEORGE Service Forestry-Logging Assembly-Repair Processing Miscellaneous Agriculture-Fishing Construction Sales Administration, H.E.W. Cle r i c a l Total ,99 .90 .83 .82 .79 .68 .61 .53 .32 .25 .13 109 Table 8b. Standard Deviation of Unemployment by Occupational Groups: 1967-7 5. QUESNEL PRINCE GEORGE Total Miscellaneous Processing Construction Service Forestry-Logging C l e r i c a l Sales Assembly-Repair Administration, H.E.W. Agriculture-Fishing 316 86 65 61 48 41 38 21 11 10 6 Total Miscellaneous Construction Processing Service Clerical Forestry-Logging Sales Assembly-Repair Administration, H.E.W. Agriculture-Fishing 299 256 243 165 125 123 119 90 53 44 11 110 From an examination of these r e s u l t s , one can observe, f o r example, that although A g r i c u l t u r e - F i s h i n g i s quite unstable i n both centres, there are few people involved and the absolute impact of i t s i n s t a b i l i t y i s minor. The Assembly-Repair group i s equally unstable i n both ce n t r e s , but the s o c i a l impact of t h i s i s greater i n Prince George (the d i s t r i b u t i o n and s e r v i c e centre where many people are involved) than i n ' the s m a l l town of Quesnel. Unemployment i s shown to be r e l a t i v e l y , more unstable i n P r i n c e George's S e r v i c e , Forestry/Logging, Assembly/Repair and Processing s e c t o r s than i n Quesnel or i n the other s e c t o r s i n P r i n c e George. This can not be explained i n terms of the l a r g e P r i n c e George population or labour force i n these s e c t o r s , but most l i k e l y i s due t o exogenously induced changes i n f o r e s t i n d u s t r y a c t i v i t y which have greater e f f e c t i n P r i n c e George than Quesnel. The r e s u l t s a l s o i n d i c a t e t h a t the almost s i n g l e - i n d u s t r y town of Quesnel e x h i b i t s much greater i n s t a b i l i t y of t o t a l unemployment, r e l a t i v e l y and a b s o l u t e l y , than ( d i v e r s i f i e d ) Prince George. The r e l a t i v e d i s p e r s i o n of t o t a l unemployment i n Quesnel (33%) i s considerably greater than i n P r i n c e George (13%). Although Quesnel's 1975 population was only o n e - s i x t h of P r i n c e George's, the number of r e g i s t e r e d unemployed i n Quesnel i s approximately h a l f of that i n P r i n c e George, and the standard d e v i a t i o n about the trend i n t o t a l unemployment shows that more people are d i r e c t l y a f f e c t e d by employment i n s t a b i l i t y than i n 111 Prince George. 1 These r e s u l t s may be i n t e r p r e t e d i n two ways, depending on the assumptions one makes concerning labour force m o b i l i t y . I f the labour f o r c e was p e r f e c t l y mobile between occupations and could migrate f r e e l y between r e g i o n s , the problems or s o c i a l c o s t s of employment i n s t a b i l i t y would be g r e a t l y reduced. F i r s t l y , assuming t h a t no migration occurs i n response to unemployment i n the r e g i o n , the r e s u l t s i n d i c a t e that the Quesnel economy i s r e l a t i v e l y unstable. I f one considers f l u c t u a t i o n s i n a number of occupations out of phase, r e s u l t s as i n Fig,11a can be a n t i c i p a t e d . However, i f the component s e c t o r s f l u c t u a t e i n phase, the t o t a l v a r i a b i l i t y or i n s t a b i l i t y w i l l be g r e a t l y a m p l i f i e d as i n 11b. I t would seem highly probable that Quesnel's c o n s t r u c t i o n , l o g g i n g , processing (=sawmilling i n Quesnel) and t r a n s p o r t occupational groups would a l l move i n response to the same f a c t o r s , whether lumber p r i c e s , i n d u s t r i a l d i s p u t e s , B.C.F.S. p o l i c y or something e l s e . Therefore, i f the p o s s i b i l i t y of migration or changing occupations i s ignored, there i s evidence that the s t r u c t u r e of Quesnel's economy i s a m p l i f y i n g any i n s t a b i l i t y induced i n sawmilling and logging employment, while i n Prince George the e f f e c t i s much l e s s n o t i c e a b l e . • ' A l t e r n a t i v e l y , i f one assumes that m i g r a t i o n and occupational changes occur, the r e s u l t s can be i n t e r p r e t e d as 1 This may seem q u i t e remarkable considering the boom-town nature of Prince George's recent growth. (See Table 1.) These data suggest that the boom was not unbalanced. 112 Time. l l a . D i v e r s i f i e d Economy - 3 I n d u s t r i e s , 3 Sectors Time. l i b . N o n - d i v e r s i f i e d Economy-- 3 I n d u s t r i e s , l S e c t o r . F i g u r e 11. T o t a l and S e c t o r a l Unemployment. 113 evidence that i t i s more d i f f i c u l t to leave Quesnel or to f i n d employment i n another i n d u s t r y there when the f o r e s t - r e l a t e d i n d u s t r i e s are depressed. That i s , the labour force i n P r i n c e George may be more mobile than that of Quesnel (perhaps because a house can be s o l d or rented more e a s i l y or because of a wider range of s a l e a b l e occupational s k i l l s i n P r i n c e George). Whether or not migration occurs, the r e s u l t that t o t a l unemployment i n Quesnel i s more unstable r e l a t i v e l y and a b s o l u t e l y than i n Prince George can be a t t r i b u t e d t o the d i f f e r e n c e s i n s t r u c t u r e of the two towns' economies, namely that Prince George i s more d i v e r s i f i e d . For purposes of comparison, two other l a s s s a t i s f a c t o r y i n d i c e s of employment i n s t a b i l i t y were c a l c u l a t e d and are considered below. Table 9a shows the ranking of o c c u p a t i o n a l groups by variance / mean i n ascending order, f o r the c i t y of Princ e George and the town of Quesnel, along with the mean of ( r e g i s t e r e d unemployed - vacancies) f o r the period J u l y 1967 -August 1975. While t h i s index provides some i n t e r e s t i n g i n s i g h t s and i s g e n e r a l l y supportive of the r e s u l t s i n Table 8a, i t has two major drawbacks. I t has l i t t l e s t a t i s t i c a l usefulness and i s there f o r e not g e n e r a l l y accepted as an index, and i t has no n a t u r a l u n i t s (whereas the c o e f f i c i e n t of v a r i a t i o n i s a percentage) . Table 9a. Ordering of Occupational Groups by Employment I n s t a b i l i t y  Indexl (and Mean Number Unemployed: 1967-75). QUESNEL ' PRINCE GEORGE Occupational Group Mean Occupational Group Mean Unemployed Unemployed Agriculture-Fishing 11 Administration, Health, Education § Welfare 24 Sales 55 Assembly-Repair 13 C l e r i c a l 111 Service 127 Construction 195 Forestry-Logging 76 Processing 171 Miscellaneous (including Students and Transportation)110 Total* 958 Agriculture-Fishing 15 Administration, Health, Education § Welfare 137 C l e r i c a l 485 Total* 2302 Assembly-Repair 63 Sales 169 Forestry-Logging 132 Service 126 Processing 201 Construction 398 Miscellaneous (including Students and Transportation)324 The Index used here i s Variance/Mean, for the 97 month time series. 115 2 . 2 5 A s s e n b l y - R e p a i r 1 .87 . P r o c e s s i n g / M i l l i n g T o t a l * 1 .55 1 .53 E c r e s t r y -I c g g i n g M i s c e l l a n e o u s 0 . 8 8 C c n s t r u c t i c n 0 . 7 5 M i s c e l l a n e o u s S a l e s 0 . 5 8 A s s e m b l y 0 . 4 7 0 .41 A g . - f i s h i n g A d m i n . , E . E . v J . 0 . 3 6 A g . - F i s h i r g 0 . 3 0 0 . 2 5 S a l e s . f o r . - L o g g i n g 0 . 2 3 0 . 2 2 S e r v i c e S e r v i c e 0 . 1 6 P r o c e s s i n g 0 . 1 5 T c t a l * H i l l i n g C o n s t r u c t i o n 0 . 1 3 A d m i n . , H . E . W . C l e r i c a l 0 .11 0 . 0 8 C l e r i c a l 1 1 6 Another measure of i n s t a b i l i t y i s a l o g variance i n d e x i 1 The r e s u l t s using t h i s index are presented as Table 9b. The i n t e r p r e t a t i o n of these r e s u l t s i s not as' obvious as f o r the c o e f f i c i e n t of v a r i a t i o n , but they are s i m i l a r i n some res p e c t s . Forestry-Logging and P r o c e s s i n g - H i l l i n g are r e l a t i v e l y more unstable i n Prince George than i n Quesnel, while Quesnel* s t o t a l unemployment i s more unstable than Prince George's, The a n a l y s i s of these data i s v i t i a t e d by the problem of people r e g i s t e r i n g i n d i f f e r e n t unemployment c a t e g o r i e s at d i f f e r e n t times. For example, an unemployed logger could r e g i s t e r f o r a d i f f e r e n t type of work and might w e l l do so i f he r e a l i s e s that the i n d u s t r y i n which he normally works i s c u r r e n t l y depressed. Canada Manpower can not a s c e r t a i n how often t h i s might occur, although i t too presumes that no changing between c l a s s e s occurs. This e f f e c t could f u r t h e r complicate the comparison between P r i n c e - George and Quesnel, since the scope f o r changing the type of employment would appear much greater i n Prince George than i n the almost s i n g l e i n d u s t r y Quesnel. B) Trends i n unemployment. Other i n t e r e s t i n g i n f o r m a t i o n generated by the r e g r e s s i o n of l o g (unemployment-vacancies) on time, concerns the trend 1 This i s not'to be confused with the'somewhat d i f f e r e n t index of the same name, used i n the i n t e r n a t i o n a l trade l i t e r a t u r e , which was developed by Coppock (1962). The index used here i s formulated as the variance of the r e g r e s s i o n l o g X = c + a.Time. The use of logarithms means that p r o p o r t i o n a l changes about the re s p e c t i v e group trends are being compared by the l o g variance index. 117 growth r a t e s of net unemployment. 1 These r e s u l t s are presented as Table 10. One should immediately note t h a t the number of net unemployed i n P r i n c e George has been growing very s l o w l y compared to the r a p i d growth i n t o t a l population. (See Table 1) This - i s i n marked c o n t r a s t to Quesnel's rather high growth r a t e of the number unemployed. Coupled with i t s g u i t e undramatic t o t a l population growth (see Table 1), these data suggest (not s u r p r i s i n g l y ) that Quesnel has not performed w e l l r e c e n t l y . Unemployment i n each occupational group has been growing considerably f a s t e r than i n Prince George. The estimates, that net unemployment for the e i g h t year period has been d e c l i n i n g s i g n i f i c a n t l y f o r P r i n c e George's assembly-repair, 1 c o n s t r u c t i o n and miscellaneous ( i n c l u d i n g transport) groups may seem s u r p r i s i n g at f i r s t . However, the Manpower Regional Economist i n Prince George has a l s o observed, on d i f f e r e n t c r i t e r i a , "that these are " p e r s i s t e n t shortage occupations" i n t h a t a r e a . 2 What remains most noteworthy, i s the appearance of s t r u c t u r a l labour immobility i n those same occupations i n Quesnel. Perhaps Quesnel's'unemployed s k i l l e d tradesmen are not prepared to move to P r i n c e George where * there are more vacancies. Yet, one cannot be sure whether t h i s observation i s accurate, or whether unemployed people from Prince George' are moving to Quesnel i n search of s a w m i l l i n g , logging and r e l a t e d employment, thereby i n f l a t i n g the apparent 1 I f log"X = c + a.T, then a = d log X/dT = 1/X . dX/dT. Thus the estimated c o e f f i c i e n t s of T i n the r e g r e s s i o n s are the p r o p o r t i o n a l growth r a t e s of each occ u p a t i o n a l group's "net unemployment" over the 97 month period. a see Smelser (1975) . 118 Table 10. Trends i n Number Unemployed - Vacancies 1967-75. Occupational Group Administration, Health, Education § Welfare C l e r i c a l Sales Service Agriculture-Fishing Forestry-Logging Processing, Machining § M i l l i n g Assembly-Repair Construction Miscellaneous (including Students and Transportation) Annual Growth Rate (Unemployed-Vacancies)  Prince George Quesnel 16.20^ 9.84% 4.421 -0.83% * 9.05% 4.36% 6.33% -30.81% * -12.13% * -5.82% * 31.83% 19.96% 20.94% 3.63% 14.53% 19.00% 12.53% 31.85% 14.76% 19.88% Total 2.26% 18.99% * Denotes negative trends. 11;9 trends there. An examination of trends i n unemployment such as t h i s would be incomplete without c o n s i d e r a t i o n of labour force migration as p r e v i o u s l y discussed. However, i t seems that the P r o v i n c i a l government has never recognised the d i f f i c u l t i e s of t r y i n g t o create jobs f o r l o c a l people or maintain s t a b l e employment i n remote areas, as long as i t has v i r t u a l l y no c o n t r o l at a l l over i n t e r n a t i o n a l , i n t e r p r o v i n c i a l or i n t r a p r o v i n c i a l migration. C) The e f f e c t s of lumber p r i c e s on employment s t a b i l i t y . Econometric time s e r i e s a n a l y s i s of these same data was used t o examine the hypothesis t h a t unemployment i n s a w m i l l i n g (and to a l e s s e r extent logging) i s c o r r e l a t e d with c u r r e n t or previous lumber p r i c e s . Figure 12 i n d i c a t e s the 8-yaar monthly trends i n p r i c e s f o r the species and s i z e s ' o f lumber commonly produced. Numerous other r e l a t i o n s h i p s can be postulated from a knowledge of the area and i n d u s t r y , and from s u b j e c t i v e l y examining the data. For example, a p p l i c a n t s per job vacancy or net unplaceable a p p l i c a n t s i n those i n d u s t r i e s c l o s e l y a s s o c i a t e d with sawmilling ( v i z . maintenance, t r a n s p o r t , c o n s t r u c t i o n and l o g g i n g ) , seem to r i s e soon a f t e r unemployment i n sawmilling r i s e s , or about three months a f t e r a (sustained) p r i c e f a l l . I t also seems that employment i n s e r v i c e i n d u s t r i e s i s cnly adversely a f f e c t e d a f t e r sustained downturns i n sawmilling and as s o c i a t e d a c t i v i t i e s , i n these two c e n t r e s . There i s no e s t a b l i s h e d theory to use as a b a s i s f o r a n a l y s i s of r e g i o n a l employment i n s t a b i l i t y , other than the Figure 12. Trends in Selected Lumber Prices: 1967-75. $/M f.b . m . Spruce - Pine - Fir (Western) Kil n Dried 2"x4"x8'/20' Std. & Btr. 250 200J 150 100 50. F i r and Larch, Unseasoned, 2"x4"x8 7 2 0 ' Std & Btr. Lodgepole Pine Studs, Kiln Dried, 2"x4"x8' PET. i : \ » / y ^ w I 1 9 6 7 1 9 6 3 1 9 6 9 1970 1 9 7 1 1 9 7 2 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 121 general concepts of economic base a n a l y s i s . 1 An i n t u i t i o n e x i s t s among a n a l y s t s , e.g. . Den i k e and Leigh (1971, p. 70-71), and members of the f o r e s t i n d u s t r y , t h a t export lumbar p r i c e s s u b s t a n t i a l l y a f f e c t l e v e l s of production and employment. Thus, i n t h i s a n a l y s i s ^ i t i s necessary to work backwards from the data, • to a c e r t a i n extent, using scmewhat ad hoc r a t i o n a l e s , to p o s t u l a t e more s p e c i f i c r e l a t i o n s h i p s between the demand f o r lumber ( r e f l e c t e d i n i t s price) and the l e v e l of production and employment i n the f o r e s t i n d u s t r i e s . ' There are of course numerous- intermediate stages i n the p o s t u l a t e d r e l a t i o n s h i p . Employment and unemployment l e v e l s are a f f e c t e d by wage r a t e s , p a r t i c i p a t i o n r a t e s and population s i z e f o r example, as w e l l as the demand f o r labour t o work i n processing p l a n t s . I t i s then assumed here that the s h o r t run demand f o r labour i s determined p r i m a r i l y by the l e v e l of processing a c t i v i t y 2 " w h i c h i n turn i s l a r g e l y dependent upon the p r o f i t a b i l i t y of•the e n t e r p r i s e , although these r e l a t i o n s h i p s are c e r t a i n l y not simple. F i n a l l y , i t has been assumed th a t the 1 where s e r v i c e s e c t o r (or non-basic) employment or incomes i s considered t o be a m u l t i p l e of employment or incomes i n the (basic) export commodity producing s e c t o r s . 2 As one would i n t u i t i v e l y expect, the number of r e g i s t e r e d unemployed i n logging and processing (shown i n Figures 10a and 10b) appears to be i n v e r s e l y c o r r e l a t e d with production from northern m i l l s (shown i n Figure 2b). However, because of the nature of the three data s e r i e s (unemployment, production and lumber prices) only the f i r s t and l a s t could be e c o n o m e t r i c a l l y analysed. That i s the intermediate stage i n the r e l a t i o n s h i p between lumber p r i c e s , production and unemployment was bypassed. Figures 2a, 10a and 10b o f f e r e d no evidence t h a t these assumptions were i n a p p r o p r i a t e . 122 marginal p r o f i t a b i l i t y of logging or sawmilling e n t e r p r i s e s w i l l be c o r r e l a t e d with changing lumber p r i c e s . The l a s t of these a l l e g e d r e l a t i o n s h i p s i s of p a r t i c u l a r relevance to t h i s t h e s i s but has received only l i m i t e d a t t e n t i o n i n the l i t e r a t u r e . I t i s therefore examined as a p r e l i m i n a r y to the i n v e s t i g a t i o n of the a f f e c t s of lumber p r i c e s on unemployment i n the f o r e s t i n d u s t r y and r e l a t e d i n d u s t r i e s . A model of the r e l a t i o n s h i p between lumber p r i c e s , the stumpage a p p r a i s a l system and a c t i v i t y i n s a w m i l l i n g i n the B.C. I n t e r i o r i s as f o l l o w s . Consider a p r o f i t - m a x i m i s i n g , p r i c e - t a k i n g sawmilling f i r m , with the s p e c i a l c o n d i t i o n that the supply p r i c e of logs t o i t i s a f u n c t i o n of the demand f o r or p r i c e of lumber. Yet t h i s i s not a v a r i a b l e r e l a t i o n s h i p as would be determined by competitive b i d d i n g , but one set by a r i g i d c a l c u l a t i o n procedure, by the f o r e s t - owner. InB.C;, using the modified Rothery method, 1 Conversion Return (CR) = S e l l i n g P r i c e of lumber (SP) - Operating Costs (OC) This conversion r e t u r n i s to be d i v i d e d between stumpage (St) payable to the Crown and p r o f i t (P) to the operator. The allowed p r o f i t = x% of (St + OC) where x i s an allowance f o r p r o f i t and r i s k , which can range from 12% to 23%. Thus SP = St + OC + x (St + OC) = (1+x) (St + OC) i . e . St = SP / (1+x) - OC and 1 See Pearse et a l , (1974, Appendix I I ) f o r a d e t a i l e d example. 