Researchers at San Diego State University and Bentley University examine the economic benefits of recreational cannabis legalization. Opponents of recreational cannabis legalization have argued that increased cannabis use could diminish motivation, impede cognitive function and harm health, ultimately affecting the economic wellbeing of adults. However, an analysis published by the National Bureau of Economic Research finds the opposite is true: Legalization of adult-use cannabis is actually associated with economic improvements and increased job opportunities.
Researchers at San Diego State University and Bentley University performed the study, which they said is the first to explore the impacts of recreational cannabis laws on employment, wages and labor market outcomes of working-age individuals. They used data from the 2002-2020 Current Population Survey Merged Outgoing Rotation Groups, along with various difference-in-difference approaches including TWFE and Callaway and Sant’Anna estimators.
Ultimately, the researchers said they found “little evidence that RMLs [recreational marijuana laws] adversely affect labor market outcomes among most working-age individuals.”
Rather, they found evidence of “modest increases” in employment and wages, especially among those over the age of 30 (often shorter-run gains), younger racial/ethnic minorities and those working within the agricultural sector.
“These results are consistent with the opening of a new licit industry for marijuana and (especially for older individuals) a substitution away from harder substances such as opioids,” researchers said.
The working paper’s introduction begins with two contrasting quotes from Elon Musk and Seth Rogan—Musk’s quote, “I’m not a regular smoker of weed … I don’t find that it is very good for productivity,” and Rogan’s, “I smoke a lot of weed when I write.”
The paper’s focus was not on cannabis and productivity among individuals, though a number of recent studies have explored that question with conflicting results. One 2022 study concluded cannabis use has no effect on motivation, though a 2016 study suggested improved performance and cognitive function for cannabis users. Others have concluded cannabis use could indeed lead to lower motivation.
Instead, this analysis explored broader economic trends following recreational cannabis legalization. Ultimately, the authors said that cannabis reform has introduced a new industry, which ultimately creates jobs and opportunities for the working class.
In addition to the bustling job opportunities, researchers said that legal cannabis access keeps more people away from other substances, like opioids or heavy alcohol use, that can lead to negative effects on productivity. They also note that, if cannabis is effective in improving physical or psychological health symptoms, these improvements could also work to generate “positive labor market spillovers.”
With legal cannabis, there is also reduced criminalization surrounding possession, once again allowing for better labor market outcomes, especially among young Black and Hispanic men, who have “disproportionately suffered diminished labor market opportunities due to having a criminal record,” researchers said.
Due to the relatively new market, researchers said the study was limited simply based on the limited period available to analyze. “Longer-run labor market effects may differ as we learn about the effects of RMLs on cognitive development and human capital acquisition of those under age 21, which could take time to unfold and be reflected in market level effects on productivity, wages, and/or employment,” they concluded. “Moreover, the labor market effects of reductions in criminal records could also take time to unfold.”
Researchers also said that it’s difficult to confirm how the new legal industry will evolve over time, citing the initial COVID-19 period as a “dramatic increase” for cannabis sales and the period following it “one of dramatically declining sales.”
“Nonetheless, our findings answer some important early questions about the economic consequences of recreational marijuana legalization,” authors said. Previous studies have confirmed an association between recreational cannabis laws and increased employment levels among older adults. Data compiled last year by Leafly and Whitley Economics also shows the cannabis industry added more than 100,000 new jobs in 2021 and employed more than 428,000 full-time workers at the time of its release.
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