Harsh economic tidal wave might hit region

BANGOR – It’s called “the ripple effect,” the economic distress that flows through a town or state when there’s a major layoff at a business or a permanent shutdown of operations altogether.

These days, it feels like Penobscot County and the state are bracing for more of a tidal wave than a ripple.

Since January, more than 1,350 paper industry jobs have been lost at two of the major paper companies in the county – 1,050 at Great Northern Paper Inc. in Millinocket and East Millinocket, and 300 at Georgia-Pacific in Old Town.

The economic shock wave already has begun, from video rental stores laying off part-time workers to small businesses cutting back hours just to save on costs. One Georgia-Pacific worker, a couple of hours after hearing that his job with the company no longer existed, was asking industry colleagues attending the annual Maine Pulp and Paper Foundation open house Friday in Bangor for work.

According to two nationally accepted economic formulas, for every paper mill job lost another two to 3.4 jobs at other businesses, from fast-food restaurants to professional services, are affected, most of them in the communities where the workers live.

That’s another 4,590 jobs that could be gone in the coming months.

“There is almost no job that’s not affected by any big change,” David Field, a professor of forest policy at the University of Maine, said after a speech at the foundation’s conference. “It’s not just what you feel in the town where the mill is located. It’s statewide.”

Pulp and paper industry jobs are among the best-paying in the state, with average wages exceeding $50,000 a year. And some of the industry’s manufacturing facilities throughout the state are the envy of other sites nationwide, said James McNutt, executive director of the Center for Paper Business and Industry Studies, who attended Friday’s conference.

“But somehow the behavior of man would screw it up,” he said.

For each job lost, whether it’s a paper millworker or a hamburger fryer, the state will lose an average annual wage of $30,000, said McNutt, adding that “it doesn’t take a rocket scientist” to figure out that the income loss is $169 million. That’s money that is spent on food, movies, electricity and clothes, among other items.

With Great Northern’s workers currently receiving at the most $280 a week in unemployment benefits, and Georgia-Pacific’s employees about to face the same kind of check, their loss of income is the first to be felt by businesses, Field said.

“People who work in Millinocket and Old Town were able to go to the Bangor Mall and buy more than the rest,” he said.

The loss of thousands of jobs and millions of income dollars are worries of Penobscot County, which is more heavily dependent on the pulp and paper industry than most places in the state. According to Field, if just the paper processing part of the industry that’s located in Penobscot County were killed, almost 9,000 jobs, or 10 percent of the county’s total employment, would be lost. Statewide, the job-loss number is more like 3 percent.

“You’re not going to solve the Old Town and Great Northern problems by worrying about them,” McNutt said.

Human behavior may “screw up” an industry, but it also can fix it, McNutt said. If immediate action is taken to repair a business climate that is negatively perceived on a national level as being anti-industry, the state may only have to “suck it up” for another 10 years of significant job losses before the tide turns around, he said.

“It’s hard,” McNutt said. “I think there is a light at the end of the tunnel. It’s just the light’s not yet on the train and the train’s not near the tunnel.”

Laurie Lachance, the state’s economist, said Maine is facing a “harsh reality” that the paper industry is financially hurting because of the high costs associated with running a business in the state, such as energy rates and taxes. State government in recent months has been awakening to the fact that the paper industry and other manufacturing sectors need help, and also have been hit with the statistic that manufacturers and their workers account for $1 out of every $5 in the state’s economy.

“There’s no doubt that this industry has reached a critical juncture,” Lachance said. “When you’re not attracting investment, more and more of these mills become obsolete. Some would suggest it takes a crisis to bring major changes among a structure, not small ones but major ones.”

Field said he agreed with Lachance.

“How many governors have we heard say, ‘We need to get electronics into the state; we need to get IT [information technology]; we need to get this or that,’?” Field said. “But they say, ‘The paper industry? We don’t have to worry about them.’ I don’t think anyone can say that anymore.”