The effects of recreational cannabis access on labor markets: evidence from Colorado

Abstract

Recreational cannabis markets possibly increase labor demand through investments in facilities for growing, processing, and retail sales of cannabis, as well as through other industries such as manufacturing, leisure, and hospitality. However, this increase in labor demand may vary substantially across counties within a state as most states with legal recreational cannabis allow individual counties to ban commercial cannabis sales. Meanwhile, labor supply may change through positive and negative effects from cannabis use. Using county-level Colorado data from 2011 to 2018 and exploiting variation across counties in the existence and timing of the start of dispensary sales, we test for changes in the unemployment rate, employment, and wages, overall and by industry subsector. Consistent with an increase in labor demand, we estimate that the sale of recreational cannabis through dispensaries is associated with a 0.7 percentage point decrease in the unemployment rate with no effect on the size of the labor force. We also find a 4.5% increase in the number of employees, with the strongest effects found in manufacturing. We find no effect on wages. Given the lack of a reduction in labor force participation or wages, negative effects on labor supply are likely limited, in line with the existing literature. The decrease in unemployment, coupled with an increase in the number of employees, indicates that labor demand effects likely dominate effects on labor supply. Our results suggest that policymakers considering recreational access to cannabis should anticipate a possible increase in employment.

Does expanding access to cannabis affect traffic crashes? County‐level evidence from recreational marijuana dispensary sales in Colorado

“…Dragone et al (2019) found that recreational marijuana legalization in Washington is associated with a reduction of rape and thefts, while the opening of retail cannabis stores in Denver is associated with an increase in property crimes (Connealy et al, 2020). On the labor market, the creation of the newly legal cannabis industry can increase labor demand, reducing unemployment (Chakraborty et al, 2021). My analysis contributes to these studies by examining the potential effects of recreational marijuana dispensaries on traffic crashes, which is one of the main concerns of expanding access to marijuana.…”

Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization

“…Four studies examine the impact of recreational marijuana access on labor market and social insurance outcomes. First, Chakraborty et al (2021) show that the opening of dispensaries in Colorado reduces unemployment rates but has minimal effects on labor market participation or wages. Second, Dong (2020) finds that workplace injuries in Oregon increase after a county legalizes the sale of recreational marijuana.…”

“…RMLs may also offer a boost to the economy (Chakraborty et al, 2021;Dave et al, 2023). Improved labor market opportunities could increase WC receipt as there are more employed individuals at risk of a work-related injury.…”

“…The CBP captures the universe of businesses establishments in the U.S. and is based on Internal Revenue Service tax filings. We consider two measures of establishments: total number of establishments and number of establishment in industries plausibly related to the recreational marijuana market as categorized by Chakraborty et al (2021). 38 Data are converted to an annual rate per 100,000 residents in the state, and we weight the data by the state population.…”

“…Please seeChakraborty et al (2021) for a thoughtful motivation for these specific industries. Broadly, the authors discuss how the demand and supply sides of the market can potentially be impacted by the legalization of recreational marijuana sales, with these industries being the most likely to be influenced by this policy change.…”