Photo Credit: Yahoo.
In 2005, a Harvard professor of economics named Jeffrey A. Miron published a report titled “The Budgetary Implications of Marijuana Prohibition.” Funded by The Marijuana Policy Project (MPP), Miron concluded that cannabis legalization on a federal level would save the government $7.7 billion per year. He also estimated that the tax revenue would generate an annual income of $2.4 billion for the government.
While we’re still a long way from federal legalization, Miron’s predictions are ringing true today. With states all over the country lifting weed restrictions, the cannabis industry has experienced exponential growth. Today, we’re taking a deep dive into how legalization has impacted the economy.
The Beginning
It’s hard to discuss legalization without first detailing the government’s infamous War on Drugs. Not only has it failed spectacularly, but it’s also cost the U.S. a ridiculous amount of money. Miron’s assessment of the government’s prohibition spending remains spot on. Since 1971, the federal government is estimated to have spent about $1 trillion in its crusade against illegal substances, according to NBC.
Things began to shift in 1996, when California became the first state to legalize medical cannabis with the approval of Proposition 215. Colorado and Washington took things a step further in 2012, legalizing the plant for recreational purposes. Today, medical cannabis is legal in 38 states and recreational weed legal in 24.
Job Creation
As the industry continues to grow, new jobs are popping up everywhere from coast to coast. These openings include the more obvious options like budtenders, farmers, and botanists, as well as areas like marketing and accounting.
As a whole the cannabis industry has added over 23,000 new jobs in the past year, employing north of 440,000 full-time workers. This job growth eclipses more established fields like construction and retail trade. While growth has slowed in recent years, Forbes reported a 5.4% job growth in 2023.
Of those 440,000 cannabis jobs, the most popular sector is cultivation, making up 31% of jobs across the country. Retail and ancillary positions like budtender and delivery person come in second and third at 23% and 20% respectively. Rounding out the top seven in order are processing and manufacturing, wholesale, distribution, and testing labs.
California, the largest market in the U.S., had over 78,000 people working cannabis jobs as of March 2024, according to Vangst, an industry jobs platform. The state of Michigan has added over 11,000 jobs in the 2023 fiscal year alone, a 39% gain.
As of 2020, the state of Massachusetts saw cannabis workers outnumber hair stylists and cosmetologists. Nevada had as many cannabis workers as they did bartenders. Illinois had twice as many cannabis workers as meatpackers, according to a Leafly Jobs Report.
Raking in Revenue
Between 2022 and 2023, retail cannabis sales produced $28.8 billion. Statistica predicts that the country’s cannabis market will generate almost $43 billion in 2024, which would make the U.S. cannabis industry the biggest in the world in terms of revenue.
Miron’s point about tax revenue stands the test of time as well. According to the MPP, cannabis sales in legalized states have produced over $4 billion in taxes in 2023 alone. State governments can allocate some of these funds toward social services.
In 2022, for example, the city of Denver saw $54.8 million in tax revenue from cannabis sales. A large chunk of that money was put towards homelessness. Denver funneled $9 million into affordable housing and another $8 million into a local shelter. The rest of that money was used for cannabis regulation and education, investing in small businesses, and the city’s general fund.
Growing Pains
Unfortunately, it’s not all sunshine and rainbows for the cannabis market. Between 2016 and 2020, the industry saw unprecedented growth, with the number of cannabis jobs doubling in size. For five years in a row, the U.S. cannabis market never saw less than 15% year-to-year job growth.
This created some lofty expectations for the coming decade. Leafly’s 2020 Jobs Report estimated a 250% legal cannabis job growth by 2028. With the benefit of hindsight, this was unsustainable.
What happened instead was a plateau. By 2022, the industry took a step back, adding fewer jobs than the previous year for a growth rate of -2%. A rebound in 2023 brought a 5% bump, but still a far cry from previous years.
In some cases, legalization has caused many businesses to close. Since cannabis was legalized in California, the amount of growers and brands has dropped by 70% according to Mercury News.
Even this year, Whitney Economics predicted revenue from cannabis sales would total $31.4 billion dollars in 2024. They’ve also suggested that that number could double by the end of the decade. Halfway through the year, that projected 9.1% growth rate is looking more like 3 to 6%, according to the Green Market Report.
Improvise, Adapt, Overcome
It’s easy to look at the raw numbers, but identifying and figuring out how to solve these problems is much more complicated. We’ll start by looking at job growth by state. Of the top nine states in terms of cannabis job gains, Michigan is the only market considered “mature,” according to the Vangst. That growth was driven by over 100 new retail outlets opening in the state.
On the other side of the coin, California, Colorado, and Washington led the nation in job losses. It’s no coincidence that these were some of the first states to legalize recreational cannabis. As time goes on, the newer markets of today like New Jersey and Connecticut could meet the same fate.
Other variables that might’ve led to this post-boom falloff include high interest rates, reduced access to capital, the lack of federal cannabis reform, unlicensed competition, the high costs of regulations, and delinquent payments. It’s clear that in order to keep thriving, the industry will need to learn how to adapt once the hype dies down.
All told, the cannabis industry remains one of the country’s biggest job creators and generates billions in year-to-year revenue to local and state governments. As more states legalize the plant for both medical and recreational use, the cannabis economy will continue to boom.
Leave a Reply