123 allowed P r o f i t = SP - OC - St = SP (1 - 1/(1+x)) Thus sawmi l l i n g p r o f i t and lumber s e l l i n g p r i c e s per u n i t of output should be monotonically and p o s i t i v e l y r e l a t e d i f the p r o f i t and r i s k allowed (x) i s constant, although any changes i n the conversion r e t u r n are not shared between log-producer and log-processor i n the same proportion. As the s e l l i n g p r i c e r i s e s above the point of minimum stumpage; stumpage increa s e s at a f a s t e r r a t e than does the allowed p r o f i t . However, the a p p r a i s a l system cannot always be accurate i n e s t i m a t i n g a l l • c o s t s or revenues from sawmilling and logging and, as noted p r e v i o u s l y , there can be lags of some months i n r e v i s i n g stumpage r a t e s . Thus, the a c t u a l p r o f i t 1 to the operator depends on h i s s e l l i n g p r i c e and operating c o s t s and the B.C.F.S. estimates of them which determine stumpage, as w e l l as h i s l e v e l of output, i . e . P = SP. Q - St.g - OC (g) where Q i s the volume of lumber produced and q i s the volume of log throughput. T h a t i s , P = S P . Q " '( x|| " " O C " ) q - O C(q) From t h i s i t i s c l e a r that a c t u a l p r o f i t i s not a simple function- of the s e l l i n g p r i c e of lumber. I f the p r o f i t and r i s k allowance or the estimated (allowed) operating c o s t s ("OC") are r e v i s e d downwards or i f a c t u a l operating costs i n c r e a s e as s e l l i n g p r i c e s f o r lumber i n c r e a s e , i t i s p o s s i b l e t h a t a c t u a l p r o f i t s might d e c l i n e . ' ~ , I f m i l l i n g a c t i v i t y i s considered to be a f u n c t i o n of the 1 Assuming a p e r f e c t l y e l a s t i c export demand f o r B.C. lumber. 124 absolute s i z e of the operator's share of the rent, r a t h e r than of lumber p r i c e s , the r o l e of the a p p r a i s a l system i n s e t t i n g the p r o f i t a b i l i t y of logging and m i l l i n g becomes apparent. The a p p r a i s a l system i s meant to equate the p r o f i t a b i l i t y of a l l logging chances, g e o g r a p h i c a l l y and i n t e r t e m p o r a l l y . To the extent that i t f a i l s to do this> overcompensates or imposes minimum or maximum stumpages, the t i m i n g and l o c a t i o n of logging a c t i v i t y i s d i s t o r t e d . Thus although lumber p r i c e s might r i s e 10%, f o r example, the a c t u a l p r o f i t a b i l i t y t o the operator may not respond p r o p o r t i o n a t e l y , p o s i t i v e l y or even p r e d i c t a b l y over a time s e r i e s . Thus any causal r e l a t i o n s h i p between changes i n lumber p r i c e s and output or employment l e v e l s could be masked (to an unknown extent) by t h i s e f f e c t of the stumpage a p p r a i s a l system. A second e f f e c t of the a p p r a i s a l system which warrants a t t e n t i o n hare, stems from the f a c t t h a t appraised p r i c e s f o r timber are derived from 3-month moving averages of product p r i c e s . Whenever lumber p r i c e s are r i s i n g , the moving average w i l l understate the spot p r i c e s , meaning that the immediate "conversion r e t u r n " i s greater than estimated. That i s , the operator's share of the rent exceeds what the B.C. F.S.- would normally allow ( i f p r i c e s were s t a t i c ) . Conversely, i n any period of s i g n i f i c a n t p r i c e d e c l i n e s , t h i s e f f e c t could act as a deterrent to logging and/or m i l l i n g a c t i v i t y , which may then be r e f l e c t e d (depending on i t s duration and lags) i n unemployment s t a t i s t i c s . As the f i r s t step i n q u a n t i t a t i v e l y i n v e s t i g a t i n g the complex r e l a t i o n s h i p postulated between unemployment and lumber 125 p r i c e f l u c t u a t i o n s , a regression between the numbers unemployed i n p r o c e s s i n g - m i l l i n g and i n l o g g i n g , and lumber p r i c e s was t r i e d using monthly d a t a . 1 Deseasonalizing and detrending was considered necessary to ensure that no secular or c y c l i c a l i n f l u e n c e s were r e f l e c t e d i n the estimated c o e f f i c i e n t s of independent v a r i a b l e s under i n v e s t i g a t i o n . 2 These r e s u l t s are included i n Tables 11 and 12, and show s i g n i f i c a n t c o r r e l a t i o n between current lumber p r i c e s and unemployment i n the sawmilling i n d u s t r y only, and then only i n Quesnel. The s i g n i f i c a n t trends of i n c r e a s i n g unemployment i n each of the l o g g i n g , processing and t o t a l groups i n Quesnel noted aboye, again appear. Seasonal changes i n unemployment i n the logging and processing s e c t o r s were not shown t o be s i g n i f i c a n t , although such changes do appear f o r the t o t a l . I t i s p o s s i b l e to r a t i o n a l i z e these r e s u l t s - production and employment i n s a w m i l l i n g could be expected to respond p o s i t i v e l y t o a change i n lumber p r i c e s , while logging may continue more s t e a d i l y , year round, with any d i s c r e p a n c i e s i n production being manifested i n changes i n log yard i n v e n t o r i e s . * The lumber P r i c e index used i s the weighted average of the p r i c e s i n Figure 11. The weights are the harvest of t h a t species as a percentage of the t o t a l cut i n the P r i n c e George, ( I n t e r i o r ) P r i n c e Rupert and Cariboo Forest D i s t r i c t s . Production data by species and s i z e , f o r t h i s region were not a v a i l a b l e to derive more accurate weights. 2 P r e l i m i n a r y examination of c o r r e l a t i o n (in the form of disturbance). To obtain c o n s i s t e necessary to transform the d i t e r a t i v e technique, p r i o r to or the data suggested s e r i a l a f i r s t order autoregressive nt c o e f f i c i e n t estimates, i t was ata using the cochrane-Orcutt dinary l e a s t squares r e g r e s s i o n . Table U. Regression Results - Quesnel. Dependent Variable Constant Time (months) Summer Dummy Variable Winter Dummy Variable 1. U (logging) 52.5 11.49 2. tl 49.2 11.49 -5.70 12.47 3. M 32.7 12.52 -8.73 15.16 4. U (processing) 181.1 2.72 0.58 21.25 5. 197.8 2.78 -4.16 19.26 6. U (total) 561.9 55.50 7. 490.5 63.60 131.52 123.89 3. 388.2 66.35 68.58 115.68 9. tt 304.7 0.22 43.25 -34.96 10. it 195.1 182.99 39.11 104.66 11. U (service sector) 182.5 37.07 -15.10 50.22 * V1 = U (logging) 2 months prior. ** U 2 - U (logging + millinj 95% significance ___ 99% significance L.P.I. L.P.I. * U 2 ** U 3 *** R2 2 months prior -0.231 .3132 -0.219 -3468 -0.128 .4710 -1.244 -5725 -1.400 ' . -5699 1.32 .3123 1.38 .37.14 4.06 ==• .7568 . 7306 l-fiS .8013 -0.279 .4788 2 months prior. *** U, = U (logging, milling, transport ^ and maintenance) 1 month prior. K> Table 12. Regression Results - Prince George. Dependent Variable Constant •1. U (logging) 151.8 2. " 202.0 3. U (processing) 205.3 4. " 172.3 5. " 231.2 - 6. " 299.5 7. U (total) 1528.8 Time Sunnier Winter (months) Dummy Dummy Variable Variable 1. .463 -38.25 -24.75 2. .061 -43.58 -28.63 .163 -29.73 29.98 2. .128 -34.18 30.56 1. .958 -37.99 30.24 2, .640 ' -36.93 27.20 •2. .090 -21.65 3.16 * 3 month moving average of lumber prices. ** U 2 = U (logging + milling) 2 months prior. 95% significance _ 991 significance .P.I. L.P.I. L.P.I. L.P.I.* U 2 ** R2 1 month 2 months prior prior 0.788 -3649 -1.400 -3880 1.062 -6384 -0.764 .6355 -1.120 .6427 -1.951 ' .6437 2.407 .7393 128 However, the r e s u l t s f o r P r i n c e George give no s i g n i f i c a n t c o r r e l a t i o n between unemployment i n processing and lumber p r i c e s . There are a number of p o s s i b l e explanations: 1. The processing group i s much more d i v e r s i f i e d than i n Quesnel where i t is-almost t o t a l l y s awmilling and pulp and paper processing. Thus changes i n sawmilling unemployment may occur, but not be r e f l e c t e d i n t h i s aggregate processing category. 2. I f the s a w m i l l i n g i n d u s t r y i s s t r u c t u r a l l y d i f f e r e n t i n Prince George, f o r example, more t e c h n i c a l l y e f f i c i e n t , or with more aggressive marketing agencies, or i f the p l a n t s are s u b s i d i a r i e s of l a r g e n a t i o n a l corporations instead of l o c a l independent m i l l s , then i t i s p o s s i b l e that production (and unemployment) j u s t does not respond as much to lumber p r i c e changes. This e x p l a n a t i o n can be discounted somewhat, given the r e s u l t s of the preceding a n a l y s i s showing unemployment i n processing i n Prince George to be h i g h l y - unstable, r e l a t i v e l y and a b s o l u t e l y . I t appears then, that unemployment i n t h i s c i t y and o c c u p a t i o n a l group corresponds to something other than ( t h i s index of) lumber p r i c e s , or responds to i t i n a d i f f e r e n t manner than i t does i n Quesnel. Perhaps t h i s could be as a r e s u l t of the i n d u s t r i a l s t r u c t u r e i n Prince George. The e f f e c t s of the stumpage a p p r a i s a l system as p r e v i o u s l y discussed, can not be used to e x p l a i n the absence of c o r r e l a t i o n i n P r i n c e George, when a strong c o r r e l a t i o n between unemployment i n processing and the lumber p r i c e index e x i s t s i n Quesnel. Another p o s s i b l e explanation i s t h a t the long period covered by the data used may have v i t i a t e d t h i s a n a l y s i s . A v i s u a l comparison of Figures 2b, 10a and b and 12 suggests t h a t 129 i n the very short term, lumber p r i c e s and production seem to be p o s i t i v e l y c o r r e l a t e d and i n v e r s e l y r e l a t e d with unemployment. However, over the l a s t few years, unemployment, production and p r i c e s have a l l been r i s i n g . That i s , the longer term trends (because of i n s t i t u t i o n a l and i n d u s t r i a l changes) appear to be c o n t r a d i c t o r y to the month to month r e l a t i o n s h i p s . However, these simple models assume instantaneous adjustment, t h a t i s , that the dependent v a r i a b l e a d j u s t s immediately 1 and c o s t l e s s l y to i t s " d e s i r e d " or e q u i l i b r i u m l e v e l as circumstances change. I t i s obvious that there are lags i n the adjustment process, perhaps because labour cannot be dismissed immediately, or because of u n f i l l e d order books when lumber p r i c e s d e c l i n e , or a delay i n recruitment i f business prospects improve. 2 For these and other such reasons, r e g r e s s i o n between previous months' lumber p r i c e s and current ' unemployment i n c e r t a i n occupations seemed appropriate. The r e s u l t s are presented as equations 3, 5 and 11 of Table 11 and 2, 4, 5 and 6 of Table 12. Generally t h i s r e c o g n i t i o n of l a g s improved the goodness of f i t ( R 2 ) of the eguations s l i g h t l y , but s t i l l i n the processing unemployment - P r i n c e George equations (Table 12:3, 4, 5, 6) lumber p r i c e s were not s i g n i f i c a n t , 3 although the 1 w i t h i n the same one month period. 2 This a n a l y s i s assumes that there are no c r i t i c a l l e v e l s , above or below which there are d i s c o n t i n u i t i e s i n behaviour. That i s , the r e a c t i o n t o any change i s gradual and uniform. 3 although the d i r e c t i o n of change was negative, as expected. J 130 c o e f f i c i e n t s of determination (R 2) f o r these r e g r e s s i o n s are reasonably good. I t must be kept i n mind t h a t i n these regressions the lumber p r i c e index has been used as a proxy f o r the p r o f i t a b i l i t y of logging or m i l l i n g - the a l l e g e d primary determinant of logging and sawmilling unemployment - and t h i s lumber p r i c e - p r o f i t a b i l i t y c o r r e l a t i o n may be (and seems to be) weak a t times. This q u a n t i t a t i v e a n a l y s i s has been somewhat i n c o n c l u s i v e . I t has attempted ' to leap a number of complex in t e r m e d i a t e processes r e l a t i n g unemployment to employment to production to p r o f i t a b i l i t y t o stumpage r a t e s and lumber s e l l i n g p r i c e s . Although each of these r e l a t i o n s h i p s warrants much i n v e s t i g a t i o n , the model used contained only the observations of r e g i s t e r e d unemployed and lumber p r i c e s . I t has been shown th a t the r e l a t i o n s h i p between lumber p r i c e s and p r o f i t a b i l i t y of sawmills can be weak i n p r a c t i c e due t o lags and unavoidable e r r o r s i n the a p p r a i s a l process, although on t h e o r e t i c a l grounds i t should be p r e c i s e . - • In view of these circumstances, the r e s u l t s that unemployment i n processing i n Quesnel i s s i g n i f i c a n t l y c o r r e l a t e d with current or previous lumber p r i c e s o f f e r s a b a s i s to support the i n t u i t i o n of c a u s a l i t y . This support i s not negated by the f a c t t h a t the a n a l y s i s of the P r i n c e George data y i e l d e d r e s u l t s which were not s t a t i s t i c a l l y s i g n i f i c a n t , which may i n part be a t t r i b u t e d to a data aggregation problem. The r e c o g n i t i o n of lags i n the model confirmed that the adjustment process may take two to three months, but did not c o n t r i b u t e f u r t h e r to the argument that changing lumber p r i c e s are d i r e c t l y 131 r e l a t e d to changes i n the l e v e l of unemployment. I t i s r e c o g n i s e d tha t North American lumber market p r i c e s can b e - a f f e c t e d ' b y a number of r a t h e r u n p r e d i c t a b l e f a c t o r s c o n s t r a i n i n g the s u p p l y o f lumber from the B . C . I n t e r i o r . A bad f i r e season may prevent m i l l s from o b t a i n i n g ' t h e i r d e s i r e d l o g s u p p l y , l a b o u r d i s p u t e s can l i m i t p r o d u c t i o n even i n t imes of h i g h lumber p r i c e s , or a shor tage of r a i l c a r s to s h i p lumber may l e a d to such an i n v e n t o r y accumula t ion t h a t p r o d u c t i o n has t o c e a s e , c a u s i n g temporary unemployment. However, t h e s e f a c t o r s do n o t ' a p p e a r t o be the most s i g n i f i c a n t f o r the s h o r t term employment i n s t a b i l i t y (or boom and bust) tha t has c h a r a c t e r i s e d the f o r e s t i n d u s t r y . D) An economic base - type unemployment m u l t i p l i e r . The p r e c e d i n g g u a n t i t a t i v e a n a l y s i s d i d not c o n c l u s i v e l y c o n f i r m the p o s t u l a t e d r e l a t i o n s h i p between f l u c t u a t i n g lumber p r i c e s and unemployment i n the u n s t a b l e p r o c e s s i n g and l o g g i n g s e c t o r s . I t was n e v e r t h e l e s s p o s s i b l e to c o n t i n u e the e c o n o m e t r i c a n a l y s e s o f the da ta s u p p l i e d by Canada Manpower to seek c o r r e l a t i o n s between the unemployment i n f o r e s t i n d u s t r i e s - the b a s i c ( expor t -ea rn ing ) s e c t o r s of the r e g i o n a l economy -and t o t a l unemployment. The e s t i m a t e d r e l a t i o n s h i p between the number of unemployed l e s s v a c a n c i e s i n t o t a l and i n the l o g g i n g or p r o c e s s i n g o c c u p a t i o n s are p resen ted i n e q u a t i o n s 8, 9 and 10 of T a b l e 11 and-7 Of Tab le 12. These r e l a t i o n s h i p s were s u g g e s t e d by economic base theory and b y • s u b j e c t i v e examinat ion of the data in F i g u r e s 1 0 a a n d 10b. The c o r r e l a t i o n c o e f f i c i e n t s a r e q u i t e h i g h , and t - s t a t i s t i c s i n d i c a t e t h a t the e s t i m a t e d c o e f f i c i e n t s 132 are h i g h l y s i g n i f i c a n t . Eguation 10 of Table 11, f o r example, suggests that a crude economic base-type m u l t i p l i e r of 1.65 a p p l i e s i n the Quesnel area. This i s much lower than would have been expected, on the b a s i s of the indust r y ' s apparent s i g n i f i c a n c e i n that centre. From -equation 9 of Table 11 and eguation 7 of Table 12, i t seems that each unit change i n unemployment i n log g i n g and m i l l i n g i s associated with a 1.4 to 1.45 change i n non-forest i n d u s t r y unemployment, the f o l l o w i n g month, i . e . the m u l t i p l i e r i s 2.41 or 2.45. These r e s u l t s a l s o i l l u s t r a t e the obvious (although sometimes ignored) aspect of economic base a n a l y s i s that the s i z e of the estimated m u l t i p l i e r d e c l i n e s as the d e f i n i t i o n of the basic sector i s expanded. To f u r t h e r i n v e s t i g a t e the nature of the lagged adjustment processes between - f o r e s t i n d u s t r y unemployment and lumber p r i c e s , and between t o t a l or s e r v i c e s e c t o r unemployment and the f o r e s t i n d u s t r y ' s , a simple " p a r t i a l adjustment modal" was introduced. Assume U* t = A + B;X t + E l Where U*t i s the e q u i l i b r i u m l e v e l of unemployment i n one occupational group, i n month t , i f adjustment was immediate and c o s t l e s s , Ot i s • the measured unemployment i n that occupation, i n month t , -Xt i s the independent v a r i a b l e , observation f o r month t , and E1 i s a random e r r o r term, normally d i s t r i b u t e d with mean zero. 133 Because of the l a g s , only p a r t i a l adjustment occurs, such t h a t the d i f f e r e n c e between a c t u a l current and previous l e v e l s i s some f r a c t i o n (G) of the d i f f e r e n c e between the e q u i l i b r i u m current l e v e l and the previous l e v e l (with another random e r r o r term appended). 1 That i s , U - U t l = G.(U* t - U ^ + E2. Therefore, U = G.A + G.B.X + (1-G)-U ^ + ( E l + G.E2). Again, because of s e r i a l c o r r e l a t i o n , the data were transformed by the a u t o c o r r e l a t i o n c o e f f i c i e n t (estimated by the Cochrane-Orcutt technique) to " c l e a n " the e r r o r terms. Thus c o n s i s t e n t estimators could be d e r i v e d , t h i s time by,non-linear l e a s t squares e s t i m a t i o n techniques. Tables 13 and 14 present the r e s u l t s of so estimating t h i s model f o r Quesnel (13) and Prince George (14), t a k i n g d i f f e r e n t combinations of dependant and independent v a r i a b l e s . The estimated c o e f f i c i e n t of the lagged dependent v a r i a b l e (1-G) i s s t a t i s t i c a l l y s i g n i f i c a n t i n a l l but two of the equations. For example, Equation 1 of Table 13 i n d i c a t e s that logging unemployment responds n e g a t i v e l y to a change i n the lumber p r i c e index (as expected, although i t i s not s t a t i s t i c a l l y s i g n i f i c a n t ) and that the adjustment c o e f f i c i e n t (G) equals 1 - 0.345 or 65.5%. This can be i n t e r p r e t e d as meaning that only 65.5% of the response t h a t would occur i f adjustment was instantaneous and c o s t l e s s , takes * This i s the behavioural assumption on which the standard form of the p a r t i a l adjustment model i s based. Table 13. Distributed Lags Results - Quesnel. Estimated Coefficients and t- S t a t i s t i c s . Dependent Variable Constant Time (months) Summer Dummy Variable Winter Dummy Variable L.P.I. L.P.I. 1 month prior u1 * U2 ** Lagged Dependent Variable R 2 1. U (logging) 16.47 (1.27) 0.550 (3.51) -12.00 (2.05) -7.18 (1.18) -0.103 (0.82) 0.345 (3.73) .6985 2. U (processing) 29.93 (1.80) -0.190 (0.82) 2.73 (0.19) 6.37 (0.46) 0.000 (-) 0.209 (2.83) .6384 3. M 29.94 (1.80) -0.190 (0.82) 2.73 (0.19) 6.37 (0.46) 0.000 (— ) 0.209 .6384 4. 11 7.13 0.254 2.56 16.51 0 .459 0.310 .6904 ( 0.53) (0.96) (0.21) (1.32) f 2, ,55J 5- U (total) 151.40 (2.41) 1.42 (1.35) -31.80 (0.60) -57.79 (1.10) 0.917 ( 3.23) 0.446 (4.88) .7038 * U x = U (logging). ** U 2 = U (logging + milling). 951 significance CO _____ 99% significance (t-Statistics) Table 14. D i s t r i b u t e d Lags Results - Pr ince Gecrge. Estimated C o e f f i c i e n t s and t - S t a t i s t i c s . L . P . I . Dependent V a r i a b l e Constant 1. U ( logging) 76.85 (2.48) Time (months) 0.653 (1.76) Summer Dummy Var iab le -64.41 (4.05) Winter Dummy Var iab le -31.51 (1.38) L . P . I . 