By DataTrek co-founder Jessica Rabe
With more than 26 million initial claims for US unemployment insurance over the last five weeks, legalizing recreational marijuana in more US states could provide the American labor market with a new, fast growing industry capable of millions of workers. Consider:
- Many cannabis-related jobs do not require a college degree. After a recession, those with less education tend to take the longest to get hired throughout an economic cycle. The marijuana industry could pull these types of workers into the labor market sooner.
Also important: it could offer employment to those most disadvantaged by the drug’s illegality and the inequality in the current legal system.
- The marijuana market could supply jobs to those who work in the service industry and were laid off because of the COVID-19 Crisis. Many restaurants and bars among other businesses will not survive the lockdown, so providing employment in similar service sector jobs is important. There will also be a raft of storefronts available to turn into dispensaries.
- The marijuana industry is relatively virus and recession proof. Most states have deemed dispensaries as essential businesses; some states even relaxed laws to allow curbside pickup and delivery. While sales may lessen as users turn to lower prices in the black market or cut discretionary purchases, similar to alcohol users don’t tend to stop altogether.
- Marijuana cannot cross state lines, so every state that legalizes retail cannabis has to create an entire infrastructure and supply chain from the grow process and transportation to dispensaries and lab testing, etc. That means a greater number of cannabis-related jobs per state.
To give you a better sense about the current size of the US cannabis labor market, here are a few points from Leafly’s 2020 annual jobs report:
- The US legal marijuana market employed 243,700 full-time-equivalent jobs as of early 2020. That was up 15% year-over-year despite a tough 2019 for the industry.
- Leafly started tracking the number of legal marijuana jobs four years ago because state agencies and the US Bureau of Labor Statistics do not count them since the product is classified as a Schedule I drug. Over that time, the legal cannabis industry has doubled in size by “creating nearly 121,000 full-time jobs”.
- “Massachusetts now has more legal cannabis workers than hair stylists and cosmetologists. Nevada has as many cannabis workers as bartenders. Illinois has twice as many cannabis workers as meat packers.”
- The upshot: “the legal cannabis industry continues to be America’s single greatest job creation engine, growing at a rate faster than any other industry over the past four years.”
As for earnings power, here are some stats from Glassdoor’s analysis of the industry in January 2019:
- The median salary for legal marijuana jobs is $58.5k a year, or +10% higher than the US median salary of $52.9k at the time.
- Glassdoor found a 76% y/y increase in cannabis industry job openings in December of 2018. That was with retail marijuana sales in just 7 states compared to 9 states currently.
- “53% of cannabis job openings are for professional and technical workers.” The top five included: Brand Ambassador, Sales Associate, Store Manager, Wellness Coordinator and Delivery Driver.
Just as we’ve been arguing that legalizing and then taxing marijuana sales could help states and cities cover their large budget shortfalls post-COVID – such as in New York and New Jersey – the same notion applies for getting people back on private sector payrolls. A few points here:
- Out of a population of 5.8 million, Colorado has roughly 35k cannabis jobs according to Leafly. We use Colorado as our example since it has the most mature (first to sell retail cannabis) and efficient (reasonable tax/regulatory structure) legal cannabis market in our opinion.
Even though California’s legal marijuana market employs more workers, it is not the best comp given that roughly three-fourths of its cities ban sales leaving the black market largely intact.
- New York has a population of 19.5 million and 2,941 legal cannabis jobs due to its medical marijuana market. New York’s population is 3.4 times that of Colorado, so multiplying this by the number of legal marijuana jobs in Colorado means New York could potentially employ +117k people. We think that is fair especially since New York receives significant more tourists (65 million visitors last year) than CO.
Initial claims for unemployment in New York totaled 395k for the week ended 4/11/2020 according to the latest state data. Legalizing sales of adult-use marijuana could at least cover nearly a third of those losses.
- New Jersey has a population of 8.9 million and 2,356 legal cannabis jobs from its medical market. The state’s population is 1.5 times the size of Colorado, and could potentially provide 53k marijuana jobs. That is almost 40% of the 141k initial claims filed in New Jersey for the week ended 4/11/20.
- Between New York and New Jersey, legalizing retail cannabis could add +170k jobs.
Bottom line: legalizing sales of recreational marijuana could add tens of thousands of high paying, quality jobs at all education levels in states across the US. Aside from tax revenue, this is another reason large US states like New York that have been deeply affected by the virus may try to speed up legalization.
While all this is not necessarily a reason to own publicly held legal marijuana stocks, it most certainly is a reason to keep this industry on your radar. This is, in the end, an industry with the power to disrupt existing consumer spending patterns at scale. Yes, it’s been in the wilderness of late. But we think the tremendous state-level economic pressures from COVID-19 could force legalization to happen more quickly than otherwise possible.