Allowing Legal Marijuana Dispensaries Boosts Employment Rates In Colorado Counties, Study Finds

The legalization of adult-use marijuana in Colorado increased jobs and did not negatively impact worker productivity, according to a new study based on eight years of data from the state.

Researchers also found that unemployment fell in counties in which dispensaries opened, compared to counties in which dispensaries did not open. And overall employment increased, particularly in manufacturing, as a response to dispensaries opening in a county.

“In terms of jobs, it is clearly the counties with the recreational dispensaries that benefited most after Colorado legalized adult-use cannabis,” study co-author Avinandan Chakraborty, of the University of New Mexico, said in a press release.

Using county-level Colorado data from 2011 to 2018, and taking advantage of the variation across counties in terms of both the existence and the start dates of dispensary sales, the researchers tested for changes in the unemployment rate, employment and wages; overall and by industry subsector.

The study, published recently in the IZA Journal of Labor Economics, found that a dispensary opening triggered a decrease in the unemployment rate, driven by a 4.5 percent increase in employment rather than any reduction in labor force participation. The authors found no evidence of any increase in wages or labor force participation, however, leading them to conclude that this new employment appeared to be drawing from unemployed and self-employed workers, rather than pulling cannabis employees away from other industries.

“Overall, the findings in this paper provide evidence that recreational cannabis dispensaries improved county-level labor market conditions in Colorado.”

The authors, which also include a researcher from California Polytechnic University, say this appears to be the first published study on the effects of recreational marijuana legalization on labor market outcomes, beyond disability claims. And they credit the robust impact on labor market participation from adult use marijuana legalization in 2012 to the “long supply chain that includes cannabis cultivators, extraction services, product manufacturers, testing facilities, distributors, and retail stores.” Technology innovations in THC and CBD extraction and concentration also appear to be driving job growth in the industry.

Because marijuana production methods are often “labor-intensive, with, e.g., hand-trimming of individual cannabis flowers still common among commercial cultivators” as well as regulatory requirements resulting in an increased demand for testing and packaging services, the researchers found that in spite of the continued presence of the unregulated, traditional market, “most of the growth in the cannabis industry likely is driven by new, legal entities.”

“Our results suggest that policymakers considering recreational access to cannabis should anticipate a possible increase in employment.”

The authors also grappled with what this research means for newly legal adult use states, like New York and New Jersey, which are allowing local communities to ban marijuana businesses and New Mexico, where local governments are allowed to limit the number of dispensaries or restrict where they are located, but may not ban them entirely.

“Our results suggest that, by preventing counties from banning dispensaries, New Mexico’s approach to legalizing cannabis will yield more widespread employment benefits than those experienced in Colorado,” study co-author Sarah Stith of the University of New Mexico said. “In fact, we may already have begun experiencing some of the benefits as producers begin preparing for dispensaries to open in April 2022.”

As more policymakers at the state and local levels consider their responses to new legalization initiatives, the authors say that their results “suggest that policymakers considering recreational access to cannabis should consider employment effects as a potential outcome from recreational cannabis legalization but should also account for significant differences for counties with and without recreational dispensaries.”

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Photo courtesy of Chris Wallis // Side Pocket Images.