1 month p r i o r u2 --0.322 (1.09) Lagged Dependent V a r i a b l e 0.400 (4.53) .4372 2. U (processing) 4. 15.12 0.256 -32.97 (0.61) (0.82) (1.82) 14.96 0.2S5 -32.99 (0.61) (0.81) ( 1.81) 20.01 -1.49 -14.59 (0.92) (0.50) (0.83) 31.39 -0.007 (1. 72) (0.27) 31.38 (1.72) j5^ 7_7_ (2.68) -0.005 (0.19) 0.341 (3.25) 0.131 (1.69) 0.131 (1.69) 0.323 (3.99) .6491 .6490 .7200 5. U ( to ta l ) 669.2 (4.25) 0.334 (0.22) -255.6 (2.57) -44.44 (0.45) 1.055 (3.67) 0.428 (5.51) .7209 * 1^ = U ( logg ing) . * * U 2 = U ( logging + m i l l i n g ) 95% s i g n i f i c a n c e _ _ 99% s i g n i f i c a n c e (t-Statistias) CO Cn 136 place w i t h i n the same month. In Prince George, the r e s u l t (Table 14:1) of 60% suggests that unemployment i n logging responds a l i t t l e more slowly there to a change i n lumber p r i c e s . Equation 5 of Table 14 i n d i c a t e s t h a t a change of 100 i n the number unemployed i n logging + m i l l i n g would l e a d to an immediate change i n t o t a l unemployment of at l e a s t 106, with only 57% ( i . e . 1 - 0.428) of f u l l adjustment t a k i n g place w i t h i n the same month. -Economic base a n a l y s i s i s conceptually very simple although sometimes d i f f i c u l t i n p r a c t i s e because of problems i n d e f i n i n g the basic s e c t o r s . Moreover, the r e s u l t s may be a p p l i e d where i n a p p r o p r i a t e ; e.g. to a d i f f e r e n t region or t o one p a r t i c u l a r s e c t o r i n the economic base. 1 I t i s therefore e s s e n t i a l t h a t these r e s u l t s be e x p l i c i t l y q u a l i f i e d . F i r s t l y , they apply only w i t h i n the area served by each Canada Manpower o f f i c e . They are not r a t i o s of-numbers employed, but r e f l e c t changes i n the number of r e g i s t e r e d unemployed, over the 97 month period covered by the data; T h i r d l y , these r e s u l t s estimate marginal changes f o r p a r t i c u l a r occupational groups, whereas the standard economic base a n a l y s i s y i e l d s only an average r a t i o , which i s then assumed t o becommon to a l l basic s e c t o r s . For example, Equation 7 of Table 12 suggests that i n Prince George there i s a 1 An economic base study by Heed (1973) found a r a t i o of 2.4 between t o t a l employment w i t h i n twenty miles of P r i n c e George and employment i n a l l basic s e c t o r s (as defined by Reed). This f i g u r e was subsequently used by the Northern I n t e r i o r Lumber Sector of the Council of Forest I n d u s t r i e s to estimate the increase i n t o t a l employment' throughout B r i t i s h Columbia r e s u l t i n g from increased lumber and plywood sales to Japan over the next f i v e years. See Vancouver Sun x Sept. 16, 1975, p.23. •J 137 r e s i d u a l l e v e l of unemployment (1529 people) and th a t t o t a l unemployment a l s o responds to a marginal change i n the number unemployed i n logging and processing by a m u l t i p l e of 2.407, a f t e r two months. The i n t r o d u c t i o n of a pa r t i a l - a d j u s t m e n t (lag) process to the model has not p a r t i c u l a r l y c l a r i f i e d the postulated r e l a t i o n s h i p between t o t a l and fo'rest i n d u s t r y unemployment, except to confirm that the two are s i g n i f i c a n t l y c o r r e l a t e d and'that the adjustment process i s slow. •• This part of the study has focused on the nature and i n s t a b i l i t y of unemployment, with l i t t l e ' r e f e r e n c e t o the absolute l e v e l s of employment i n each sec t o r . U n f o r t u n a t e l y , the unemployment f i g u r e s (from Canada Manpower) cannot be d i r e c t l y compared with t o t a l employment as Canada' Manpower does not c o l l e c t such data. The only source of that i n f o r m a t i o n i s the 1971 Census (as shown i n Table 2), which uses an e n t i r e l y d i f f e r e n t geographical b a s i s . For example; on June 30, 1971, the Canada Manpower centre at Quesnel reported 15 unemployed i n Farming, while the census taken the same day i n d i c a t e s no-one i n the Quesnel enumeration areas was l i s t e d as a farm worker. Thus only very general comparisons between the census data on employment and the Canada Manpower data on unemployment, are j u s t i f i a b l e . 138 S t a b i l i t y Of P r o v i n c i a l Revenues, Since references to the s t a b i l i t y of the p r o v i n c i a l tax base appear i n much of the l i t e r a t u r e expounding the v i r t u e s of sustained y i e l d f o r e s t management,1 an i n v e s t i g a t i o n of the p r o p o s i t i o n that sustained y i e l d f o r e s t r y c o n t r i b u t e s to the s t a b i l i t y of government revenues seemed warranted. Figure 2a above i l l u s t r a t e d the v a r i a b i l i t y of logging a c t i v i t y i n the province during the past 30 years i n s p i t e of s u s t a i n e d y i e l d r e g u l a t i o n s and even-flow planning. Data compiled from the P r o v i n c i a l P u b l i c Accounts presented i n Table 15 and Fi g u r e s 1.3a and b, i l l u s t r a t e the i n s t a b i l i t y of p r o v i n c i a l revenues derived from •timber s a l e s , the logging tax and other l i c e n c e s , l e a s e s and fees a p p l i e d - f o r f o r e s t lands. For purposes of comparison, the crown revenues from mining a c t i v i t i e s f o r the same"12 years have been i n c l u d e d , and show considerable s t a b i l i t y (except f o r the i n t r o d u c t i o n of the new r o y a l t y / t a x a t i o n scheme of 1974/75). This i s despite the f a c t that one would expect mining a c t i v i t y , l i k e lumber production, to be c l o s e l y r e l a t e d to business c y c l e s and the production of c a p i t a l goods. At t h i s stage, i t i s only p o s s i b l e to speculate that the d i f f e r e n c e i n v o l a t i l i t y could be r e l a t e d t o market s t r u c t u r e - the s i z e * d i s t r i b u t i o n of f i r m s - and the nature of the export markets i n which production i s s o l d . Met revenues from Liquor A d m i n i s t r a t i o n , on the other hand, seem i n v a r i a n t to 1 See, f o r example, U.S. congress (1944) and Mulholland (1931). Table 15. Sources of Provincial Revenue 1964/5 - 1975/6 ($million). Year Timber Sales Logging Tax A l l Lands and Forests Mining Liquor Administration A l l Taxes Total Revenue % of Total from Lands § Forests 1964/65 39.830 9 .213 53 .706 34 .120 35 .455 282.263 452 .993 11.8 1965/66 46 .074 7 .080 58 .628 36 .369 41 .684 351.848 544 .686 10.8 1966/67 41 .090 6 .553 53 .616 42 .634 44 .856 406.059 727 .563 7.4 1967/68 34 .583 7 .988 49.157 38 .672 50 594 465.674 810 165 6.0 1968/69 55 033 10 425 74 621 45 637 56 055 486.769 963 794 7.8 1969/70 77 526 23 941 111 926 49 705 61 525 601.270 1169 222 9.6 1970/71 48 608 13 416 71 622 52 976 66 030 654.362 1286 545 5.6 1971/72 64 330 8 977 83 598 57 305 85 267 767.327 1462 717 5.7 1972/73 122 790 18 928 151. 580 53. 205 97 297 869.626 1667 218 9.1 1973/74 248. 443 23, 053 282. 771 62. 705 108. 622 1093.402 2108 880 13.4 1974/75 129. 545 44. 643 186. 788 37. 784 120. 300 1413.788 2625 724 7.1 1975/76* 35. 000 21. 000 68. 000 119. 700 136. 000 1592.300 2900. 100 2.3 S o u r c e : Public Accounts of B r i t i s h Columbia, Department of Finance, Victoria, B r i t i s h Columbia, 1964/65 to 1974/75. * Forecast from Clarkson, Gordon Report, as published in Vancouver Sun, February 21, 1976, p.14. I —r— i i i —•—i i i i l • 64/65 65/66 66/67 67/68 68/69 -.69/70 70/71 71/72 72/73 73/74 74/75 75/76 Figure 13a. British Columbia Revenues from Selected Sources: 1964/65 to 1975/76. 141 Figure 13b. British Columbia Revenues: 1964/65 to 1975/75 ($ Million). 142 the l e v e l of i n d u s t r i a l a c t i v i t y or the s t a t e of the p r o v i n c i a l economy, as one might expect f o r a consumption good. Except f o r the period 1972/73 to 1974/75, t h i s income has exceeded d i r e c t p r o v i n c i a l revenue from the s a l e of i t s f o r e s t s . While the Crown revenues from the Department of Lands and Forests have d e c l i n e d d r a m a t i c a l l y s i n c e 1973/74, the t o t a l revenue from a l l sources, and the revenues from personal, corporate, property and s o c i a l s e r v i c e s taxes•(Figure 13b) have continued to climb e x p o n e n t i a l l y . Thus the p r o p o r t i o n of government revenue d i r e c t l y derived from the s a l e of the province's f o r e s t wealth has been extremely e r r a t i c , g e n e r a l l y d e c l i n i n g from 11.8% i n 1964/65 t o 2.3% i n 1975/76, except f o r the boom year of 1973/74 when the r a t i o rose to 13.4%. While t h i s i s not to b e l i t t l e the i n d i r e c t c o n t r i b u t i o n from the f o r e s t i n d u s t r i e s using the resource, to the p r o v i n c i a l c o f f e r s , i t can be taken as evidence that the s a l e " o f timber (even on a sustained y i e l d basis) does not guarantee constant or p r e d i c t a b l e sources of f i n a n c i n g f o r other government programmes. 143 V. STRATEGIES TO STABILISE THE REGIONAL ECONOMY. The preceding chapter has shown that unemployment i n those occupations a s s o c i a t e d with the f o r e s t i n d u s t r y i s h i g h l y unstable, that t h i s i n s t a b i l i t y i s l a r g e l y due to changes i n the export p r i c e of lumber, and t h a t the i n s t a b i l i t y i s a m p l i f i e d throughout the r e g i o n a l economy p a r t i c u l a r l y where the f o r e s t i n d u s t r y forms the economic base of communities. Furthermore, i t has been shown that changes i n i n d u s t r i a l s t r u c t u r e i n response to t e c h n o l o g i c a l change, l o c a t i o n a l advantages and d i r e c t ( a l b e i t uncoordinated) government i n t e r v e n t i o n , have a l t e r e d the s t a b i l i t y , l o c a t i o n and amount of employment i n the f o r e s t i n d u s t r y . The B r i t i s h Columbia Forest Service and the f o r e s t r y p r o f e s s i o n g e n e r a l l y have argued that sustained y i e l d r e g u l a t i o n of f o r e s t s i s both necessary and s u f f i c i e n t to assure employment s t a b i l i t y , the permanence of communities and'the conservation of the resource. The f i r s t two of these claims have been shown to be unsubstantiated, while the t h i r d has been proven elsewhere (Haley, 1966 and Samuelson, 1974) t o be c o r r e c t but i n e f f i c i e n t . The Role-And L i m i t a t i o n s Of The B.C.F.S. In Regional ___________ And __________ I f community s t a b i l i t y i s s t i l l ' a n o b j e c t i v e ( i . e . , i f the problems th a t motivated past d i s c u s s i o n s are s t i l l of concern), the p e r t i n e n t questions are "what are the prospects of reducing 144 the i n s t a b i l i t y of employment?" and "what u s e f u l f u n c t i o n s could the B.C.F.S. perform now towards t h i s end?" The p o t e n t i a l f o r a s u c c e s s f u l c o n t r i b u t i o n has been apparent to many an a l y s t s . As Nagla (1971) wrote, ' "(The maximum u t i l i s a t i o n p o l i c y ) . . . places the p u b l i c f o r e s t a d m i n i s t r a t i o n of B.C. sguarely i n t o a p o s i t i o n towards which i t has been moving f o r two decades - that of d i r e c t economic planning of the fu t u r e of the r e g i o n a l f o r e s t r y s e c t o r . Resource p r i c i n g , product mix and ind u s t r y s t r u c t u r e are being d i r e c t l y manipulated through a t e c h n i c a l l y c o n t r o l l e d a l l o c a t i o n system f o r f o r e s t resources." * One s t r o n g l y s u b s t a n t i a t e d contention i s t h e r e f o r e , that c o n t r o l / i n f l u e n c e can be exerted by the B.C.F.S. through i t s impacts on ind u s t r y s t r u c t u r e . An a l t e r n a t i v e p r o p o s i t i o n which i s favoured as a r e s u l t of t h i s i n v e s t i g a t i o n , i s that the determinants of community s t a b i l i t y are l a r g e l y i n v a r i a n t to the p o l i c i e s and procedures- of the B.C.F.S. I t seems t h a t c u r r e n t concern should be d i r e c t e d towards understanding how and how much, these B.C.F.S. de c i s i o n s can impinge on the i n d u s t r y , and through i t on the r e g i o n a l economy and s o c i e t y , and what the other rele v a n t f o r c e s are. In t h i s t h e s i s , i t has been argued that the i n d u s t r y ' s s t r u c t u r e s u b s t a n t i a l l y a f f e c t s the l o c a t i o n and s t a b i l i t y of employment o p p o r t u n i t i e s , but many of the f a c t o r s i d e n t i f i e d here as being of major s i g n i f i c a n c e to the i n d u s t r i a l s t r u c t u r e are l a r g e l y beyond the c o n t r o l of the B.C.F.S. One such f a c t o r i s c ontinuing economies of s c a l e r e s u l t i n g from t e c h n o l o g i c a l i A s i m i l a r c o n c l u s i o n was presented by Haley (1971), p.2., 145 change that i n c r e a s e s the c a p i t a l i n t e n s i t y of wood conversion operations. The shape of the LRATC i s therefore discussed here with a view to determining whether any changes i n i t may c o n t r i b u t e to greater corporate concentration and/or employment s t a b i l i t y , and how the B.C. Forest S e r v i c e might r e a c t to such changes. I f the LRATC i s L-shaped as argued by Dobie (1971) 1 then there i s no maximum e f f i c i e n t m i l l s c a l e (or a t l e a s t B.C. m i l l s have not yet approached a point of s i g n i f i c a n t managerial or other diseconomies). This has important i m p l i c a t i o n s f o r i n d u s t r i a l o r g a n i s a t i o n . With an L-shaped LRATC curve f o r p l a n t s i n the i n d u s t r y , small m i l l s should be able to compete e f f e c t i v e l y and c o e x i s t with very l a r g e m i l l s or any others of intermediate s i z e , 2 with respect to production costs. However while t h i s seems to be so, there i s , s t r o n g evidence that managerial and marketing economies are also important and one could conclude t h a t i n the B.C. I n t e r i o r e s p e c i a l l y , a great deal more concentration yet w i l l occur to e x p l o i t managerial and marketing economies r a t h e r than production economies. I f the only c o n s t r a i n t i s raw m a t e r i a l supply, then sawmill operators could amalgamate c u t t i n g r i g h t s (as allowed i n the past) or 1 This i s i n con t r a s t to the evidence of Mead (196 6) and others t h a t the LRATC was 0-shaped and the maximum e f f i c i e n t s i z e f o r west coast U.S. m i l l s was 140 M f.m.b. per 8 hour s h i f t . 2 I t must be noted that minimum or maximum e f f i c i e n t s i z e f o r a f i r m or plant i n the i n d u s t r y i s not• merely an engineering f u n c t i o n , but r a t h e r a f u n c t i o n of the p a r t i c u l a r context -l o c a t i o n , market s t r u c t u r e , supply c o n s t r a i n t s and e s p e c i a l l y the i n s t i t u t i o n a l framework - w i t h i n which the f i r m operates. 146 sub-contract f o r l o g s u p p l i e s , i f c u t t i n g r i g h t s are non-transferable. That i s , f u n c t i o n a l i n t e g r a t i o n between f i r m s r a t h e r than v e r t i c a l i n t e g r a t i o n w i t h i n firms could occur. In d i s c u s s i n g these economies i n production, only plant s i z e has been considered. Once one allows f o r m u l t i - p l a n t f i r m s - t o e x p l o i t managerial or marketing economies - then greater corporate concentration should be expected; There i s -a secondary f a c t o r which may c o n t r i b u t e to a changing i n d u s t r i a l s t r u c t u r e which i s a l s o beyond the i n f l u e n c e of the B.C.F.S. I t has been argued t h a t corporate c o n c e n t r a t i o n i s necessary to accumulate the very l a r g e c a p i t a l requirements f o r new i n t e g r a t e d conversion complexes (or pulp m i l l s ) . The r a p i d i n f l a t i o n of c o n s t r u c t i o n costs has l e d some s e c u r i t i e s a n a l y s t s to p r e d i c t f u r t h e r concentration i n the f o r e s t i n d u s t r i e s . This c o n c l u s i o n r e s t s on the a s s e r t i o n t h a t f o r e s t companies should be, but pr e s e n t l y are not, generating adeguate p r o f i t s from curre n t operations, to meet the c a p i t a l c o s t s of another (new) venture. The President of Canadian Forest Products (quoted by J. Lyon, i n the Vancouver Sun, November 14, 1975) argued t h a t "The f o r e s t i n d u s t r y , because of i t s high degree of inherent r i s k , must be permitted to achieve a rate of retu r n s u b s t a n t i a l l y greater than t h a t of regulated i n d u s t r y which has l i t t l e or no d i r e c t competition and which i s e s s e n t i a l l y low r i s k ... C.F.P. agrees ... that an absolute minimum average r a t e of retu r n should be a t l e a s t 11% a f t e r taxes." Three comments seem warranted. F i r s t l y , t h i s argument makes the f o r e s t i n d u s t r y appear l i k e a regulated u t i l i t y , such as B.C. Telephone. I t i s true that p r o f i t s are regulated i n a r a t h e r broad sense, through stumpage a p p r a i s a l , although there may be 147 some debate about the adequacy or accuracy of the a p p r a i s a l data. Operation on a cost plus basis has been known to f r e q u e n t l y lead to gross i n e f f i c i e n c i e s . Secondly, i t assumes that the government, or the B.C.F.S., has s u b s t a n t i a l c o n t r o l over the p r o f i t a b i l i t y of the i n d u s t r y . This i s c o r r e c t , but the c o n t r o l i s c e r t a i n l y not complete. F i n a l l y , there i s a widespread presumption that the r a t e of r e t u r n must be high enough f o r the maintenance of investments and t o encourage and provide f o r expansion. However, i t could be argued that the r a t e of r e t u r n on investment i n the f o r e s t i n d u s t r y i s what i t i s , and that a low r a t e of return i s a v a l i d market s i g n a l t h a t the i n d u s t r y i s too b i g or i n e f f i c i e n t . There seems to be only sparse evidence to support the statement by Nagle (1971) quoted above, at the l e v e l of the i n d i v i d u a l f i r m . The analyses presented here support the view suggested i n Chapter 3 that any i n d u s t r i a l and employment s t a b i l i t y which does e x i s t - i s due to corporate c o n c e n t r a t i o n and" a r e a l agglomeration i n the wood-using i n d u s t r i e s - a world wide trend - and t h e r e f o r e l a r g e l y independent of B.C.F.S. a c t i o n s . I t must be noted again t h a t the s t a b i l i t y stemming from i n d u s t r i a l c o n c e n t r a t i o n i s d i f f e r e n t to that envisaged i n the sustained y i e l d l i t e r a t u r e . The short term s t a b i l i t y of employment may be at the expense of long run s u r v i v a l of s m a l l towns and v i l l a g e s , which wane as t h e i r l o c a l s a w m i l l s are r e l o c a t e d . A f t e r c o n s i d e r i n g the e f f e c t s of p o l i c y and t e c h n o l o g i c a l change on economies i n t e r n a l to a f i r m engaged i n the f o r e s t i n d u s t r y , one should turn to those e f f e c t s e x t e r n a l to the f i r m 148 and the- i n d u s t r y . I t i s then p o s s i b l e to gain a precise r e a l i s a t i o n of the r o l e that f o r e s t p o l i c y could play i n the o v e r a l l schema - of r e g i o n a l development and s t a b i l i t y . The most s i g n i f i c a n t f a c t o r s seem to be: labour f o r c e c h a r a c t e r i s t i c s , t r a n s p o r t routes and a l l other l o c a t i o n a l f a c t o r s , the o b j e c t i v e s and e f f o r t s of a l l other agencies and the c o o r d i n a t i o n between those agencies. 