Chicago Fed Insights

What the Closure of a Paper Mill Means for the Community of Wisconsin Rapids

November 24, 2020

Can Wisconsin Rapids reinvent itself once again? This was the central question raised at the November 18 Project Hometown virtual panel moderated by Steven Kuehl, senior advisor on community and economic development at the Chicago Fed. The paper mill in Wisconsin Rapids closed indefinitely on July 31 after 116 years of continuous operation, explained Kuehl. “The pandemic precipitated a sudden and dramatic decline in demand for paper produced at the Rapids mill,” accelerating long-term global trends in the industry, said Kuehl. The closure led to the loss of over 900 jobs to the detriment of the Wisconsin Rapids community and, more broadly, central Wisconsin, he added.

The unfortunate circumstances facing the community feel personal to Kuehl, who grew up just down the road from Wisconsin Rapids. Both his grandfathers worked at the paper mill. Kuehl sees the problem through a broader lens as well, remarking that, what Wisconsin Rapids is facing is part of a “transformational change” affecting similarly situated communities across the U.S.

Before the Wisconsin Rapids paper mill opened in 1904, there was a sawmill on the site that supported a vibrant lumber industry dating back to the late 1800s, explained Katie Weichelt, learning analyst at the Marshfield Clinic Health System and an independent geographer (her doctoral dissertation included an examination of the historical geography of Wisconsin Rapids and its impacts). With changes brought on by the railroad, the local lumber industry contracted, and Wisconsin Rapids’ sawmill operation ran into trouble, she said, but instead of closing, the company decided to stay and invest in new opportunities. The comeback was accomplished by local businesses getting together—a “group project,” Weichelt said. The newly formed company, Consolidated Papers, was successful, she surmised, because of its ability to collaborate, pool capital, seek out advice, adapt to new technologies, and diversify into new paper lines. This required a willingness to take risks, she added. Based on this historical experience, it is evident that this is not the first time Wisconsin Rapids has had to face significant challenges, Kuehl concluded.

Kristopher Gasch, who chairs the Incourage Community Foundation, said that Wisconsin Rapids was proud to be the smallest community in the U.S. to have had a Fortune 500 company headquartered there. Over the 100 plus years in business, including the most recent period of ownership under Verso, the paper mill has provided many benefits to the community, Gasch explained. “The paper mill gave us generations of employment,” he said, but added that “a lot changed in a short window of time requiring our community to change our mindset from one of dependency.”

“If we are not paper makers, what are we?” Gasch, asked rhetorically. The challenge facing displaced workers is significant with no quick fixes, and finding a new job can take up to a year, said Daniel Sullivan, executive vice president of the Chicago Fed. Losing jobs is hard on workers not just because of the need to find new employment but because, on average, earnings can be as much as 30% lower in the new positions, Sullivan added. The impact on earnings could continue ten years out, he noted. Younger workers are less affected as they have time to catch up, and those close to retirement are also less impacted because they have fewer working years left. It is the middle-aged folks, from ages 35 to 55, that take the hardest hit to earnings, he explained.

It is best when workers can use their existing skills and transfer them to a new setting, Sullivan remarked. Regarding the future of the paper industry, Paul Fowler, executive director of the Wisconsin Institute for Sustainable Technology, stated that “while it is true that graphic paper consumption is in steep decline, the global demand for fiber and paper-based products is increasing.” “Global mega trends” in this rapidly diversifying industry include the expansion of e-commerce, food packaging, hygiene products, and the anti-plastic sentiment, he explained. The demand for cardboard packaging to supply e-commerce giants like Amazon is strong, he noted, citing the example of a previously closed paper mill in Combined Locks, Wisconsin, that successfully restructured its production to take advantage of this brown paper market (as featured in the New York Times article from March 22, 2019, “The Great American Cardboard Comeback”). In regard to revitalizing the Wisconsin Rapids’ mill, virgin fiber production could potentially be a viable “differentiated space” to meet the growing demand for high-end next generation packaging and specialty materials, Fowler said. He concluded by pointing out that “there is a lot of work to do but the industry as a whole is not dying—it has a sustainable future ahead.”

The skills that workers at the paper mill possess can also be transferred to other industries that require a similar skill set, explained Sullivan. For example, auto workers who lost jobs in the past successfully pivoted into windmill production given the production similarities. Training workers for new jobs through community colleges and technical institutes can be a good option for some, he commented. While training can be effective, “one can’t really expect miracles” he said, and training is time intensive. Training is less well suited for workers close to retirement age, and it is also less likely to benefit those who do not do well in formal educational settings, he added. For those workers that could benefit from training, it is important that it takes place in fields where job openings exist. The linkages between training programs and employers are important, remarked Sullivan, and it is best if employers can contribute to the cost of this training.

Moving forward, Weichelt stressed the need for the community to seek out opportunities that make effective use of their collective resources and strengths and, also, to reach out to industry experts for advice, adapt to new technologies, and take risks. Reaffirming that latter point, Gasch remarked that the community has been asked to take on risks “even though that’s intimidating” in order to address the uncertain future. “Entrepreneurship is a skill set and we needed it in the 1880s and we need it today” added Kuehl.

Fowler discussed ways to keep Verso interested in locating a new owner for the paper mill, remarking that the Wisconsin Rapids Task Force has been helpful in negotiating with Verso and trying to get a better handle on the company’s plans. Fowler recommended leveraging Verso’s customers and investors as this was successful in other situations. For example, customers pressured Nestlé to switch to a more sustainable supplier of palm oil, and Proctor and Gamble’s shareholders pressured the company to stop using Canadian boreal forest timber.

In downtown Wisconsin Rapids sits the Tribune Building, originally a newspaper printing operation that was purchased by the Incourage Community Foundation in 2012 for use as a community space and resource. It is a “connector” of the region’s assets through the participation of industry, government, non-profits, and education, which Gasch explained is helping to facilitate approaches for economic renewal. Plans are underway to develop its new center for regional collaboration and innovation to further that effort, he added. “The world is run by those that show up” explained Gasch, adding that it is imperative that everyone in the community participates and that their voices are heard in shaping Wisconsin Rapids' path forward.

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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