Watching the grass grow: does recreational cannabis legalization affect retail and agricultural wages?

BACKGROUND

Over the past several years, cannabis has become legal for recreational use in many US states and jurisdictions around the world. The opening of these markets has led to the establishment of hundreds of cannabis production and retail firms with accompanying demand for labor, leading to concerns about spillover effects on wages from incumbents.

METHODS

We study the markets for agricultural and retail labor in Washington and Colorado from 2000 to 2019 using differences-in-differences with synthetic controls. We employ employment data from the Quarterly Census of Employment and Wages, state-level demographic data from the US Census Bureau, and agricultural data from the National Agricultural Statistics Service. We use the least absolute shrinkage and selection operator (LASSO) for variable selection and classification and regression trees (CART) for chained imputation of missing values.

RESULTS

We find little-to-no evidence of a significant difference in weekly wages per worker generated by cannabis legalization: the log of the weekly wage per worker decreases by 0.013 in Washington's agricultural sector (p value 0.091) and increases by 0.059 in Washington's retail sector (p value 0.606). Results in Colorado are qualitatively similar. These results are limited in part by the short post-legalization period of the data.

CONCLUSIONS

Cannabis legalization is unlikely to negatively impact incumbent agriculture or retail firms through the labor market channel.