1 While many would agree with Lewis (1974, p.3), "Because p u b l i c f o r e s t s cover most of the usable land throughout the province, f o r e s t p o l i c y i s a c r i t i c a l i n f l u e n c e on the pattern of economic and s o c i a l development... P o l i c i e s a f f e c t i n g forest-development determine i n l a r g e degree the pattern- of development of access, i n f r a s t r u c t u r e , other e x t r a c t i v e i n d u s t r i e s and economic development g e n e r a l l y . . . " i t may be necessary to emphasise that f o r e s t p o l i c y i s only one of the re l e v a n t f a c t o r s . T h e c a u s a l l i n k between f o r e s t p o l i c y and r e g i o n a l development suggested above may be c a l l e d i n t o g uestion, given that so many other agencies are n e c e s s a r i l y in v o l v e d . Perhaps there i s , or could be, a coordinated approach to r e g i o n a l development and/or community*stability r a t h e r than a l i n e a r sequence beginning with the B.C.F.S., with subsequent * I t should be noted that there are at l e a s t eleven other government agencies involved i n t h i s subject i n t h i s r e g i o n , v i z . ( P r o v i n c i a l ) B.C. R a i l , B.C. Hydro and Power, Department of Economic Development, Dept. of Highways, Dept. of Mun i c i p a l A f f a i r s , Dept. of Recreation and Conservation; (Federal) Dept. of Regional Economic Development, Dept. of Transport, Canada Manpower; and ( l o c a l ) M u n i c i p a l i t i e s and Regional D i s t r i c t s . 149 compromises, patch ups, e t c . 1 In c o n s i d e r i n g the e f f o r t s of the B.C. Forest S e r v i c e , i t must be acknowledged that the tasks of promoting r e g i o n a l development and o f f e r i n g employment t o s c a t t e r e d l o c a l populations appears to have f a l l e n to the B.C.F.S. by d e f a u l t . While the numerous agencies l i s t e d above have bean somewhat r e t i c e n t i n approaching the t a s k s , the Forest Service approached them c o n s c i e n t i o u s l y •••-but with r a t h e r outmoded concepts and t e c h n i c a l , resource-oriented s t r a t e g i e s . However, now t h a t these other agencies e x i s t and may a c t i v e l y - o f f e r new e x p e r t i s e , there i s no longer any need f o r the B.C.F.S. to claim an e x c l u s i v e r o l e i n r e g i o n a l development or a t t a i n i n g community s t a b i l i t y . The n e c e s s i t y of c o o r d i n a t i n g a l l the d i f f e r e n t agencies and i n d u s t r i e s which c o n t r i b u t e to the economic base of t h i s region ( l i k e any other) and the towns w i t h i n i t , has been emphasised by one of the most experienced r e g i o n a l planners i n the B.C. I n t e r i o r . "In the l a s t decade we have seen i n the Peace River area and Rocky Mountain t r e n c h , development of a number of small communities, 1 The Northern Development Concept, r e f e r r e d t o by G i l g a n (1974) in v o l v e s doubling the population of two or three towns, c o n s t r u c t i n g hundreds' of miles of roads and r a i l s p u r s, and l o c a t i n g four l a r g e new sawmills. The basic reason i s t o thereby generate wood chips l o c a l l y , t o improve the poor f i n a n c i a l performance of two pulp m i l l s c u r r e n t l y using roundwood. The pulp m i l l s were o r i g i n a l l y s i t e d i n t h a t area p r i m a r i l y because i t was f e l t t hat the very l a r g e volume of low grade timber a v a i l a b l e l o c a l l y should be used. Apparently i t was assumed that a l a r g e untapped f o r e s t resource could provide the stimulus f o r r e g i o n a l development here, as i t had elsewhere. Subseguent events suggest that the f o r e s t was marginal as a commercial resource, despite i t p h y s i c a l extent. See W i i l i s t o n (1971b, p.14) and Gilgan (1974, p. 20). 150 sometimes v i r t u a l l y s i n g l e i n d u s t r y based, of such small s i z e as to be uneconomic i n terms of f u l l c u l t u r a l and s o c i a l development.. .Apart from the waste of the unplanned development i n soma of these communities, the e a r l y i n t e g r a t i o n of the economic bases f o r these communities may have seen f a r r i c h e r and more s t a b l e communities of l a r g e s i z e i n d i f f e r e n t l o c a t i o n s and fewer i n number.Imagine how s t a b l e a s m a l l p r o v i n c i a l c i t y would r e s u l t from the s o l i d a g r i c u l t u r a l b a s i s with a d i v e r s i t y of gas scrubbing and o i l r e f i n i n g , r a i l r o a d t r a n s p o r t a t i o n , and supply f a c i l i t i e s f o r hydro c o n s t r u c t i o n . " 1 I t i s against t h i s type of background and i n the knowledge th a t development with s t a b i l i t y i s more l i k e l y to stem from d i v e r s i t y than from f o r e s t y i e l d r e g u l a t i o n , t h a t the Forest S e r v i c e i n p a r t i c u l a r should be re-examining i t s r o l e , even i t s o b j e c t i v e s , i n promoting r e g i o n a l development or " s t a b i l i s i n g " e x i s t i n g (and new?) communities. I t should be superfluous to point out that B.C.F.S. i s not synonymous with "Department of Regional Economic Development with Employment S t a b i l i t y " . The f a c t t h a t the f o r e s t i n d u s t r y i s extremely important to the p r o v i n c i a l economy or that i t accounts f o r 65% of export earnings, i n no way i m p l i e s that the Forest Service c u r r e n t l y has a mandate or the e x p e r t i s e to d i r e c t the l o c a t i o n o f r a i l l i n e s and highways, to s h i f t and create towns, to f o l d up v i l l a g e s or t o prop up v i l l a g e s that i n e v i t a b l y w i l l c o l l a p s e . However, i t seems to be c r u c i a l to the p u b l i c i n t e r e s t t h a t , f o r as long as the f o r e s t s e c t o r dominates tha P r o v i n c i a l economy, the Forest Service attempt to e x p l i c i t l y recognise the i Parker (1968) p.20. 151 r e g i o n a l s o c i a l and economic i m p l i c a t i o n s of any a c t i o n s which d i r e c t l y or i n d i r e c t l y a f f e c t timber flows or the s t r u c t u r e , s i z e , l o c a t i o n and concentration of elements of the f o r e s t i n d u s t r y . 1 This i s because -of the s o c i a l ( p o l i t i c a l and economic) repercussions from any in d u s t r y changes induced. Even 9 years ago i t was s t a t e d : 2 "By d e f a u l t of other c o n s i d e r a t i o n s , we have depended upon' t e c h n i c a l people not only t o manage our f o r e s t resources, but a l s o to s e t the goals of f o r e s t p o l i c y . As a r e s u l t , our o b j e c t i v e s are t e c h n i c a l ones, and our c r u c i a l d e c i s i o n s are made according to t e c h n i c a l c r i t e r i a . - " I t may be expected that the current Royal Commission w i l l attempt to remedy t h i s omission by recommending a r e t u r n to the s o c i a l o b j e c t i v e s towards which resource management i s or should be d i r e c t e d . The Prospects For S t a b i l i t y . The above d i s c u s s i o n s have concluded that for a number of reasons, the sa w m i l l i n g i n d u s t r y e s p e c i a l l y i s becoming more concentrated c o r p o r a t e l y and a r e a l l y (with fewer l a r g e r p l a n t s l o c a t e d at agglomeration points) and should t h e r e f o r e be more 1 This same concern has been r e c e n t l y expressed and addressed by Dr. Pearse and some p a r t i c i p a n t s at the Royal Commission hearings. The P r o d u c t i v i t y Committee of B.C.F.S, began such an i n v e s t i g a t i o n l a s t year. 2 Pearse (1970) p.287. This paper was o r i g i n a l l y presented to the Canadian Fo r e s t r y A s s o c i a t i o n of B.C. i n 1967. 152 s t a b l e i n i t s seasonal and annual production and employment. While these c o n d i t i o n s are g e n e r a l l y favorable to community s u r v i v a l (of the growth centres and t h e i r s a t e l i t e s only) and short term s t a b i l i t y , there are a l s o consequences such as a reduction i n the labour force required per u n i t output and a reduction i n competition f o r labour or wood s u p p l i e s . Therefore, while the f a c t o r s c o n t r i b u t i n g most to increased employment s t a b i l i t y over the l a s t twenty years have been corporate and a r e a l c o n c e n t r a t i o n , the e f f e c t of an e r r a t i c a l l y f l u c t u a t i n g lumber demand appears to have been g r e a t e r , l e a v i n g the observed i n s t a b i l i t y i n ^ f o r e s t i n d u s t r y and r e l a t e d employment. There must be inventory problems as long as market c o n d i t i o n s continue to f l u c t u a t e w i d e l y . 1 Whenever the inventory or cash flow problems become s u b s t a n t i a l , • employment s t a b i l i t y i s adversely a f f e c t e d . Consequently,- t h i s section of the t h e s i s examines the prospects and s t r a t e g i e s f o r a t t a i n i n g greater s t a b i l i t y of employment and encouraging permanence of communities, on the assumption that these are s t i l l p a r t of the set of p o l i t i c a l l y accepted s o c i a l o b j e c t i v e s . While the p u r s u i t of community s t a b i l i t y has been widely proclaimed, to j u s t i f y sustained y i e l d and y i e l d r e g u l a t i o n , i t i s being recognised that the "problem" i s the lumber market, as documented i n the preceding chapter. This has been so ever s i n c e production i n the European context of r e g i o n a l s e l f - s u f f i c i e n c y 1 There i s a l s o the p r o b a b i l i t y that the accumulation of i n v e n t o r i e s during slumps may l a t e r suppress market recovery. This seems to be happening i n the B.C. market pulp i n d u s t r y . 153 was r e p l a c e d i n the B . C . con tex t by p r o d u c t i o n f o r e x p o r t (of b a s i c c o n s t r u c t i o n lumber p a r t i c u l a r l y ) . Yet while f o r e s t e r s f r e q u e n t l y a s s e r t t h a t y i e l d r e g u l a t i o n and a s u r e t y of wood supp ly b r i n g i n d u s t r i a l and community s t a b i l i t y , on ly r a r e l y , many years ago , has a m i l l had to c l o s e because o f l a c k of wood s u p p l y . I t seems t o have always been market c o n d i t i o n s which have l e d to c l o s u r e s and booms i n B r i t i s h Columbia s a w m i l l i n g ; 1 S i m u l t a n e o u s l y , changes i n t r a n s p o r t a t i o n rou tes and t e c h n o l o g y and the s t a t e of the o v e r a l l economy have d i c t a t e d abandoning some towns and expanding o t h e r s . . . There i s a p o s s i b i l i t y t h a t the g e n e r a l i n s t a b i l i t y i n f o r e s t i n d u s t r y p r o d u c t i o n ( induced by exogenous changes such as the U .S . mortage r a t e , b u i l d i n g code r e v i s i o n s i n J a p a n , U . S . P r e s i d e n t i a l e l e c t i o n s or the r a t e o f f a m i l y f o r m a t i o n i n the U . S . ) , has been a r e t a r d i n g i n f l u e n c e on the o v e r a l l r e g i o n a l / p r o v i n c i a l development p r o c e s s . T h i s m e r i t s s e r i o u s c o n s i d e r a t i o n . Without g e t t i n g e m b r o i l e d i n the realm o f s o c i a l d e c i s i o n making, i t i s p o s s i b l e tha t development path B i s s o c i a l l y p r e f e r a b l e t o path A , i n F i g u r e 1 4 , 2 i . e . t h e c l a s s i c growth r a t e v e r s u s s t a b i l i t y t r a d e - o f f . However, i t has been suggested i n some of the development l i t e r a t u r e tha t i f major 1 T h i s was the answer g e n e r a l l y g iven to the c u r r e n t B o y a l Commiss ion , when i n d u s t r y r e p r e s e n t a t i v e s ware q u e r i e d r e g a r d i n g the boom-bust c y c l e s and s e c u r i t y of wood s u p p l y . 2 Path A may i n v o l v e very r a p i d i n c r e a s e s i n f a c t o r c o s t s or s e c t o r a l i n f l a t i o n a r y p r e s s u r e s , d u r i n g the boom y e a r s and the s o c i a l c o s t s of unemployment (of l a b o u r and a l l o ther f a c t o r s ) d u r i n g the s lumps. 154 F i g u r e 14. A l t e r n a t i v e Growth Paths. 155 new i n v e s t m e n t s a r e be ing d i s c o u r a g e d because of t h i s -v o l a t i l i t y , then an even more r a p i d , more s t a b l e p a t h , C , would be a t t a i n a b l e i f o n l y the b a s i c i n s t a b i l i t y c o u l d be " c o r r e c t e d " or dampened. The Pa ley Commission ( c i t e d by S c o t t , 1972, p.90) noted a p a r t i c u l a r i n s t a n c e o f t h i s i n the mining i n d u s t r y . "The knowledge tha t m a t e r i a l s are h y p e r s e n s i t i v e t o even s m a l l changes i n the b u s i n e s c y c l e makes i n v e s t o r s e x t r a c a u t i o u s i n s t a r t i n g a p r o j e c t , p a r t i c u l a r l y i n m i n e r a l s , t h a t may promise good p r o f i t s when undertaken b u t , s e v e r a l years l a t e r when i t comes i n t o s t r o n g p r o d u c t i o n , may f i n d a market i n which p r i c e s a re s c r a p i n g bottom. T h i s brake on e x p a n s i o n , the c a p i t a l e x p e n d i t u r e wasted i n shutdowns and b u i l d ups , the a c t u a l l o s s o f inground r e s e r v e s th rough d e p r e s s i o n , n e g l e c t of mines , a l l add up t o lower p r o d u c t i o n and h i g h e r c o s t s than would be expected wi th more s t a b l e markets and p r i c e s . " More g e n e r a l l y , i t may be c o n c l u d e d t h a t any e f f o r t s t o remove i n s t a b i l i t y may be p r o p u l s i v e to economic development by removal o f investment u n c e r t a i n t y . Such e f f o r t s c o u l d a v e r t the c i r c u l a r dilemma o f the p r o v i n c i a l o r r e g i o n a l economy be ing t i e d t o a s i n g l e i n d u s t r y which i s h i g h l y u n s t a b l e , thereby p r o v i d i n g d i s i n c e n t i v e s t o new i n d u s t r y with the r e s u l t tha t i t remains a s i n g l e i n d u s t r y (undeveloped) economy.* I t would be very d i f f i c u l t to gauge how much," i f a t a l l , B r i t i s h C o l u m b i a ' s p r o s p e c t s are b e i n g (or have been) r e t a r d e d because of the overwhelming r o l e o f the ( v o l a t i l e ) f o r e s t i n d u s t r y i n the p r o v i n c i a l economy, but the p o s s i b i l i t y shou ld not be i g n o r e d . 156 Sh2£t run s t a b i l i t y . . . I t has been argued i n t h i s t h e s i s that short term employment i n s t a b i l i t y i n most towns 1 i n the North C e n t r a l I n t e r i o r of B r i t i s h Columbia i s caused by exogenous changes i n the export p r i c e of lumber. I f i t i s p o s s i b l e to determine the sources of i n s t a b i l i t y i n the r e g i o n a l economy by s u c c e s s i v e l y r e t r a c i n g the e f f e c t s , some b u f f e r s could p o s s i b l y be interposed at those stages where they could be most e f f e c t i v e . Once the sources of i n s t a b i l i t y have been determined and accepted, four general s t r a t e g i e s i n response to economic i n s t a b i l i t y i n the Northern I n t e r i o r , can be proposed; 1. l a i s s e z f a i r e , the predominant approach at present, 2. l i m i t e d government i n t e r v e n t i o n to cope with the more s e r i o u s consequences of i n s t a b i l i t y , 3. the establishment of an agency which would bu f f e r or absorb the exogenously induced f l u c t u a t i o n s i n demand f o r B.C. f o r e s t products, and ii, d i v e r s i f i c a t i o n of the p r o v i n c i a l economy and r e o r g a n i s a t i o n of the i n d u s t r y and i t s product marketing so that the t o t a l demand f o r the products of the region does not f l u c t u a t e as much as at present. The f i r s t s t r a t e g y i s a u t o m a t i c a l l y unacceptable i f one has defined r e g i o n a l economic i n s t a b i l i t y t o be a problem of s o c i a l and p o l i t i c a l concern. The second has been introduced on a small 1 This may seem a broad g e n e r a l i s a t i o n from an a n a l y s i s of only two f o r e s t i n d u s t r y centres. However, while these may not be t y p i c a l of a l l the settlements i n the r e g i o n i n terms of f u n c t i o n , s i z e or i n d u s t r i a l s t r u c t u r e , Prince^ George and Quesnel provide minimum estimates of the e f f e c t . In the smaller towns with smaller l o c a l l y owned and financed operations, the impacts could be g r e a t e r . Prince George and Quesnel do of course account f o r a large component of the region's t o t a l production. See Table 6. 157 s c a l e by Federal agencies such as Canada Manpower and the Department of Regional Economic Expansion, with programmes to f a c i l i t a t e adjustment to the fortunes of a r e g i o n a l economy. 1 The t h i r d s t r a t e g y might i n c l u d e a marketing agency, a guaranteed reserve p r i c e scheme or bank guarantees a g a i n s t the value of i n v e n t o r i e d lumber. However a l l these are i n s t i t u t i o n a l changes or i n t e r v e n t i o n s , i n what now i s a freewheeling competitive market f o r lumber. This a u t o m a t i c a l l y excludes them from c o n s i d e r a t i o n i n the minds of many people i n the i n d u s t r y . S t i l l , t h e - f a c t s ' a r e : -A . The whole i n d u s t r y i s basedon and r e l i a n t upon one giant government i n t e r v e n t i o n i n s u p p l y . 2 Wood i s a l l o c a t e d without competitive bidding, a new m i l l ' s l o c a t i o n i s s u b j e c t to government d i r e c t i o n and c e r t a i n t r a n s p o r t charges are absorbed by the Forest S e r v i c e through the stumpage a p p r a i s a l system and the wood chip d i r e c t i o n p o l i c y . B. The product market i s s e r i o u s l y a f f e c t e d by a c a p i t a l market i m p e r f e c t i o n , i n that banks r a r e l y lend money to cover a sawmill's operating c o s t s , despite the s e c u r i t y of thousands of d o l l a r s worth of d r i e d lumber being produced. Bankers apparently do not accept t h a t the lumber market w i l l recover c y c l i c a l l y from each slump. 1 For example, some Canada Manpower Centres have found employment i n northern Alberta f o r those displaced from jobs i n c o n s t r u c t i o n and t r a n s p o r t a t i o n i n the North C e n t r a l I n t e r i o r of B.C. F i n a n c i a l a s s i s t a n c e i n r e l o c a t i n g or otherwise a d j u s t i n g to changes could be provided. 2 Again, see Haley (1971), Lewis (1974) and Nagle (1971). 158 C. Even i f there were p e r f e c t markets f o r a l l f a c t o r s , i f i t i s deemed that major f l u c t u a t i o n s i n l o c a l employment are undesirable, that i s presumably grounds f o r i n t e r v e n t i o n . 