Watching the Grass Grow: Does Recreational Cannabis Legalization Affect Labor Outcomes?

Abstract

Over the past several years, cannabis has become legal for recreational use in several U.S. 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. We study the markets for agricultural and retail labor in Washington and Colorado, early legalizers with now-established cannabis markets. Using a synthetic control technique to account for the possibility of border-state spillover effects and machine learning techniques for data imputation and variable selection, we find no evidence that cannabis legalization is associated with increases in per-employee wages, neither within industries most similar to cannabis production or retail, nor in more broad industry categories. We conclude that cannabis legalization is unlikely to negatively impact incumbent firms through the labor market channel.