Kawerau residents say the town has become a scapegoat for declining paper markets and looming job losses will increase social problems.
Norwegian company Norske Skog on Monday confirmed plans to shut one of its newsprint machines early in 2013, halving production at the pulp mill.
Kawerau Intermediate School chair Trina Hayes says children are leaving to go to school elsewhere and the small Bay of Plenty town is dying.
Te Huinga Trust community worker Mate Tangitu, whose brother works at the mill, says Monday's announcement has been a long time coming.
She feels Kawerau is in a good place at the moment, so halving production at the mill will be terrible.
In April this year, the Ministry of Social Development said 19% of the town's 7000 residents were working-age beneficiaries, the highest percentage in New Zealand.
Ms Tangitu says the town also used to have a high youth suicide rate that only recently started to abate and job losses will make things worse.