1 Since one of the foundations f o r government i n t e r v e n t i o n through y i e l d c o n t r o l was (and a l l e g e d l y s t i l l i s ) s t a b i l i t y of incomes and employment, and since t h i s i s not achieved while lumber s a l e s are e r r a t i c and v o l a t i l e , lumber market i n t e r v e n t i o n seems at l e a s t as - j u s t i f i a b l e as the e x i s t i n g r e g u l a t i o n of s u p p l y . 2 That i s , s t a b i l i t y of production and employment might be obtained by an agency which would s t o c k p i l e i n v e n t o r i e s during depressed market periods, f o r r e s a l e l a t e r . The c a p i t a l gains of so doing could be returned to any producers who v o l u n t a r i l y - p a r t i c i p a t e i n such a guaranteed reserve p r i c e scheme. In e f f e c t , t h i s i s a method of circumventing the short term l i g u i d i t y problems of the smaller operations. * 1 Despite the f a c t t h a t marketing agencies have a very poor r e p u t a t i o n with Canada's p u b l i c , they seem t o have helped producers s t a b i l i s e production planning and incomes. The comparison between a g r i c u l t u r e and f o r e s t r y i s noteworthy. Both have e l a s t i c product demand curves, face world commodity p r i c e s and there are concerns f o r r u r a l s t a b i l i t y , f o r example. Yet, as waggener (1969) noted, a g r i c u l t u r e opted f o r p r i c e s t a b i l i t y long ago, while f o r e s t e r s chose g u a n t i t y s t a b i l i t y (sustained y i e l d ) as an i d e a l . 2 There i s no r e a d i l y a v a i l a b l e i n f o r m a t i o n on employment i n s t a b i l i t y i n l o g g i n g or m i l l i n g f o r B r i t i s h Columbia operations unconstrained by allowable cut maxima and minima. However elementary micro-economic theory would argue t h a t the marginal cost of labour and other f a c t o r s r i s e s during a boom period, while the marginal revenues d e c l i n e , {and v i c e versa during poor times). This e f f e c t alone should have some e f f e c t i n dampening price-induced employment f l u c t u a t i o n s . Some comparisons might be made with the southeast U.S. See Anderson (1974) . 159 From the trade j o u r n a l s , news reports and B r i e f s t o the Royal Commission,' i t seems that i t i s the _edium-to-large independent s a w m i l l e r s , q u i t e numerous i n the I n t e r i o r , who regard themselves as unfettered r i s k - t a k i n g entrepreneurs who most v o c i f e r o u s l y r e j e c t "government i n t e r v e n t i o n " i n attempts to achieve " s t a b i l i t y " . There seems to be a paradox here, as on one hand they demand s p e c i a l c o n s i d e r a t i o n and a t t e n t i o n from the government because of the b e l i e f (quite accurate i n many cases) that they form the economic backbone of the r e g i o n . Yet on the other hand, they seem to refuse t o recognise the e x t e r n a l d i s a m e n i t i e s of a l l o w i n g the f o r e s t i n d u s t r y to "free-wheel". They appear to accept a la r g e f o r e s t i n d u s t r y m u l t i p l i e r e f f e c t i n good times, but have d i f f i c u l t y i n accepting t h a t i t works i n the opposite d i r e c t i o n , i n hard times. I f an agency or marketing board i s unacceptable to the i n d u s t r y and/or B r i t i s h Columbians g e n e r a l l y , there may be d i f f e r e n t approaches t o reducing the short run i n s t a b i l i t y a s s o c i a t e d with the export demand f o r f o r e s t products. One p a r t i a l s o l u t i o n at the l e v e l of the i n d i v i d u a l f i r m s , i s an experienced, widespread or aggressive marketing team. This would generally be a v a i l a b l e only t o those l a r g e r scale or v e r t i c a l l y i n t e g r a t e d f i r m s which have the f i n a n c i a l support to be able to a f f o r d such a s e r v i c e . Thus while the Shelton Cooperative 160 Sustained Y i e l d U n i t 1 has been acclaimed as a success, p a r t i c u l a r l y i n that year to year f l u c t u a t i o n s i n employment have been very low despite market c o n d i t i o n s , t h i s can s c a r c e l y be a t t r i b u t e d 1 t o f o r e s t management alone. I t was recognised that "employment was supported by a r e s o u r c e f u l marketing e f f o r t , by the d i v e r s i t y of production and by exports s o l d through Simpson I n t e r n a t i o n a l " . 2 . I t seems from a general survey of " s u c c e s s f u l " or " s t a b l e " m i l l operations that i t i s the aggressiveness of marketing coupled with managerial e x p e r t i s e that has s t a b i l i s e d employment, r a t h e r than even flow or any other y i e l d r e g u l a t i o n . 3 A t h i r d method of b u f f e r i n g lumber market f l u c t u a t i o n s has a more widespread a p p l i c a t i o n . The advent of the commodity f u t u r e s market f o r standard grades of lumber and plywood was expected to c o n t r i b u t e to s t a b i l i t y of production, by p r o v i d i n g a b u f f e r or "hedge" f o r producers. However, i t seems t h a t very few members of the I n t e r i o r f o r e s t i n d u s t r y a v a i l themselves of 1 This was e s t a b l i s h e d at Shelton, Washington, under the Sustained Y i e l d Forest Management Act {U.S. Congress, 1944) i n 1947 "to p r o v i d e c o n t i n u o u s t r e e crops under mu l t i p l e - u s e management as s t a b i l i t y f o r communities served by the U n i t " . __eo_le Land and Trees_ 1970, p. 2.) 2 "The year of the b i g E" i n _e_>_le_ Land and „___§_••• (1970), p. 3. 3 Haley (1971, p.4) s i m i l a r l y concluded that i t was managerial production and marketing economies that were the basis of the "success" (on various c r i t e r i a ) of the Tree Farm Licence system i n B r i t i s h Columbia . 161 the hedge, p r e f e r r i n g i n s t e a d t o absorb the r i s k s t h e m selves. 1 There i s an i n t e r e s t i n g prospect that the a v a i l a b i l i t y of lumber f u t u r e s c o u l d p a r t i a l l y a l l e v i a t e the c a p i t a l market i m p e r f e c t i o n noted t h r e e pages e a r l i e r . I t has - been o b s e r v e d 2 t h a t some U.S. bankers sere prepared to advance up to 90% of the value of g r a i n i n v e n t o r i e s which were hedged by commodity f u t u r e s c o n t r a c t s . In comparison, the customary f i g u r e f o r i n v e n t o r i e s whose value s were not thus pr o t e c t e d was 60%. I f t h i s p r a c t i c e spread to B r i t i s h Columbia and the f o r e s t i n d u s t r y , producers engaging i n commodity f u t u r e s t r a n s a c t i o n s would not only have a reserved f u t u r e p r i c e t o s e l l a t , but would a l s o be able t o borrow more a g a i n s t any unsold p r o d u c t i o n h e l d i n i n v e n t o r i e s d u r i n g a depressed market p e r i o d . One must r e a l i s e t h a t these are some of the few responses that the f o r e s t i n d u s t r y i n B r i t i s h Columbia can make t o a d j u s t t o exogenous changes. However, as Lewis (1974) emphasised, there are many other determinants of the s t a t e of B.C.'s f o r e s t economy - completely exogenous to the p r o v i n c i a l economy but perhaps even more important. Amongst t h e s e ' would be t a r i f f agreements, f o r e i g n exchange • r a t e s and s h i p p i n g r a t e s . For example, l e g i s l a t i o n p r o h i b i t i n g the use of f o r e i g n s h i p p i n g f o r 1 A few of the l a r g e s t f o r e s t companies i n B r i t i s h Columbia do trade i n lumber f u t u r e s but some s e n i o r e x e c u t i v e s have suggested t h a t t h i s i s p r i m a r i l y f o r s p e c u l a t i v e purposes, r a t h e r than i n search of p r o d u c t i o n s t a b i l i t y . There i s some d i s s a t i s f a c t i o n amongst the mid-sized f i r m s who f e e l t h a t " o u t s i d e r s " with l a r g e s p e c u l a t i v e investments can s u b s t a n t i a l l y a f f e c t the commodity f u t u r e p r i c e s . 2 Business Weekx March 15, 1976, p.57. 162 f o r e s t - products from B.C. p o r t s , i n order to f o s t e r a n a t i o n a l s h i p p i n g i n d u s t r y , c o u l d v i r t u a l l y e l i m i n a t e B r i t i s h Columbia producers from e a s t e r n U.S. markets, under present c o n d i t i o n s . Sales of lumber to the U.K. are d r a m a t i c a l l y a f f e c t e d by the U.S.S.B.'s lumber s a l e s to a c g u i r e f o r e i g n exchange, perhaps because of a bad wheat harvest! world market c o n d i t i o n s w i l l c ontinue to f l u c t u a t e widely and e r r a t i c a l l y i n both supply and demand. B r i t i s h Columbia o b v i o u s l y cannot c o n t r o l i n t e r n a t i o n a l trade i n lumber, s i n c e i t produces approximately s i x percent of the world's annual•output, but t h e r e i s no suggestion t h a t i t needs t o . A c a r e f u l l y managed marketing agency might b u f f e r the exogenous shocks and so i n s u l a t e the B.C. economy, i . e . , e s t a b l i s h a hedge. However, given t h a t the f o r e s t i n d u s t r y has been r e l u c t a n t or f i n a n c i a l l y unable t o take advantage of the f u t u r e s market to hedge, the prospects f o r success o f such an i n s t i t u t i o n as t h i s must be d o u b t f u l . -In summary, the t h i r d s t r a t e g y i s to b u f f e r the exogenously induced changes in"demand. Those f i r m s with strong f i n a n c i a l backing can a f f o r d some i n v e n t o r y b u f f e r i n g and can o f t e n a l s o r e l y on strong s a l e s promotion networks; However, f o r the many independent and/or f i n a n c i a l l y c o n s t r a i n e d f o r a s t companies i n B r i t i s h Columbia, an o r g a n i s a t i o n capable of a b s o r b i n g or d i s p e r s i n g the market r i s k and storage c o s t s of h o l d i n g i n v e n t o r i e s during depressed markets seems necessary. Commodity f u t u r e s markets d i s p e r s e the r i s k very widely between many i n d i v i d u a l s p e c u l a t o r s and could guarantee a c e r t a i n p r i c e t o the producer f o r h i s f u t u r e p r o d u c t i o n . In t h i s way, i t could induce g r e a t e r short run s t a b i l i t y of production and employment. 1 6 3 However, f o r a number of reasons, t h i s has not been s i g n i f i c a n t l y used i n B r i t i s h Columbia because of producers' i n a b i l i t y or d i s i n c l i n a t i o n t o t r a d e i n commodity f u t u r e s . A p r o v i n c i a l f o r e s t products marketing agency or minimum r e s e r v e p r i c e scheme would be s i m i l a r , except t h a t i t m o n o l i t h i c a l l y absorbs the c o s t s and r i s k s of depressed markets, and might d i s p e r s e any subseguent p r o f i t s among p a r t i c i p a t i n g producers.,.! Whether such a scheme would be p o l i t i c a l l y acceptable o r used i f i n t r o d u c e d , are undetermined as yet. T h i s leads to the f o u r t h s t r a t e g y of d i v e r s i f y i n g so t h a t the i n s t a b i l i t y i ndemand f o r B.C. lumber products ju s t does not appear to the same extent as at present. T h i s ' seems both f e a s i b l e and a t t r a c t i v e s i n c e i t i n t r o d u c e s a l t e r n a t i v e s t h a t are n e i t h e r d i r e c t l y i n t e r v e n t i o n i s t , or as s u b j e c t to the other exogenous f a c t o r s ; One c o u l d argue g u i t e s t r o n g l y t h a t the s u s c e p t i b i l i t y of the p r o v i n c i a l economy to boom-bust c y c l e s i s because i t has only s c a r c e l y developed or d i v e r s i f i e d beyond the "hewers of wood and drawers of water" phase, t o become producers of p a r t i a l l y processed wood products, i . e . , lumber and pulp. The dependence of the B.C. economy on primary processing o f f o r e s t products has been widely analysed, e.g., Denike and L e i g h (1972) and Shearer (1968). B r i t i s h Columbians have, t o use the c l i c h e , put a l l t h e i r eggs i n one basket. That i s , they r e l y very h e a v i l y on one i n d u s t r y (mainly t h r e e products i n only three marketing areas) f o r t h e i r s o c i a l / p o l i t i c a l o b j e c t i v e s of s t a b l e r e g i o n a l development and c o n t i n u i n g p r o s p e r i t y ; While the "spread e f f e c t s " from the l e a d i n g . s e c t o r or s t a p l e product (Watkins, 164 1963) have g e n e r a l l y been presumed t o favour development and p r o s p e r i t y , the f a c t t h a t the opposite can occur with equal p r o b a b i l i t y and f o r c e i n the event of the f a i l u r e of that l e a d i n g (export) s e c t o r , has been widely overlooked. Not a l l the consequences of the " s t a p l e theory" s t r a t e g y f o r development are fav o u r a b l e ; v u l n e r a b i l i t y to a d e c l i n e i n demand f o r t h a t s t a p l e good i s c h a r a c t e r i s t i c of s i n g l e i n d u s t r y economies. Watkins (1963, p.149) -recognised that . " P a r t i c u l a r export l i n e s can create p r o s p e r i t y , but t y p i c a l l y only f o r a short time. Over the longer p u l l they cease to be p r o f i t a b l e ... This tendency can be slowed up by attempts t o improve marketing and by seeking out cost-reducing innovations. ... Sustained growth, then, requires resource f l e x i b i l i t y and innovation s u f f i c i e n t t o permit s h i f t s i n t o new export l i n e s or i n t o production f o r the domestic market." While I am not i n a p o s i t i o n t o suggest which new i n d u s t r i e s warrant encouragement, 1 i t can be suggested t h a t development and s t a b i l i t y would be promoted i f the " B r i t i s h Columbia has always been a f o r e s t economy and t h e r e f o r e always should and w i l l be" a t t i t u d e was l e s s widely accepted. Within the f o r e s t i n d u s t r i e s , f u r t h e r d i v e r s i f i c a t i o n of product l i n e s and i n t o new geographic markets should s i m i l a r l y l e s s en s u s c e p t i b i l i t y t o exogenously induced f l u c t u a t i o n s . The f o l l o w i n g question can l e g i t i m a t e l y be posed, "what would an omnipotent planner do, given the task of d i v e r s i f y i n g the economy of the B.C. I n t e r i o r i n order t o achieve " s t a b i l i t y " of 1 The c r i t e r i a f o r s e l e c t i n g i n d u s t r i e s to be encouraged i n order to f o s t e r r e g i o n a l economic s t a b i l i t y , have been analysed by Conroy (1975), f o r example. 165 employment and incomes?" I t seems that no s i n g l e move could accomplish t h a t , but there are numerous small steps i n that d i r e c t i o n which could be taken or f u r t h e r encouraged. For example, ' 1. encourage the C o u n c i l of Forest I n d u s t r i e s t o promote new products and markets (although t h i s does not d i v e r s i f y the economy from f o r e s t products), 2. argue f o r realignment of t a r i f f s t r u c t u r e s to f a c i l i t a t e the s a l e of manufactured goods, 3. argue f o r r e v i s i o n of f r e i g h t r a t e schedules to enable B r i t i s h Columbia to supply eastern Canada with manufactures, and 4. encourage the development of gas (Peace L i a r d ) , c o a l (e.g. Hat Creek), mining, a g r i c u l t u r e and tourism. 5. encourage the growth of the s e r v i c e sectors i n the r e g i o n a l economy through i n f r a s t r u c t u r e development. These suggestions do not advocate undertaking i n e f f i c i e n t p r o j e c t s merely i n an attempt to get s t a b i l i t y , but r a t h e r the purpose i s to o f f e r an a l t e r n a t i v e to what Hatkins (196 3, p.150) c a l l e d an "export mentality r e s u l t i n g i n an overconcantration of resources i n the export s e c t o r and a reluctance t o promote domestic development". B r i t i s h Columbia's dependence on the f o r e s t i n d u s t r y , as analysed b y Denike and Leigh (1972) and Shearer (196S), i s widely accepted, almost as a t r a d i t i o n i n B.C. I t was recognised e x p l i c i t l y by Sloan 1 "Shen we r e a l i z e that we s e l l about 78 per cent of our exported wood and wood products i n f o r e i g n markets and must continue t o - do so i n order to maintain a healthy economy, i t does not need much imagination to appreciate how 1 Sloan (1956, p.13.) emphasis added. 166 vulnerable we are to the impact of i n t e r n a t i o n a l and world c o n d i t i o n s , to which we must respond, but over which we have no c o n t r o l . " • The substantive conclusion of t h i s t h e s i s - i s t h a t B r i t i s h Columbia does not n e c e s s a r i l y have to continue- as a lumber exporter over the long term, t h a t i t s economy c e r t a i n l y has been and i s v u l n e r a b l e t o e x t e r n a l i n f l u e n c e s , but that there are means whereby that v u l n e r a b i l i t y could be reduced. The goal of employment and perhaps income s t a b i l i t y would be furt h e r e d by the promotion of domestic processing and i n c r e a s i n g l o c a l value added. This s t r a t e g y would r e l y on e i t h e r a - l a r g e r domestic market or r e n e g o t i a t i o n of i n t e r n a t i o n a l b a r r i e r s and t a r i f f s t o enable the s a l e of f i n i s h e d consumer goods rather than standard commodities. Mobile home components and f u r n i t u r e , f o r example, have a more s t a b l e and l e s s e l a s t i c demand than has c o n s t r u c t i o n lumber. 1 Apart from the i n t e r n a t i o n a l marketing aspects discussed above, a r e a l advantage of such a p o l i c y could be that the i n f l u e n c e s a f f e c t i n g processing a c t i v i t y become l o c a l or n a t i o n a l r a t h e r than autonomous exogenous f a c t o r s i n the f o r e i g n markets. The demand f o r wood i s a derived demand, hence anything a f f e c t i n g the a v a i l a b i l i t y or p r i c e of those f a c t o r s combined with wood i n the f o r e i g n markets, a f f e c t s the B.C. lumber economy. With l o c a l processing and assembly, F e d e r a l , P r o v i n c i a l or even Municipal i Many observers seem amazed that B.C. has a very small f u r n i t u r e i n d u s t r y . Yet t o change t h i s would re q u i r e r e v i s i o n s t o t a r i f f s t r u c t u r e s and trans-Canada f r e i g h t r a t e s which would make i t as cheap to ship manufactured products west-east as i t i s east-west. 167 f i s c a l p o l i c i e s become more s i g n i f i c a n t . 