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Analysis: Adult-Use Cannabis Leads to Economic Improvements, More Jobs

Some opponents of legalizing recreational marijuana argue that it could lead to a decline in motivation, cognitive dysfunction, and health problems, which can ultimately affect the financial wellbeing of adults. The National Bureau of Economic Research has published an analysis that shows the contrary. Legalization of cannabis for adult use is associated with increased employment opportunities and economic improvement.

The study was conducted by researchers at San Diego State University, Bentley University, and is believed to be the first ever to examine the effects of recreational marijuana laws on the employment, wages, and labor market outcomes for working-age people. 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. A 2022 study found that cannabis does not affect motivation. However, a 2016 study showed cannabis users have better cognitive functions and performance. Other studies have shown that cannabis could lead to lower motivation.

This analysis focused on the wider economic implications of recreational marijuana legalization. The authors concluded that legalization of cannabis has created a new industry which eventually creates opportunities and jobs for the working classes. 

Research shows that legal cannabis access helps people avoid other addictive substances like heroin and alcohol, which can have a negative impact 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.

Because the market was relatively new, the researchers stated that their study was not complete due to the short time frame available for analysis. 

“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.

Studies in the past have shown a correlation between recreational marijuana laws and higher employment rates among seniors. Leafly and Whitley Economics released data from last year which shows that the cannabis industry created more than 100,000 additional jobs in 2021 and had more than 428,000 employees at the time.