The local paper industry was well established before the 1950s. In recent decades it has undergone a series of contractions. Unlike other clusters in the region, the paper industry has been gradually declining as a consequence of wider global and national market trends. In 1958, the industry employed 10,700 workers; in 1969, 7,800 workers, and today, the industry employs only 6,000 workers or 2.0 percent of the region's work force.

The paper industry as a whole is characterized by a harsh market environment. Newsprint prices have fallen by more than 30 percent in the past year, some coated papers by 25 percent and uncoated grades by 15 percent. At the same time, high costs, old equipment and an aging work force plague the local business environment. The declining industry and local economic input challenges have combined to exert negative pressure on regional employment. For example, the region's mills lost nearly all of their share of the large cereal box market to out-of-state competitors. Among these are Fort James's loss of Kellogg's cereal box contract and the closure of Battle Creek's Michigan Cartons.

Despite its troubles, the paper industry remains a major player in the area's economic base. Local firms are primarily export-based- 97 percent of the industry's workers depend on the sale of their product to out-of-the region customers. Although it accounts for only 2 percent of the region's total employment, paper makes up nearly 9 percent of the region's total manufacturing work force and 4.6 percent of its export-base employment. Moreover, it provides good-paying jobs. In 1995, average annual earnings reached over $43,000 which was 88 percent above the region's average wage for that year. But the paper industry, like most of the region's manufacturing clusters, has a very limited supplier-base. On average, for 100 new jobs in the industry, only 4 new manufacturing jobs would be created by the region's other manufacturers.

The region possesses an important R&D asset with the presence of Western Michigan University's Paper Technology Institute. One of only nine paper technology institutes across the nation, the WMU program is highly regarded and unique in its capacity to train and conduct research in pulping, paper and printing. The Institute plays a significant role in the global and national paper industry with important ties across a wide range of multinational companies such as ABB Industrial Systems, Beloit Corporation, International Paper, Mead Corporation, Champion International Corporation and Georgia-Pacific Corporation.

Our region's paper industry is holding its own. Over the period from 1989 to 1995, local jobs in paper manufacturing grew at about 0.7 percent annually whereas U.S. employment was flat during that same time. With the August opening of Green Bay Packaging's new 312,000 square-foot production/administration facility, the regional paper industry received much well-deserved publicity and recognition. The new facility increases the company's local capacity to produce corrugated carton packaging by up to 50 percent.

Benchmarking: How Do We Compare?

The region's paper industry has been stuck in low gear. Regional earnings in the paper industry were $77 million lower than if regional firms kept up with their national counterparts. Of com- petiting metropolitan areas in the Great Lakes, the Kalamazoo-Battle Creek area ranked near the bottom.