2. E__ s t a b i l i t y or _ermane_ce_ There does not seem to be much r e l i e f i n s i g h t f o r d e c l i n i n g towns and v i l l a g e s . I t must be assumed th a t - some towns w i l l grow while others begin or continue to d e c l i n e . As long as t r a n s p o r t a t i o n continues to improve and get cheaper* the ra t e of decline w i l l i n c r e a s e . I f there were no more changes, there would s t i l l be a d e c l i n i n g trend, f o r a while, as u r b a n i s a t i o n economies i n production were sought • and e x p l o i t e d , e s p e c i a l l y i f t h i s continues to be ass o c i a t e d with u r b a n i s a t i o n amenities f o r the r e s i d e n t labour f o r c e and popu l a t i o n . As Siemens (1972, p.9,13) observed, "Community h a l l s that once served as s o c i a l centres f o r t h e i r r e s p e c t i v e communities have ge n e r a l l y f a l l e n i n t o disuse i n favour of f a c i l i t i e s of l a r g e r towns. The general store a t the crossroads has atrophied and shopping centres have increased i n number ... The high degree of m o b i l i t y , the economic concentration and the s o p h i s t i c a t i o n of mass communications c h a r a c t e r i s i n g l i f e i n the modern c i t y have had t h e i r e f f e c t s on the remotest farms and corner hamlets." In the i n t r o d u c t o r y chapters, c o n s i d e r a t i o n of the o b j e c t i v e of community s u r v i v a l r a i s e d the f o l l o w i n g questions. What i s a town? Why does i t e x i s t ? What changes would make i t redundant or cause i t to wane? One can contemplate the h i s t o r i c a l progression from stagecoach routes to roads to i The r e a l cost of t r a n s p o r t a t i o n may have been s i g n i f i c a n t l y increased by the "Energy C r i s i s " of 1973-74. However, r e l i a b l e current information i s not yet a v a i l a b l e . 168 highways and the concommitant changes i n p o p u l a t i o n d i s t r i b u t i o n . Does t h i s mean we are headed towards a s t a t e i n which only the e q u i l i b r i u m number of o p t i m a l l y s i z e d c i t i e s (whatever that may be) are r e g u l a r l y d i s t r i b u t e d a l l over the country? There w i l l presumably s t i l l be small towns growing and d e c l i n i n g on the f r o n t i e r s and elsewhere and perhaps s t a t i c on the boundaries of spheres of growth poles. That i s , the hierarchy of towns, with t h e i r d i f f e r e n t f u n c t i o n s , might w e l l be maintained, f o r a v a r i e t y of reasons. Nevertheless, from any p e r s p e c t i v e , f o r e s t management p o l i c i e s and y i e l d r e g u l a t i o n s i n p a r t i c u l a r , have no hope of maintaining communities i n the- face of a l l other i n f l u e n c e s , despite the strength of the c o n v i c t i o n i n some quarters t h a t the B.C.F.S. has c r i t i c a l c o n t r o l over r e g i o n a l development. The almost u n i v e r s a l nature of agglomeration and- i n t e g r a t i o n suggests that t h i s process i s i n e v i t a b l e - the B.C.F.S. can slow i t or f a c i l i t a t e i t but not prevent i t ( i f i t wants to) without very great costs (such as l o s s of markets, lower wages and employment, e t c ; ) . While governments may have a n a t u r a l and v a l i d concern f o r the maintenance of community s t a b i l i t y - p o l i t i c a l l y , s o c i a l l y and economically - and should t h e r e f o r e give some c o n s i d e r a t i o n to the p o t e n t i a l f o r permanence of any r e g i o n a l development they promote "or i n v e s t i n , i t i s s u r e l y not the only c r i t e r i o n f o r such d e c i s i o n s . There are examples of governments r e l y i n g on one i n d u s t r y or even one company to develop and s u s t a i n towns and whole region s , even c o u n t r i e s . The record of government-industry cooperation i n such ventures i n c l u d e s a number of success 169 s t o r i e s ( i . e . r a p i d growth and high incomes), but some c l a s s i c f a i l u r e s i n the event of disagreements, i n t h i s b i l a t e r a l monopoly - mutual interdependence s i t u a t i o n (which the government has u s u a l l y created and f o s t e r e d ) . As tlusgrave (1976) observed, -"The consequences when one of"these (one company towns) goes bust are f a r worse than the equivalent i n a large conurbation, where the unemployed are more e a s i l y re-employad i n other i n d u s t r i e s . I hope the c i v i l servants responsible f o r r e g i o n a l investment g r a n t s , advance f a c t o r i e s and so on w i l l use t h e i r powers to d i r e c t l a r g e f i r m s to l a r g e towns and small ones t o small towns, i f they do not already do so." This i s not n e c e s s a r i l y the argument that "small i s b e a u t i f u l " , but rather that the s i z e of i n d u s t r i a l ventures (and t h e i r technologies) should be appropriate to the environment i n t o which they are s i t e d . I t i s p o s s i b l e that Musgrave has exaggerated the consequences of the f a l l of a one company town i n t hat any such consequences may merely be "more v i s i b l e " r ather than " f a r worse". This d i s c u s s i o n has a good deal i n common with the development economist's dilemma i n underdeveloped c o u n t r i e s -whether to push f o r "growth poles", d e s t a b i l i s i n g r u r a l v i l l a g e s with new i n d u s t r i e s and roads, or t o promote " g r a s s r o o t s " development, maintaining e x i s t i n g communities i n t a c t . The greater the economies of s c a l e and the cheaper the t r a n s p o r t a t i o n , the more l i k e l y one i s to opt f o r growth poles. A two-way flow of goods and s e r v i c e s t o and from the h i n t e r l a n d would occur, with the only " c o s t s " the " d e s t r u c t i o n " of small 170 r u r a l towns 1 which may have undesirable s o c i o l o g i c a l r a m i f i c a t i o n s . 1 Though some would c a l l i t " c u l t u r a l and economic e v o l u t i o n " . 171 VI. SUMMARY AND CONCLUSIONS. Few would dispute the dependence of the B.C. economy on the st a t e of the f o r e s t i n d u s t r y i n general, ot the greater dependence of p a r t i c u l a r communities on the success of s p e c i f i c l a r g e f o r e s t companies, under the present circumstances. while t h i s could be used as a ba s i s to argue f o r more favourable treatment f o r the f o r e s t based i n d u s t r i e s , t h i s t h e s i s suggests that a p o l i c y of l e s s e n i n g the i n f l u e n c e of the f o r e s t i n d u s t r y (with i t s c y c l i c a l f l u c t u a t i o n s ) would be more appropriate f o r the attainment of s t a b l e (steady trend) r e g i o n a l development. Other i n d u s t r i e s which are l e s s subject to the exogenously induced f l u c t u a t i o n s of b u i l d i n g c y c l e s , or a number of sm a l l e r i n d u s t r i e s behaving c o u n t e r - c y c l i c a l l y would be more conducive to the attainment of employment s t a b i l i t y . Regional economic development based on one r e s o u r c e - e x t r a c t i v e i n d u s t r y which i s rather unpredictable, should not be recommended without g u a l i f i c a t i o n ; • A p o l i c y of sustained y i e l d f o r e s t management as p r a c t i s e d i n B r i t i s h Columbia can be e f f e c t i v e i n r a t i o n i n g the harvest of timber over* a very long p e r i o d , although other authors have shown that i t i s economically i n e f f i c i e n t i n doing so. This t h e s i s has shown t h a t the e x t r a p o l a t i o n from the co n s e r v a t i v e preservation of the f o r e s t resource to indeterminate perpetuation of e x i s t i n g towns and i n d u s t r i e s i s u n j u s t i f i e d , because of the major e f f e c t s of t r a n s p o r t a t i o n , t e c h n o l o g i c a l and c u l t u r a l changes. 172 That equal annual or p e r i o d i c harvests of timber are required by the i d e a l i s e d theory of sustained y i e l d , has l e d to an expectation that B r i t i s h Columbia's f o r e s t p o l i c i e s would c o n t r i b u t e to almost constant l e v e l s of employment i n the wood processing i n d u s t r i e s i n the short term. I t has been shown i n t h i s t h e s i s that no such short term s t a b i l i t y has r e s u l t e d from sustained y i e l d r e g u l a t i o n and that the wood processing and as s o c i a t e d i n d u s t r i e s are among the most unstable, i n terms of unemployment, i n two B.C. towns. Analyses have shown the i n s t a b i l i t y of unemployment and of production to be c o r r e l a t e d with the f l u c t u a t i n g p r i c e of export c o n s t r u c t i o n lumber. • In the preceding chapter, the a n a l y s i s i d e n t i f i e d f o u r s t r a t e g i e s which may reduce or cope with { s o c i a l l y undesirable) short term i n s t a b i l i t y of employment i n many s e c t o r s of the r e g i o n a l and p r o v i n c i a l economies which i s induced by exogenous f l u c t u a t i o n s i n the export demand f o r lumber. By v i r t u e of the f a c t t h a t i t i s - i d e n t i f i e d as a s o c i a l problem, - - i t - i s obvious that a l a i s s e z - f a i r e approach i s inadequate. P o l i c i e s could be introduced to f a c i l i t a t e p r i v a t e readjustment to unemployment through i n t e r r e g i o n a l migration or by changing occupations to those c u r r e n t l y i n greater demand. However, while these may p a r t i a l l y solve the problems of unemployment of l a b o u r , there can be l i t t l e e f f e c t on the c o s t l y unemployment of immobile c a p i t a l and n a t u r a l resouces. The t h i r d s t r a t e g y i s to b u f f e r the exogenously induced changes i n demand. Those fi r m s with strong f i n a n c i a l backing can a f f o r d some inventory b u f f e r i n g and- can often also r e l y on strong s a l e s promotion networks. However, f o r the many 173 independent and/or f i n a n c i a l l y c onstrained f o r e s t companies i n B r i t i s h Columbia, an o r g a n i s a t i o n capable of absorbing or d i s p e r s i n g the market r i s k and storage costs of holding i n v e n t o r i e s during depressed markets seems necessary. Commodity f u t u r e s markets disperse the r i s k very widely between many i n d i v i d u a l s p e c u l a t o r s and could guarantee a c e r t a i n p r i c e to the producer f o r h i s f u t u r e production. In t h i s way, i t could i n d u c e - g r e a t e r short run s t a b i l i t y of production and employment. However, f o r a number of reasons, t h i s has not been s i g n i f i c a n t l y used i n B r i t i s h Columbia because of producers' i n a b i l i t y or d i s i n c l i n a t i o n to trade i n commodity f u t u r e s . A p r o v i n c i a l f o r e s t ' p r o d u c t s marketing agency or minimum reserve p r i c e scheme would be s i m i l a r , except that i t m o n o l i t h i c a l l y absorbs the costs and r i s k s of depressed markets, and might disperse any subsequent p r o f i t s among p a r t i c i p a t i n g producers. Whether such a scheme would be p o l i t i c a l l y acceptable or used i f int r o d u c e d , are undetermined as yet. The f o u r t h s t r a t e g y analysed and recommended was one of f u r t h e r d i v e r s i f i c a t i o n , • i n many d i r e c t i o n s and at many l e v e l s , to reduce the v u l n e r a b i l i t y of the economy to any one f l u c t u a t i n g exogenous f a c t o r . While p r o j e c t s which are ( i n e f f i c i e n t should not be e s t a b l i s h e d simply to d i v e r s i f y the economy, i n d u s t r y , i n v e s t o r s and the government i n B r i t i s h Columbia could be searching out a l t e r n a t i v e s which would counterbalance the f o r e s t i n d u s t r y f l u c t u a t i o n s or which are c o n s i s t e n t l y p r o f i t a b l e even i f they do not match the f o r e s t i n d u s t r y ' s o c c a s i o n a l spectacular booms. A higher l e v e l of domestic processing f o r domestic consumption might be one 174 component of t h i s s t r a t e g y . The e x e r c i s e of l o c a t i n g the sources of i n s t a b i l i t y and determining how the shocks pass through or are - accommodated by the economy to the extent t h a t Canada Manpower data r e f l e c t employment i n s t a b i l i t y , might be very u s e f u l i n i t s e l f . A preparedness f o r f u t u r e changes and an awareness of how they might be modified may c o n t r i b u t e jger se to short run s t a b i l i t y of employment.• • While the r e g u l a t i o n of timber supply from P r o v i n c i a l Forests to prevent d e p l e t i o n has only minor relevence to the s t a b i l i t y - permanence - development o b j e c t i v e s commonly asso c i a t e d with B r i t i s h Columbia«s f o r e s t p o l i c i e s , the consequences of some of the a d m i n i s t r a t i v e p r a c t i c e s i n implementing the sustained y i e l d p o l i c y may have been s i g n i f i c a n t i n f a c i l i t a t i n g the adoption of world wide trends. I t i s the opinion of t h i s author t h a t the only r o l e s t h a t can l e g i t i m a t e l y be claimed as the sole provenance of the B r i t i s h Columbia Fo r e s t ~ S e r v i c e are the production of timber and of the commonly recognised non-wood goods and s e r v i c e s associated with the p r o t e c t i o n and preservation of the f o r e s t resource and environment. Any advance towards socio-economic o b j e c t i v e s such as community s t a b i l i t y and s u r v i v a l or r e g i o n a l economic development should derive from broader d i s c i p l i n e s and experience than would normally be found i n an agency whose primary concern i s f o r the growing, p r o t e c t i o n and harvesting of the f o r e s t resource. This a n a l y s i s suggests that not only r e a p p r a i s a l of Forest Service p r a c t i c e s and procedures, but a l s o of i t s o b j e c t i v e s and capacity to f u l f i l them, i s overdue. 175 Areas For Future Research • A s u i t a b l e framework i n which to analyse the r e g i o n a l economic impacts of a l t e r n a t i v e f o r e s t p o l i c i e s and a d m i n i s t r a t i o n has not been evident i n B r i t i s h Columbia, 1 To complete' such an a n a l y s i s , one needs a good d e a l more inf o r m a t i o n than has been compiled to date, e s p e c i a l l y with regard t o : " economies of s c a l e and l o c a t i o n ; f a c t o r input requirements and the r a t e and d i r e c t i o n of t e c h n o l o g i c a l change; and some f o r e c a s t s (or guesses) on the d i r e c t i o n of s o c i a l change'as i t w i l l a f f e c t labour f o r c e c h a r a c t e r i s t i c s , i n a d d i t i o n t o greater knowledge of the s t r u c t u r e of the r e g i o n a l economy and the i n t e r r e l a t i o n s h i p s between s e c t o r s . The l e a s t d i f f i c u l t u s e f u l information to"obtain t o f u r t h e r the understanding of the f o r c e s shaping i n d u s t r i a l s t r u c t u r e (and hence employment s t a b i l i t y and l o c a t i o n ) i s t e c h n i c a l . Perhaps the most obvious are : the labour and c a p i t a l i n t e n s i t y of m i l l s of d i f f e r e n t " s i z e , lumber recovery f a c t o r s (or output / wood in p u t r a t i o s ) s t r a t i f i e d by m i l l s i z e , and the shape of the LRATC curve (the s i g n i f i c a n c e of any economies of s c a l e t h a t e x i s t ) . Much of t h i s t e c h n i c a l i n f o r m a t i o n i s simply not a v a i l a b l e 1 A framework f o r such an a n a l y s i s which appears w e l l s u i t e d to the B r i t i s h Columbia context was presented by Zinn (1976). 176 to date. There i s l i t t l e comprehensive evidence on s m a l l - s c a l e sawmills: whether they are s t i l l more labour i n t e n s i v e than l a r g e m i l l s (as was the case with the small portable m i l l s ) ; whether the labour reguirements of small m i l l s are unstable; and whether s m a l l - s c a l e m i l l s can be as p h y s i c a l l y e f f i c i e n t as l a r g e conversion complexes. I f i t could be shown t h a t small sawmills such as a community cooperative sawmill could be v i a b l e , then the e n t i r e t h r u s t of the experience of the past t h i r t y years could be countered. However, t h i s would only derive from a complete r e v e r s a l of t e c h n o l o g i c a l change (to e l i m i n a t e economies of s c a l e ) , a d r a m a t i c a l l y d i f f e r e n t t r a n s p o r t a t i o n system and much greater s e c u r i t y of markets. I t i s , t h e r e f o r e , considered an u n l i k e l y prospect, although f u t u r e research may make such a strategy v i a b l e . Another extremely i n t e r e s t i n g research prospect which would c o n t r i b u t e a great deal to e x i s t i n g knowledge would be p o s s i b l e i f there were i n t e r - or i n t r a - r e g i o n a l accounts such t h a t an input-output model of a r e g i o n a l economy i n B r i t i s h Columbia could be constructed. U n t i l the necessary data become a v a i l a b l e , p o l i c y a n a l y s t s can merely improvise or e x t r a p o l a t e i n modelling the c o n t r i b u t i o n s of various s e c t o r s to the r e g i o n a l economy and the aggregate e f f e c t s of f l u c t u a t i o n s i n any s e c t o r . 177 LITERATURE CITED Alonso, I . , 1964. "Location Theory" i n L. Needleiaan, (ed.) Regional a n a l y s i s , Penguin, Middlesex, pp.337-368. A l s t o n , R.M., 1972. 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Address to the World C o n s u l t a t i o n on the Use of Wood i i i Housing, Vancouver, B.C. J u l y 16, 1971. 1971b. . Excerpts from an Address during the Budget Debate, 29th L e g i s l a t i v e Assembly. Feb 18, 1971, V i c t o r i a , B.C. Zinn, G. W. , 1976. "L o c a l Economic Impacts of Forest A c t i v i t i e s : Some prospects f o r 'unconventional* a n a l y s i s . " Paper prepared f o r Annual Meeting of Western Forest Economists, Wemme, Oregon, May 5, 1976. 12 p. Zivnuska, J.A., 1975. "An Economic View of N a t i o n a l F o r e s t Timber Management Planning." A paper presented t o the Annual Meeting of the Western Timber A s s o c i a t i o n , San Fra n c i s c o , C a l i f . , Feb. 21, 1975. 16 p. 184 OTHER LITERATURE CONSULTED. A r c h i b a l d , C.G., 1967. "Regional m u l t i p l i e r e f f e c t s i n the U.K. Oxford Economic Papers March, 1967: 22-45. B e l l , E.F., 1976. "A Technical C r i t i q u e of Economic Impact A n a l y s i s . " Paper presented to Annual Meeting of Western Forest Economists, Wemme, Oregon. May 5, 1976. 7 p. Beuter, J.H., 1974. "Farewell to the Simple Formula", J o u r n a l of Forestry 72 (4): 212-213. , K.N.Johnson and H.L.Scheurman, 1976. "Timber f o r Oregon's tomorrow: An a n a l y s i s of reasonably p o s s i b l e occurrences." Res. B u l l . 19, Forest Research Laboratory, School of F o r e s t r y , Oregon State U n i v e r s i t y , C o r v a l l i s ; 111 p. Brewis T.N., (®d.) 1969. Regional Economic P o l i c i e s i n Canada, (revised) Macmillan of Canada, Toronto. 463 p. C a i l , R.E., Land Man and the Law_ The d i s p o s a l of cxown lands i n B r i t i s h " _olum_i__ 1871- 19J3. U n i v e r s i t y of B r i t i s h Columbia press, Vancouver, 333 p. Cartwright,D., 1971. The Sawmilling Industry of B r i t i s h Columbia_ D e p t ~ o f " " i n d u s t r i a l Development, Trade and Commerce. Queens P r i n t e r , V i c t o r i a . 110 p. Da^r, D.R. and R.D. F i g h t , 1974. "Douglas County, Oregon; P o t e n t i a l economic impacts of a changing resource base." Research Paper PNW-179, P a c i f i c Northwest F o r e s t and Range Experiment S t a t i o n , P o r t l a n d . Davis, CH. and G. Hainsworth, 1970. The Cariboo - Regional D i s t r i c t : Economic ___________ ________ Canadian Environmental Sciences. Vancouver. 42 p. Ferguson, I.S., 1972. "wood Chips and Regional Development." A u s t r a l i a n F o r e s t r y 36 (4):15-23. Gamble, H.B., 1968. "The Regional Economic Role of Forest Products I n d u s t r i e s . " J o u r n a l of Forestry 66 :462-466. 