Biological Diversity Ecosystem Condition and Productivity Soil and Water Role in Global Ecological Cycles Economic and Social Benefits Society's Responsibility
Economic and Social Benefits Distribution of Benefits Sustainability of Benefits
Indicator 5.2.1 - Forest area by timber tenure Indicator 5.2.2 - Distribution of financial benefits from the timber products industry
Indicator 5.2.2 - Distribution of financial benefits from the timber products industry
core indicator

The distribution of financial benefits from the forest products industry is an important indicator of social equity in our economic system, particularly because it accounts for the greatest portion of financial benefits from forest resources.

The three broad categories of recipients of financial benefits from the forest industry are industry workers, through wages and salaries; businesses, through profits; and governments, through stumpage, profits on public enterprise, and taxes.

Total real wages and salaries, adjusted for inflation, have remained relatively constant over time, for all three of the forest industry's subsectors (forestry and logging, wood products manufacturing, and paper manufacturing) after an initial decline in total wages at the onset of the recession of the early 1990s (Figure 5.2a). Total wages are a function of both changes in employment levels (Indicator 5.3.5) and average income (Indicator 5.3.6). Wood products manufacturing wages show a strong cyclical trend, while paper manufacturing is somewhat more stable. The real average wages in paper manufacturing are the highest among the forest industry subsectors, while total direct employment is highest in wood products manufacturing.

Figure 5.2a

Figure 5.2a Real wages and salaries of total production and nonproduction workers for the logging, wood, and paper industries. (Source: Statistics Canada 2004)
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Historically, corporate profits have been quite volatile and have followed a cyclical pattern, closely linked to the pattern of commodity price movements (Figure 5.2b). Profit growth was greatest from 1993 to 1995 and 1998 to 2000, while setbacks were experienced during the recession of the early 1990s and the Asian economic crisis in 1997.

Figure 5.2b

Figure 5.2b Real operating profits for the wood and paper industries. (Source: Statistics Canada 2006a)

Stumpage charges are payments made to governments for timber harvested, usually on the basis of a rate per cubic metre of timber harvested. Governments set stumpage prices using a variety of methods that differ significantly depending on the province and tenure type. In most cases, stumpage prices are regularly adjusted to reflect changes in the prices of key forest products. Total stumpage charges also reflect changes in harvest levels over time. The stumpage charges presented below are for timber harvested from provincial and territorial crown lands and should not be interpreted as a national summary because they do not include information on stumpage payments for timber harvested from private land (Figure 5.2c).

Figure 5.2c

Figure 5.2c Real stumpage charges. (Source: CCFM 2006)
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Since 1990, stumpage charges have generally tracked forest product prices, following a somewhat cyclical trend. Significant changes to stumpage pricing systems over time have also affected the total stumpage collected by provinces.

Taxes paid to governments mirror business profitability over time and these trends have already been discussed (Figure 5.2b). As expected, the effect of the business cycle on taxes is obvious, starting with the recession of the early 1990s (Figure 5.2d).

Figure 5.2d

Figure 5.2d Real income taxes for the wood and paper industries. (Source: Statistics Canada 2006a)
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The previous information allows a broad comparison of financial benefits from the Canadian timber products industry that flowed to industry workers, businesses, and governments, averaged from 1990 to 2002 (Figure 5.2e). This analysis does not take into account all the financial flows involved. For instance, it includes only the income tax payments made by the business to the government, and not those paid by the employees of the timber products industry. Similarly, operating profits represent only wood and paper manufacturing.

Figure 5.2e

Figure 5.2e Average financial benefits to labor, businesses, and governments (1990-2002). (Sources: Statistics Canada 2005a, CCFM 2006)

Nonetheless, this comparison illustrates that significant financial benefits from the timber products industry do in fact accrue to each of the three broad categories of recipients: labor, businesses, and governments. In fact, if profits from logging were added to financial benefits accruing to businesses, and personal income tax payments were added to financial benefits accruing to governments in Figure 5.2e, the graph would show financial benefits distributed even more equitably among the three groups of recipients.

Despite its cyclical nature, a large number of workers, shareholders, and governments rely heavily on the Canadian forest sector to generate wealth and derive earnings and income and each has a stake in ensuring its sustainability.