185 Gilmour, J.F., 1965. The Forest i n d u s t r y as a Determinant of Settlement i n B r i t i s h Columbia: The case f o r i n t e g r a t i o n through r e g i o n a l planning. M.Sc. Thesis (Community and Regional P l a n n i n g ) , U.B.C. Vancouver. 195 p. Grayson, A.J. and D.R. Johnston, 1970. "The Economics of Y i e l d Planning." I n t e r n a t i o n a 1 Review of Forestry. Research. 3:69-122. Hayter, R., 1974. An Examination of Growth Patterns and L o c a t i o n a l Behaviour of M u l t i - P l a n t Forest Product Corporations i n B r i t i s h Columbia (Ph.d. T h e s i s , Geography, U n i v e r s i t y of Washington.) U n i v e r s i t y M i c r o f i l m s , Ann Arbor, Mich. 239 p. + App., Hofman, C.A., 1969. An Evaluati o n of the s t r u c t u r a l Changes i n the Forest Products I n d u s t r i e s and Their I m p l i c a t i o n s f o r P u b l i c Forest Management P o l i c i e s . Ph.D. Thesis, College of Forest Resources, U n i v e r s i t y of Washington, S e a t t l e . 134 p. Kindleberger, C P . , 1964. "Terms of Trade f o r Primary Products." In M. Clawson (ed.) Natural Resources and J j i t a r n a t i o n a l Develop.fflent. Resources f o r the Future Inc. , John Hopkins Press. pp.339-362. l e e , D.R. and D. Orr, 1975. "The P r i v a t e Discount Rate and Resource Conservation." Canadian J o u r n a l of Economics.. V I I I (3) : 351-363. LeMaster, D.C, 1974. Recent Merger A c t i v i t y of the Largest Firms i n the Forest Products I n d u s t r i e s . (Ph.D. ; Thesis, Economics, Washington State U n i v e r s i t y ) U n i v e r s i t y M i c r o f i l m s , Ann Arbor, Mich. 222 p. + App. Mason* D.T., 1927. "Sustained y i e l d and American Forest Problems." J o u r n a l of For e s t r y 25: 625-658. M c K i l l o p , W.L.M., 1967. "Supply and Demand for Forest Products -An Econometric. Study." H i l g a r d i a 38 (1):1-117. M i l l s , T.J. and R.S. Manthy, 1974. "An Econometric A n a l y s i s of Market Factors Determining Supply and Demand f o r Softwood Lumber." Research Report 238, Michigan State U n i v e r s i t y , East Lansing, Mich. 59 p. 186 Moore, A.M., 1957. Fo r e s t r y Tenures and Taxes i n Canada_ Canadian Tax Foundation, Paper 11. Toronto. 315 p. N a u t i y a l , J.C. and J.H.6. Smith, 1968. " A c c e l e r a t i o n of Economic Development Depends on Harmonisation of Te c h n i c a l and Economic Objectives i n F o r e s t r y . " Paper presented t o the Ninth Commonwealth F o r e s t r y Conference, New D e h l i , I n d i a . Jan., 1968. 20 p. North, D.C., 1955. "Location Theory and .Regional Economic Growth." J o u r n a l of P o l i t i c a l Economy L X I I I (6): 243-258. Ottens, J . , 1973. The Use of Regional Economic Techniques to Analyse Forest P o l i c y Impacts. M.F. Thesis, F a c u l t y of Fo r e s t r y , U.B.C. Vancouver. 206 p. Pinchot, G., 1910. The Fight f o r Conservation-, Americana L i b r a r y e d i t i o n , U n i v e r s i t y of Washington Press, S e a t t l e . (1967) . 147 p. P o r t e r f i e l d , R.L., 1975. "A P r o f i l e of Fo r e s t r y Employment i n Montana." U.S.D.A. Forest Service Research Paper INT-172, Intermountain Forest and Range Experiment S t a t i o n , Ogden, Utah. 24 p. Ramsey, B. , 1963. Ghost Towns of B r i t i s h Columbia,. M i t c h e l l Press L t d . Vancouver. 226 p. Robinson, J . L . and W.G. Hardwick, 1973. B r i t i s h Columbia! One Hundred Years of Geographical Change_ Talonbooks, Vancouver. 63 p. Roth, F., 1925. "Forest Regulation." Volume 2 of Michigan Mannual of Forestry., Second e d i t i o n , Ann Arbor, Mich., Smith, J . H . G . and D . Haley, 1970. "Canadian Forest Managers Must Learn How to Expand and Modulate Y i e l d s i n a High , Q u a l i t y Environment." Paper 21, i n F o r e s t r y Rejid_r x Canadian C o u n c i l of Resource M i n i s t e r s , Montreal. 370 p. Smith, L.B. , 1968. "Postwar Canadian Housing P o l i c y i n Theory and P r a c t i c e . " Land Economics XLIV (3): 339-34 9. 187 Sparhawk, W.N., 1933. "Is Forestry J u s t i f i e d ? " I n A- N a t i o n a l Plan f o r American - Fo r e s t r y . Senate Document 12, 73rd O.S. Congress. 111 p. T a y l o r , G. W., 1975. Timber z A H i s t o r y of the Forest Industry i n B r i t i s h Columbia.. J . J . Douglas Ltd. Vancouver. 209 p. Tiebout, CM., 1968. "Regional and I n t e r r e g i o n a l Input-Output Models: An A p p r a i s a l . " In L. Needleman (ed.) op. c i t Wall, B.R. and D.D. Oswald, 1975. A Technique and R e l a t i o n s h i p s f o r P r o j e c t i o n s of Employment i n the P a c i f i c Coast Forest Products I n d u s t r i e s . Research Paper PNW-189, P a c i f i c Northwest Forest and Range Experiment S t a t i o n , P o r t l a n d , Oregon. 39 p. 188 APPENDIX I. i) Extract from Canada Manpower Report of Registered Clients and Vacancies. i i ) Extract from Occupational Classification Manual - Canadian  Dictionary of Occupations. Dominion Bureau of Statistics. BDS 12-537, pp.17-25. 190 LIST OF MAJOR, MINOR AND UNIT GROUPS MAJOR GROUP 11 — MANAGERIAL, ADMINISTRATIVE AND RELATED OCCUPATIONS 111 Officials and Administrators Unique to Govern-ment 1111 Members of Legislative Bodies 1113 Government Administrators 1115 Postmasters 1116 Inspectors and Regulatory Officers, Government 1119 Officials and Administrators Unique to Government, n.e.c. 113/114 Other Managers and Administrators 1130 General Managers and Other Senior Officials 1131 .Management Occupations. Natural Sciences and Engineering 1132 Management Occupations, Social Sciences and Re-lated Fields 1133 Administrators in Teaching and Related Fields 1134 Administrators in Medicine and Health 1135 Financial Management Occupations 1136 Personnel and Industrial Relations Management Occupations 1137 Sales and Advertising Management Occupations 1141 Purchasing Management Occupations ~ 1142 Services Management Occupations 1143 Production Management Occupations 1145 Management Occupations, Construction Operations 1147 Management Occupations, Transport and Communi-cations Operations 1149 Other Managers and Administrators, n.e.c. 117 Occupations Related (oManagement and Admin-istration 1171 Accountants, Auditors andOther Financial Officers 1174 Personnel and Related Officers 1175 Purchasing Officers and Buyers. Except Wholesale and Retail Trade 1176 Inspectors and Regulatory Officers. Non-Government 1179 Occupations Related to Management and Adminis-tration, n.e.c. MAJOR GROUP 21 - OCCUPATIONS IN NATURAL SCIENCES. ENGINEERING AND MATHEMATICS 211 Occupations in Physical Sciences 2111 Chemists 2112 Geologists 2113 Physicists 2114 Meteorologists 2117 Physic?! Sciences Technologists and Technicians 2119 Occupations in Physical Sciences, n.e.c. 213 Occupations in Life Sciences 2131 Agriculturists and Related Scientists 2133 Biologists and Related Scientists 2135 Life Sciences Technologists and Technicians 2139 Occupations in Life Sciences, n.e.c. MAJOR GROUP 21 - OCCUPATIONS IN NATURAL SCIENCES, ENGINEERING AND MATHEMATICS -Concluded 214/215 Architects and Engineers 2141 Architects 2142 Chemical Engineers 2143 Civil Engineers 2144 Electrical Engineers 2145 Industrial Engineers 2147 Mechanical Engineers 2151 Metallurgical Engineers 2153 Mining Engineers 2154 Petroleum Engineers 2155 Aeronautical Engineers 2157 Nuclear Engineers 2159 Architects and Engineers, n.e.c. 216 Other Occupations in Architecture and Engine-ering 2160 Supervisors: Other Occupations in Architecture end Engineering 2161 Surveyors 2163 Draughtsmen 2165 Architectural and Engineering Technologists and Technicians 2169 Other Occupations in Architecture and Engineering, n.e.c. 218 Occupations in Mathematics, SUixisiics, Systems Analysis and Related Fields 2181 Mathematicians, Statisticians and Actuaries 2183 Systems Analysts, Computer Programmers end Re-lated Occupations 2189 Occupations i:: Mathematics, Statistics, Systems Analysis and Related Fields, c.e.c. MAJOR GROUP 23-OCCUPATIONS tN SOCIAL SCIENCES AND RELATED FI_LDS 231 Occupations in Social Sciences 2311 Economists 2313 Sociologists. Anthropologists and Related Social Scientists 2315 Psychologists 2319 Occupations in Social Sciences, n.e.c. 233 Occupations in Social Work and Related Fields 2331 Social Workers 2333 Occupations in Welfare and Community Services 2339 Occupations in Social W'ork and Related Fields, n.e.c. 234 Occupations in Law and Jurisprudence 2341 Judges and Magistrates 2343 Lawyers and Notaries 2349 Occupations in Law and Jurisprudence, c.e.c. 235 Occupations in Library, Museum and Archival Sciences 2350 Supervisors: Occupations in Library, Muserv ezi Archival Sciences 2351 Librarians and Archivists 191 L I S T O F M A J O R , M I N O R A N D U N I T G R O U P S — C o n t i n u e d MAJOR GROUP 23 — OCCUPATION'S IN SOCIAL SCIENCES AND RELATED FIELDS - Concluded 235 Occupations in Library, Museum and Archival Sciences — Concluded 2353 Technicians in Library, Museum and Archival Sciences 2359 Occupations in. Library, Museum and Archival Sciences, n.e.c. 239 Other Occupations in Social Sciences and Re-lated Fields 2391 Educational and Vocational Counsellors 2399 Other Occupations in Social Sciences and Related Fields, n.e.c. MAJOR GROUP 25 — OCCUPATIONS IN RELIGION 251 Occupations in Religion 2511 Ministers of Religion 2513 Nuns and Brothers (W), n.o.r. 2519 Occupations in Religion, n.e.c. MAJOR GROUP 27-TEACHING AND RELATED OCCUPATIONS 271 University Teaching and Related Occupations 2711 University Teachers 2719 University Teaching and Related Occupations, n.e.c. 273 Elementary and Secondary School Teaching and Related Occupations 2731 Elementary and Kindergarten Teachers 2733 Secondary School Teachers 2739 Elementary and Secondary School Teaching and Related Occupations, n.e.c. 279 Other Teaching and Related Occupations 2791 Community College and Vocational School Teachers 2792 Fine Arts School Teachers 2793 Post-Secondary School Teachers, n.e.c. 2795 Teachers of Exceptional Students, n.e.c. 2797 Instructors and Training Officers, n.e.c. 2799 Other Teaching and Related Occupations, n.e.c. MAJOR GROUP 31 — OCCUPATIONS IN MEDICINE AND HEALTH 311 Health Diagnosing and Treating Occupations 3111 Physicians and Surgeons 3113 Dentists 3115 Veterinarians 3117 Osteopaths and Chiropractors 3119 Health Diagnosing and Treating Occupations, n.e.c. 313 Nursing, Therapy and Related Assisting Occu-pations 3130 Supervisors: Nursing Occupations 3131 Nurses, Graduate, Except Supervisors 3133 Nurses-in-Training 3134 Nursing Assistants 3135' Nursing Aides and Orderlies MAJOR GROUP 31-OCCUPATIONS IN MEDICINE AND HEALTH - Concluded 313 Nursing, Therapy and Belated Assisting Occu-pations — Concluded 3137 Physiotherapists, Occupational and Other The rapists 3139 Nursing, Therapy and Related Assisting Occupa-tions, n.e.c. 315 Other Occupations in Medicine and Health 3151 Pharmacists 3152 Dietitians and Nutritionists 3153 Optometrists 3154 Dispensing Opticians 3155 Radiological Technologists and Technicians 3156 Medical Laboratory Technologists and Technicians 3157 Dental Hygienists, Assistants and Technicians 3159 Other Occupations in Medicine and Health, n.e.c. MAJOR GROUP 33-ARTISTIC, LITERARY, RECREA-TIONAL AND RELATED OCCUPATIONS 331 Occupations in Fine and Commercial Art, Pho-tography and Related Fields 3311 Painters, Sculptors and Related Artists 3313 Product and Interior Designers 3314 Advertising and Illustrating Artists 3315 Photographers and Cameramen 3319 Occupations in Fine and Commercial Art,Photog-raphy and Related Fields, n.e.c. 333 Occupations in Performing and Audio-visual Arts 3330 Producers and Directors, Performing and Audio-visual Arts 3332 Musicians 3333 Dancers and Choreographers 3335 Actors 3337 Radio and Television Announcers 3339 Occupations in Performing and Audio-visual Arts n.e.c. 335 Occupations in Writing 3352 Writers and Editors 3355 Translators and Interpreters 3359 Occupations in Writing, n.e.c. 337 Occupations in Sport and Recreation 3370 Coaches, Trainers, Instructors and Managers, Sport and Recreation 3371 Referees and Related Officials 3373 Athletes 3375 Attendants, Sport and Recreation 3379 Occupations in Sport and Recreation, n.e.c. MAJOR GROUP 41-CLERICAL AND RELATED OCCUPATIONS 411 Stenographic and Typing Occupations 4110 Supervisors: Stenographic and Typing Occupations 4111 Secretaries and Stenographers 4113 Typists and Clerk-Typists 192 L I S T O F M A J O R , M I N O R A N D U N I T G R O U P S - C o n t i n u e d MAJOR GROUP 41 - CLERICAL AND RELATED - OCCUPATIONS - Concluded <13 Bookkeeping, Accountwecording —>d Related Occupations 4130 Supervisors: Bookkeeping, Account-recording and Related Occupations 4131 Bookkeepers and Accounting Clerks 4133 Tellers and Cashiers 4135 Insurance, Bank and Other Finance Clerks 4137 Statistical Clerks 4139 Bookkeeping, Account-recording and Related Oc-cupations, n.e.s. 4.14 Office Machine and Electronic Data- pro ce ss inn Equipment Operators 4140 Supervisors: Office Machine and Electronic Data-processing Equipment Operators 4141 Office Machine Operators 4143 Electronic Data-processing Equipment Operators 415 Material Recording, Scheduling and Distributing Occupations 4150 Supervisors: Material Recording. Scheduling and Distributing Occupations 4151 Production Clerks 4153 Shipping and Receiving Clerks 4155 Stock Clerks end Related Occupations 4157 Weighers 4159 Material Recording, Scheduling and Distributing Occupations, n.e.c. 416 Library, File and Correspondence Clerks and Related Occupations 4160 Supervisors: Library, File and Correspondence Clerks and Related Occupations 4161 Library and File Clerks 4169 Library, File and Correspondence Clerks and Re-lated Occupations, n.e.c. 417 Reception, Information, Mail and Message Dis-tribution Occupations 4170 Supervisors: Reception, Information, Mail and Mes-sage Distribution Occupations 4171 Receptionists and Information Clerks 4172 Mail Carriers 4173 Mail and Postal Clerks 4175 Telephone Operators 4177 Messengers 4179 Reception, Information, Mail and Message Distribu-tion Occupations, n.e.c. 419 Other Clerical and Related Occupations 4190 Supervisors: Other Clerical and Related Occupa-tions, n.e.c 4191 Collectors 4152 Adjusters, Claim 4193 Travel Clerks. Ticket. Station end Freight Agents 4194 Hotel Clerks 4195 Personnel Clerks 4397 Genera! Office Clerks 4199 Other Clerical and Related Occupations, n.e.c. MAJOR GROUP 51-SALES OCCUPATIONS 513/514 Sales Occupations, Commodities 5130 Supervisors: Sales Occupations, Commodities 5131 Technical Salesmen and Related Advisers 5133 Commercial Travellers 5135 Salesmen and Salespersons, Commodities, n.e.c. 5137 Sales Clerks, Commodities 5141 Street Vendors and Door-to-Door Salesmen 5143 Newsboys 5145 Service Station Attendants 5149 Sales Occupations: Commodities, n.e.c. 517 Sales Occupations, Services 5170 Supervisors: Sales Occupations, Services 5171 Insurance Salesmen and Agents 5172 Real Estate Salesmen 5173 Salesmen and Traders, Securities 5174 Advertising Salesmen 5177 Business Services Salesmen 5179 Sales Occupations: Services, n.e.c. 519 Oth<~ Sales Occupations 5190 Supervisors: Other Sales Occupations 5191 Buyers, Wholesale and Retail Trade 5193 Driver-Salesmen 5199 Other Sales Occupations, n.e.c. MAJOR GROUP 61 — SERVICE OCCUPATIONS 611 Protective Service Occupations 6111 Fire-Fighting Occupations 6112 Policemen and Detectives, Government 6113 Policemen and InvestigEtors. Private 6115 Guards and Watchmen 6116 Commissioned Officers, Armed Forces 6117 Other Ranks, Armed Forces 6119 Protective Service Occupations, n.e.c. 612 Food and Beverage Preparation and Related Service Occupations 6120 Supervisors: Food and Beverage Preparation and Related Service Occupations 6121 Chefs and Cooks 6123 Bartenders 6125 Waiters. Hostesses and Stewards, Food and Beverage 6329 Food and Beverage Preparation end Related Service Occupations, n.e.c. 613 Occupation B in Lod cine and Other Accommodation 6130 Supervisors: Occupations inLodging and Other Ac-commodation 6131 Managers: Hotel. Motel and Other Accommodation 6133 Chambermaids and Housemen 6135 Sleepine-Car and Baggage Porters, and Bellmen 6139 Occupations inLodging and Other Accommodation, n.e.c. 193 LIST O F MAJOR. MINOR AN MAJOR GROUP 61 - SERVICE OCCUPATIONS -Concluded 614 Personal Service Occupations 6141 Funeral Directors. Embalmers and Related Occupa-tions 6143 Barbers. Hairdressers and Related Occupations 6144 Guides 6145 Hostesses and Stewards, ExceptFood and Beverage 6147 Babysitters 6149 Personal Service Occupations, u.e.c. 616 Apparel and Furnishings Service Occupations 6160 Supervisors: Apparel and Furnishings Service Oc-cupations 6162 Laundering and Dry Cleaning Occupations 6165 Pressing Occupations 6169 Apparel and Furnishings Service Occupations.n.e.c. 619 Other Service Occupations 6190 Supervisors: Other Service Occupations 6191 Janitors, Cbarworkers and Cleaners 6193 Elevator Operating Occupations 6198 Occupations in Labouring and Other Elemental Work, Sen-ices 6199 Other Service Occupations, n.e.c. MAJOR GROUP 71-FARMING, HORTICULTURAL AND ANIMAJL HUSBANDRY OCCUPATIONS 711 Farmers 7112 Farmers 713 Farm Management Occupations 7131 Farm Management Occupations 718/719 Other Farming, Horticultural and Animal Husbandry Occupations 7160 Foremen:Other Fanning, Horticultural and Animal Husbandry Occupations 7182 Farm Workers 7195 Nursery and Related Workers 7197 Farm Machinery Operators and Custom Operators 7199 Ofter Farming, Horticultural and Animal Husbandry Occupations, n.e.c. MAJOR GROUP 73 - FISHING, HUNTING. TRAPPING AND RELATED OCCUPATIONS 731 Fishing, Hunting, Trapping and Related Oc-cupations 7311 Captains and Other Officers, Fishing Vessels 7313 Fishermen: Net, Trap and Line 7315 Hunting, Trapping end Related Occupations 7319 Fishing. Hunting, Trapping and Related Occupa-tions, n.e.c. MAJOR GROUP 75 - FORESTRY AND LOGGING OCCUPATIONS 751 Forestry and Logging Occupations 7510 Foremen: Forestry and Logging Occupations 7511 Forestry Conservation Occupations 7513 Timber CtittinE and Related Occupations U N I T G R O U P S - C o n t i n u e d MAJOR GROUP 75 - FORESTRY AND LOGGING OCCUPATIONS — Concluded 751 Forestry and Logging Occupations —Cone. 7516 Log Inspecting, Grading, Scaling and Related Oc-cupations 7517 Log Hoisting. Sorting, Moving and Related Occupa-tions 7518 Occupations in Labouring and Other Elemental Work, Forestry and Logging 7519 Forestry and Logging Occupations, n.e.c. MAJOR GROUP 77 - MINING AND QUARRYING IN-CLUDING OIL AND GAS FIELD OCCUPATIONS 771 Mining and Quarrying Including Oil and Gas Field Occupations 7710 Foremen: Mining and Quarrying Including Oil and Gas Field Occupations 7711 Rotary Well-drilling" and Related Occupations 7713 Other Rock and Soil Drilling Occupations 7715 Blasting Occupations 7717 Mining and Quarrying: Cutting, Handling end Load-ing Occupations 7718 Occupations in Labouring and Other Elemental Work, Miningand Quarrying Including Oil and Gas Fields 7719 Mining and Quarrying Including Oil and Gas Field Occupations, n.e.c. MAJOR GROUP 81/82 — PROCESSING OCCUPATIONS 811 Mineral Ore Treating Occupations 8110 Foremen: Mineral Ore Treating Occupations 8111 Crushing and Grinding Occupations, Mineral Ores 8113 Mixing, Separating, Filtering and Related Occupa-tions, Mineral Ores 8115 Melting and Roasting Occupations, Mineral Ores 8116 Inspecting, Testing, Grading and Sampling Occupa-tions, Mineral Ore Treating 8118 Occupations in Labouring and Other Elemental Work, Mineral Ore Treating 8119 Mineral Ore Treating Occupations, n.e.c. 813/814 MetAl Processing and Related Occupations 8130 Foremen: Metal Processing and Related Occupa-tions 8131 Metal Smelting. Converting and Refining Furnace-men 8133 Metal Heat Treating Occupations 6135 Metal Rolling Occupations 8137 Moulding. Coremaking and Metal Cesting Occupa-tions 8141 Metal Extruding and Drawing Occupations 8143 Plating. Metal Spraying and Related Occupations 814G Inspecting, Testing. Grading and Sampling Occu-pations, Metal Processing 8148 Occupations in Labouring and Other Elemental Work, Metal Processing 8149 Metal Processing and Related Occupations, u.e.c. 194 L I S T O F M A J O R , M I N O R A N D U N I T G R O U P S - C o n t i n u e d MAJOR GROUP 81/82—PROCESSING OCCUPATIONS - .Continued 815 Clay, Glass and Stone Processing, Forming and Related Occupations ' • 8150 Foremen: Clay, Glass and Stone Processing, Form-ing and Related Occupations •'; 8151 Furnacemen and Kilnmen: Cley, Glass and Stone 8153 Separating, Grinding, Crushing and Mixing Occupa-tions: Clay, Glass and Stone 8155 Forming Occupations: Clay, Glass and Stone 8156 Inspecting, Testing, Gradingand Sampling Occupa-tions: Clay, Glass and Stone Processing and Forming 8158 Occupations in Labouring and Other Elemental Work: Clay. Glass and Stone Processing and Forrning 8159 Clay, Glass and Stone Processing, Forming and Related Occupations, n.e.c. 816/817 Chemicals, Petroleum, Rubber, Plastic and Related Materials Processing Occupations 8160 Foremen: Chemicals, Petroleum. Rubber, Plastic and Related Materials Processing Occupations 8161 Mixing and Blending Occupations. Chemicals and Releled Materials 8163 Filtering, Straining and Separating Occupations, Chemicals and Related Materials 8165 Distilling, Sublimit g and Carbonizing Occupations, Chemicals and ReJated Materials . 8167 Roasting, Cooking and'Drying Occupations,Chem-icals and Related Materials 8171 Crushing and Grinding Occupations, Chemicals and Related.Materials.-',. 8173 Coating and Calendering Occupations, Chemicals and Related Materials 8176 Inspecting, Testing, Grading and Sampling Occu-pations: Chemicals, Petroleum, Rubber. Plastic and Related Materials Processing 8178 Occupations in Labouring and Other Elemental Work: Chemicals, Petroleum, Rubber, Plastic •and Related Materials Processing 8179 Chemicals. Petroleum, Rubber, Plastic and Re-lated Materials Processing Occupations, n.e.c. 821/822 Food. Beverage and Related Processing Occupations 8210 Foremen: Food, Beverage and Related Processing Occupations 8211 Flour and Grain Milling Occupations 8213 Baking, Confectionery Making and Related Occu-pations 8215 Slaughtering and Meat Cutting, Canning, Curing and Packing Occupations 8217 Fish Canning, Curing and Packing Occupations 8221 Fruit and Vegetable Canning, Preserving and Packing Occupations 8223 Milk Processing Occupations 8225 Sugar Processing end Related Occupations 8226 Inspecting, Testing, Grading and Sampling Occu-pations: Food, Beverage and Related Processing 8227 Beverege Processing Occupations 8228 Occupations in Labouring and Other Elemental Work: Food, Eeveitice and Related Processing 8229 Food, Beverage and Related Processing Occupa-tions, n.e.c. MAJOR GROUP 81/82-PROCESSING OCCUPATIONS - Concluded 823 Wood Processing Occupations, Except Pulp and Papermaking 8 230 Foremen: WTood Processing Occupations, Except Pulp and Papermaking 8231 Sawmill Sawyers and Related Occupations 8233 Plywood Making and Related Occupations 8235 Wood Treating Occupations 8236 Inspecting, Testing, Grading and Sampling Occu-pations: Wood Processing, Except Puip and Papermaking 8238 Occupations in Labouring and Other Elemental Work: Wood Processing, Except Pulp and raper-making 8239 W;ood Processing Occupations, Except Pulp and Papermaking, n.e.c. 825 Pulp and Papermaking and Related Occupa-tions 8250 Fore, -.n: Pulp and Papermaking and Related Oc-cupations 8251 Cellulose Pulp Preparing Occupations 8253 Papermaking and Finishing Occupations 8256 Inspecting, Testing, Grading and Sampling Occu-pations, Pulp and Papermaking 8258 Occupations in Labouring and Other EiemenUJ _ Work, Pulp and Papermaking 8259 Pulp and Papermaking and Related Occupations, n.e.c. 826/827 Textile Processing Occupations 8260 Foremen: Textile Processing Occupations 8261 Textile Fibre Preparing Occupations 8263 T Textile Spinning and Twisting Occupations 8255 Textile Wincing and Reeling Occupations 8267 Textile Weaving Occupations 8271 Knitting Occupations 8273 Textile Bleaching and Dyeing Occupations 8275 Textile Finishing and Calendering Occupations 8276 Inspecting, Testing, Grading and Sampling Occu-pations, Textile Processing 8278 Occupations in Labouring and Other Elemental Work, Textile Processing 8279 Textile Processing Occupations, n.e.c. 829 Other Processing Occupations 8290 Foremen: Other Processing Occupations 8293 Tobacco Processing Occupations 8295 Hide and Pelt Processing Occupations 8296 Inspecting, Testing, Gracing and Sampling Occu-pations, Processing, n.e.c. 8298 Occupations in Labouring and Other Elemental Work, Other Processing 8299 Other Processing Occupations, n.e.c. MAJOR GROUP 83 - MACHINING AND RELATED OCCUPATIONS 831 Metal Machining Occupations 8310 Foremen: Metal Machining Occupations 8311 Tool and Die Muking Occupations 195 L I S T O F M A J O R , M I N O R A N D , U N I T G R O U P S - C o n t i n u e d MAJOR GROUP 83 — MACHINING AND RELATED OCCUPATIONS - Concluded 831 Metal Machining Occupations — Concluded 8313 Machinist and Machine Tool 6etting-Up Occupa-tions 8315 Machine Tool Operating Occupations 8316 Inspecting,Testing, Grading and Sampling Occu-pations, Metal Machining 8319 Metal Machining Occupations, n.e.c. 833 Metal Shaping and Forming Occupations, Ex-cept Machining 8330 Foremen: Metal Shaping and Forming Occupations, Except Machining 8331 Forging Occupations 8333 Sheet Metal Workers , 8334 Meialworking-machine Operators, n.e.c. 6335 Welding end Flame Cutting Occupations 8335 Inspecting. Testing, Grading and Sampling Occu-pations: Metal Shaping and Forming, Except Machining 8337 Boilermakers, Platers and Structural Metal Workers' 8339 Metal Shaping and Forming Occupations, Except Machining, n.e.c. ' 835 Wood Machining Occupations Foremen: Wood Machining Occupations Wood Patte rum akin g Occupations Wood Sawing and Related Occupations, Except Sawmill Planing, Turning, Sheping and Related Wood Ma-chining Occupations Inspecting, Testing, Grading and Sampling Occu-pations. Wood Machining Wood Sanding Occupations Wood Machining Occupations, n.e.c. 837 Clay, Glass and Stone and Related Materials Machining Occupations Foremen: Clay, Glass and Stone and Related Ma-terials Machining Occupations Cutting and Shaping Occupations: Clay, Glass and Stone 8373 Abrading and Polishing Occupations: Clay, Glass and Stone, n.e.c. 8375 Inspecting, Testing, Grading and Sampling Occu-pations: Clay, Glass and Stone Machining 8379 Clay. Glass and Stone and Related Materials Ma-chining Occupations, n.e.c. 839 Other Machining and Related Occupations 8390 Foremen: Other Machining and Related Occupa-tions, n.e.c. 8391 Engravers. Etchers and Related Occupations 6393 Filing. Grinding, Buffing, Cleaning and Polishing Occupations, n.e.c. 8395 Patiernmekers and Mouldmakers, n.e.c. 8396 Inspecting. Testing, Grading and Sampling Occu-pations, Machining, n.e.c, E399 Other Machining and Related Occupations, n.e.c. 8350 8351 8353 8355 8356 8357 8359 8370 8371 MAJOR GROUP 85 - PRODUCT FABRICATING. ASSEMBLING AND REPAIRING OCCUPATIONS 851/852 Fabricating and Assembling Occupations, Metal Products, N.E.C. 8510 Foremen: Fabricating and Assembling Occupations, Metal Products, n.e.c. 8511 Engine and Related Equipment Fabricating and Assembling Occupations, n.e.c. 8513 Motor Vehicle Fabricating and Assembling Occu-pations, n.e.c. 8515 Aircraft Fabricating and Assembling Occupations, n.e.c. 8523 Industrial. Farm. Construction and Other Mechan-ized Equipment and Machinery Fabricating and Assembling Occupations, n.e.c. 8525 Business and Commercial Machines Fabricating and Assembling Occupations, n.e.c. 8526 Inspecting, Testing, Grading and Sampling Occu-pations, Fabricating and AssemblingMetalProd-ucts, n.e.c. 8527 Precision Instruments and Related Equipment Fa-bricating and Assembling Occupations, n.e.c. 8528 Occupations in Labouring and Other Elemental Work, Fabricating and Assembling Metal Prod-ucts, n.e.c. 8529 Other Fabricating and Assembling Occupations, Metal Products, n.e.c. 853 Fabricating, Assembling, Installing and Re-pairing Occupations: Electrical, Electronic and Related Equipment Foremen: Fabricating, Assembling, Installing and Repairing Occupations, Electrical, Electronic and Related Equipment Electrical Equipment Fabricating and Assembling Occupations Electrical and Related Equipment Installing and Repairing Occupations, n.e.c. Electronic Equipment Fabricating end Assembling Occupations Electronic and Related Equipment Installing and Repairing Occupations, n.e.c. Inspecting, Testing, Grading and Sampling Occu-pations'. Fabricating, Assembling, Installing and Repairing Electrical. Electronic and Related Equipment Radio and Television Service Repairmen Occupations in Labouring and Other Elemental Work: Fabricating, Assembling, Installing and Repairing Electrical, Electronic and Rela'.ed Equipment Fabricating, Assembling, Installing and Repairing Occupations: Electrical, Electronic and Related Equipment, n.e.c. 8530 8531 8533 6534 8535 8536 8537 8538 8539 854 Fabricating, Assembling and Repairing Occu-pations, Wood Products 8540 Foremen: Fabricating, Assembling and Repairinc Occupations, Wood Products 8541 Cabinet and Wood Furniture Makers 8546 Inspecting, Testing. Grading and Sampling Occu-pations: Fabricating, Assembling and Repairing. Wood Products 196 LIST OF MAJOR, MINOR A N D UNIT GROUPS - C o n t i n u e d MAJOR GROUP 85-PRODUCT FABRICATING, ASSEMBLING AND REPAIRING OCCUPATIONS — Continued :>• 854 Fabricating, Assembling and Repairing Occu-pations, Wood Products — Concluded 8548 Occupations in Labouring and Other Elemental Work: Fabricating, Assembling .and Repairing, Wood Products : (8549 Fabricating, Assembling and Repairing Occupa-tions, Wood Products, n.e.c. 855/856 Fabricating, Assembling and Repairing Occupations: Textiles, Fur and Leather Products 8550 Foremen: Fabricating, Assembling and Repairing Occupations, Textile, Fur aid Leather Products 8551 Pattern making. Marking and Cutting Occupations: Textile, Fur and Leather Products 8553 Tailors and Dressmakers 8555 Furriers 8557 Milliners, Hat and Cap Makers 8561 Sboemaking and Repairing Occupations 8562 Upholsterers 8563 Sewing Machine Operators, Textile, and Similar Materials : 8566 Inspecting, Testing, Grading and Sampling Occu-pations: Fabricating, Assembling and Repairing, Textile, Fur and Leather Products 8568 Occupations in Labouring and Other Elemental Work: Fabricating, Assembling and Repairing, Textile, Fur and Leather Products e569 Fabricating, Assembling aid Repairing Occupa-tions: Textile, Fur and Leather Products, n.e.c. 857 Fabricating, Assembling and Repairing Occu-pations: Rubber, Plastic and Related Products 8570 Foremen: Fabricating, Assembling and Repairing Occupations, Rubber, Plastic and Related Prod-ucts 8571 Bonding and CementingOccupations, Rubber, Plas-tic and Related Products 8573 Moulding Occupations, Rubber, Plastic and Related Products 8575 Cutting and Finishing Occupations, Rubber, Plastic - and Related Products 8576 Inspecting, Testing, Grading and Sampling Occu-pations: Fabricating, Assembling end Repairing, Rubber. Plastic and Related Products 8578 Occupations in Labouring and Other Elemental Work: Fabricating, Assembling and Repairing, Rubber, Plastic and Related Products 8579 Fabricating, Assembling end Repairing Occupa-tions: Rubber, Plastic and Related Products, n.e.c. 858 Mechanics and Repairmen Except Electrical 8580 Foremen: Mechanics and Repairmen Except Elect-rical 85S1 Motor Vehicle Mechanics and Repairmen C5S2 Aircraft Mechanics and Repairmen 85S3 Rail Transport Equipment Mechanics and Repair-men MAJOR GROUP R5 — PRODUCT FABRICATING, ASSEMBLING AND REPAIRING OCCUPATIONS -Concluded 858 Mechanics and Repairmen Except Electrical — Concluded 8584. Industrial, Farm and Construction Machinery Me-chanics and Repairmen 8585 Business and Commercial Machine Mechanics and Repairmen 8586 Inspecting, Testing, Grading and Sampling Occu-pations, Equipment Repair Except Electrical 8587 Watch and Clock Repairmen 8588 Precision Instrument Mechanics and Repairmen 8589 Mechanics and Repairmen Except Electrical, n.e.c. 859 Other Product Fabricating, Assembling and Repairing Occupations 8590 Foremen: Product Fabricating, Assembling and Re-pairing Occupations, n.e.c. 8591 Jewellery and Silverware Fabricating, Assembling and Repairing Occupations 8592 Marine Craft Fabricating, Assembling and Repair-ing Occupations 8593 Paper Product Fabricating and Assembling Occupa-tions 8595 Painting and Decorating Occupations, Except Con-stmction 8596 Inspecting. Testing, Grading and Sampling Occu-pations: Product Fabricating, Assembling and Repairing, n.e.c. 8598 Occupations in Labouring and Other Elemental Work: Product Fabricating. Assembling and Re-pairing, n.e.c. 8599 Other Product Fabricating, Assembling and Repair-ing Occupations, n.e.c. MAJOR GROUP 87 —CONSTRUCTION TRADES OCCUPATIONS 871 Excavating, Grading, Paving and Related Occu-pation s 8710 Foremen: Excavating, Grading, Paving and Related Occupations 8711 Excavating, Grading and Related Occupations 8713 Paving, Surfacing and Related Occupations 8715 Railway Sectionmen and Trackmen 8718 Occupations in Labouring and Other Elemental Work: Excavating, Grading, and Paving 8719 Excavating, Grading, Paving and Related Occupa-tions, n.e.c. 873 Electrical Power, Lighting and Wire Communi-cations Equipment Erecting, Installing and Repairing Occupations 8730 Foremen: Electrical Power, Lighting and Wire Com-munications Equipment Erecting, Installing er.d Repairing Occupations B731 Electrical Power Linemen and Related Occupations 8733 Construction Electricians and Repairmen 8735 Wire Communications and Related Equipment Instal-ling and Repairing Occupations 197 L I S T O F MAJOR, MINOR AND UNIT GROUPS - Continued MAJOR GROUP 87 —CONSTRUCTION TRADES OCCUPATIONS - Concluded 873 Electrical Power, Lighting and Wire Communi-cations Equipment Erecting, Installing and Repairing Occupations — Concluded 8736 Inspecting, Testing, Grading and Sampling Occu-pations: Electrical Power, Lighting and Wire Communications Equipment Erecting, Installing and Repairing 8738 Occupations in Labouring and Other Elemental Work: Electrical Power, Lighting and Wire Com-munications Equipment Erecting, Installing and Repairing 8739 .Electrical Power, Lighting and Wire Communica-tions Equipment Erecting. Installing and Repair-ing Occupations, n.e.c. 878/879 Other Construction Trades Occupations 8780 Foremen: Other Construction Trades Occupations 8761 Carpenters and Related Occupations 8782 Brick and Stone Masons and Tile Setters 8783 Concrete Finishing and Related Occupations £764 Plasterers and Related Occupations S7SS Painters, Paperhangers and Related Occupations 8786 Insulating Occupations, Construction 8787 Roofing, Waterproofing end Related Occupations 8791 Pipe_tting, Plumbing and Related Occupations 8793 Structural Metal Erectors S795 Glaziers 8795 Inspecting, Testing, Grading and Sampling Occu-pations. Construction, Except Electrical 8798 Occupations in Labouring and Other Elemental Work. Other Construction Trades 8799 Other Construction TTrades Occupations, n.e.c. MAJOR GROUP 91-TRANSPORT EQUIPMENT OPERATING OCCUPATIONS S l l Air Transport Operating Occupations 9110 Foremen: Air Transport Operating Occupations 9111 Air Pilots, Navigators and Flight Engineers 8113 Air Transport Operating Support Occupations 6119 Ail Transport Operating Occupations, n.e.c. 913 Railway Transport Operating Occupations 9120 Foremen: Railway Transport Operating Occupations 9131 Locomotive Engineers and Firemen 9333 Conductors and Brekemen, Railway 9135 Railway Transport Operating Support Occupations 9139 Railway Transport Operating Occupations, n.e.c. 915 Water Transport Operating Occupations 9151 Deck Officers 9153 ELfineering Officers, Ship 9155 Deck Crew, Ship 9357 Er.fine and Eoiler-Room Crew. Ship 93 59 Water Transport Operating Occupations, n.e.c. MAJOR GROUP 91-TRANSPORT EQUIPMENT OPERATING OCCUPATIONS — Ccccluced 917 Motor Transport Operating Occupations 9170 Foremen: Motor Transport Operating Oceupat-ar.s 9171 Bus Drivers 9173 Taxi Drivers and Chauffeurs 9175 Truck Drivers 9179 Motor Transport Operating Occupations, c.e.c 919 Other Transport and Related Equipment Opera-ting Occupations 9190 Foremen: Other Transport and Related Equ::?n.-sr,t Operating Occupations 9191 Subway and Street Railway Operating Occcpariccs 9193 Motormen and Dinkeymen, Except Rail Transport 9199 Other Transport and Related Equiptnec- OperacLng-Occupations, n.e.c. MAJOR GROUP 93 —MATERIALS HANDLING AND RE-LATED OCCUPATIONS, N.E.C. 931 Materials Handling and Related Gccup«Ii«is, rue.c. 9310 Foremen: Materials Handling and Related Occupa-tions, n.e.c. 9311 Hoisting Occupations, n.e.c. 9313 Longshoremen, Stevedores and Freiast Easciers 9315 Materials Handling Equipment Operators, -L.ZJZ. 9317 Packaging Occupations, n.e.c. 9318 Occupations in Labouring and Other Eleariertai Work, Materials Handling 9319 Materials Handling and Related Occnparicas, s.s.c. MAJOR GROUP 95 — OTHER CRAFTS AND EQUIP-MENT OPERATING OCCUPATIONS 951 Printing and Related Occupations 9510 Foremen: Printing and Related Occupations 9511 Typesetters and Compositors 9512 Printing Press Occupations 9513 Stereotypers and Electroty pets 9514 Printing Engravers, Except Photoenpravets 9515 Photoengravers and Related Occupations 9517 Bookbinders and Related Occupations 9518 Occupations in Labouring and Other Elerr.-Kv.al Work, Printing and Related, n.e.c. 9519 Printing and Related Occupations, n.e.c. 953 Stationary- Engine and Utilities Equi-m^r.t Operating and Related Occupations 9530 Foremen: Stationary Engine aid Utilities Zq..~-~7.i Operating and Related Occupations 9531 Power Stetion Operators 9539 Stationary Engine and Utilities Ec;.:prr:-=r.: Oc-erat-ing and Related Occupations, n.e.c. 198 L I S T O F M A J O R , M I N O R A N D U N I T G R O U P S - C o n c l u d e d MAJOR GROUP 95-OTHER CRAFTS AND EQUIP-MENT OPERATING OCCUPATIONS - Continued 955 Electronic and Related Communications Equip-ment Operating Occupations, N.E.C. 9550 Foremen: Electronic and Related Communications Equipment Operating Occupations, n.e.c. 9551 Radio and Television Broadcasting Equipment Operators 9553 Telegraph Operators 9555 Sound Recording and Reproduction Equipment Oper-ators 9557 Motion Picture Projectionists .>•; 9559 Electronic and Relate'd'Communications.Equipment- - '• Operating Occupations, n.e.c. 959 Other Crafts and Equipment Operating Occupa-tions, N.E.C. 9590 Foremen: Other Crafts and Equipment Operating Oc-cupations, n.e.c. : . 9591 Photographic Processing Occupations . 9599 Other Crafts and Equipment Operating Occupations, n.e.c. MAJOR GROUP 99 —OCCUPATIONS NOT ELSEWHERE CLASSIFIED 991 Occupations Not Elsewhere Classified 9910 Supervisors and Foremen, n.e.c. 9916 Inspecting, Testing, Grading and Sampling Occupa-tions, n.e.c. 9918 Occupations in Labouring and Other Elemental Work, n.e.c. 9919 Other Occupations, n.e.c. MAJOR GROUP 00 —OCCUPATIONS NOT STATED i 000 Occupations Not Stated 0000 Occupation Not Stated. 

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