Recreational Marijuana and Economic Development

Recreational Marijuana and Economic Development

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November 7, 2023
Recreational Marijuana and Economic Development
Advocates of legalizing the use of marijuana for
Administration’s (FDA’s) review of marijuana, as
recreational purposes sometimes argue that taking such a
requested by President Biden in 2022. A DEA official
step could potentially create economic benefits. For
testified in a 2020 congressional hearing that DEA is bound
example, when Colorado voters considered Amendment 64
by FDA’s recommendations on scientific and medical
in 2012—an ultimately successful ballot initiative to allow
matters, which could make it likely that DEA will
recreational marijuana in the state—the Colorado
reschedule marijuana according to HHS’s recommendation.
legislature’s accompanying nonpartisan voting guide noted
For more details, see CRS Insight IN12240, Department of
that one of the arguments in favor of the amendment was
Health and Human Services Recommendation to
that “the measure will … add sales tax revenue and may
Reschedule Marijuana: Implications for Federal Policy.
add job opportunities to the state economy.”
Despite marijuana’s Schedule I status, in recent years a
Some Members of Congress have made similar claims. A
number of states have repealed state criminal prohibitions
2018 report published by Democrats on the Joint Economic
on recreational marijuana, although it remains illegal under
Committee stated that “the legalization of cannabis has
the CSA. According to the National Conference of State
significant implications for state economies, as well as the
Legislatures, as of June 2023, 23 states and the District of
national economy…As more states move to legalize
Columbia allow recreational marijuana.
cannabis, these numbers will only continue to rise,
potentially providing a new stream of revenue and jobs to
Economic Development Possibilities
local economies.” Other sources suggest that economic
Policy discussions about recreational marijuana sometimes
gains from recreational marijuana may be relatively muted,
occur in the context of potential economic benefits—
or concentrated in certain sectors.
primarily jobs. Broadly speaking, jobs in the recreational
marijuana industry belong to one of four categories:
Assessing the economic effects of recreational marijuana
can be difficult. One reason is that the recreational
• Cultivators and producers: These entities grow and
marijuana industry is young. Colorado, the first state to
harvest recreational marijuana.
legalize recreational marijuana, did so in 2012, with sales
• Manufacturers and processors: These entities turn
beginning in 2014. As a result, it is hard to discern long-
unprocessed marijuana into finished recreational
term trends. Another complicating factor is the fact that
products such as edibles and tinctures.
marijuana remains illegal at the federal level and federal
• Testers: These entities conduct potency and
agencies such as the Bureau of Labor Statistics (BLS) and
contaminant testing for retail marijuana businesses.
Bureau of Economic Analysis (BEA) can only collect
limited information related to marijuana. This In Focus
• Retailers: These entities sell recreational marijuana to
provides context on recreational marijuana and economic
consumers.
development. It does not address medical use of marijuana.
While these categories represent the bulk of direct
recreational marijuana-related jobs, some have argued that
Federal and State Legal Status of
jobs in other industries may also benefit from recreational
Marijuana
marijuana. For example, an October 2022 article from the
Marijuana is a Schedule I controlled substance under the
Federal Reserve Bank of Kansas City found that the
Controlled Substances Act (CSA, 21 U.S.C. §801 et seq.).
emergence of the recreational marijuana industry
This means the CSA prohibits the manufacture,
throughout the Tenth Federal Reserve District had led to
distribution, dispensation, and possession of marijuana
stronger demand for commercial real estate, as recreational
except in federal government-approved research studies.
marijuana businesses purchased or rented industrial
For more details on marijuana’s federal legal status, see
facilities that had otherwise been unoccupied. (The Tenth
CRS Report R44782, The Evolution of Marijuana as a
Federal Reserve District includes Colorado, which, along
Controlled Substance and the Federal-State Policy Gap.
with Washington, was one of the first states to open
recreational marijuana markets in 2014.)
In August 2023, the Department of Health and Human
Services (HHS) recommended to the Drug Enforcement
While the federal government collects limited data on
Administration (DEA) that marijuana be rescheduled from
marijuana-related jobs, other organizations—sometimes
Schedule I to Schedule III under the CSA. As a Schedule III
affiliated with the marijuana industry—offer relevant
controlled substance, marijuana would be eligible for
information. As Figure 1 shows, according to the marijuana
medical use while maintaining federal criminal control over
employment agency Vangst, total marijuana-related jobs in
unauthorized use of the substance pursuant to the CSA. The
the United States more than tripled from 2017 to 2023,
recommendation is based on the Food and Drug
though with a slight decline in the number of jobs between
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Recreational Marijuana and Economic Development
2022 and 2023. That decline may reflect contractions in the
Notes: Dollars in mil ions.
marijuana industry after it appeared to experience strong
growth during the early part of the COVID-19 pandemic.
Considerations for Congress
Recreational marijuana’s potential economic effects may be
Figure 1. U.S. Marijuana-Related Jobs, 2017-2023
a factor in any congressional actions on the substance.
However, as noted, there are limited federal data sources
concerning marijuana’s potential economic impact. Should
Congress wish to collect more information on recreational
marijuana’s potential impacts on economic development, it
could consider directing BLS, BEA, or other agencies to
develop and collect metrics related to marijuana. Obtaining
such information from nonpartisan sources could help
provide context for any potential legislative pursuits.
Congress may consider acting on marijuana’s Schedule I
status. Congress could de-schedule or reschedule marijuana
under the CSA and/or repeal associated criminal provisions.
In the 118th Congress, the Marijuana Opportunity
Reinvestment and Expungement (MORE) Act (H.R. 5601)
Source: Vangst, Jobs Report 2023, https://vangst.com/blog/2023-
would remove marijuana from control under the CSA. (A
jobs-report.
version of the bill in the 117th Congress, H.R. 3617, passed
Notes: Includes direct and indirect jobs. 2023 data is from February.
the House but not the Senate.) Conversely, Congress could
opt to encourage enforcement of the CSA and push for
Recent marijuana-related job growth is unevenly distributed
federal law enforcement to dismantle state recreational
among states. In a 2023 report, Vangst noted that some of
marijuana programs. Congress could also take no action.
the states that have had recreational marijuana for the
longest periods, including Colorado, Nevada, and Oregon,
If Congress were to decide to de-schedule or reschedule
experienced some of the largest marijuana-related job
marijuana or otherwise allow for a federal system of
losses that year, while states that introduced recreational
legalized recreational marijuana, there may be questions of
marijuana more recently, such as Missouri and New Jersey,
whether and how to impose a federal tax on marijuana. By
saw the largest job gains. This echoes research, including a
way of comparison, the federal government imposes excise
2019 report from the Pew Charitable Trusts, that found that
taxes on tobacco. Recreational marijuana’s tax structure
state recreational marijuana markets often have strong
could affect its economic development potential. For
growth immediately after introduction, but that growth may
example, some research has suggested that high marijuana
slow—or potentially even decline—over time.
tax rates—and resulting high recreational marijuana
prices—may contribute to the risk of turning potential
COVID-19 Pandemic Impact
consumers toward the untaxed black market, in turn
As mentioned, the pandemic also appears to have impacted
jeopardizing recreational marijuana’s economic potential.
the recreational marijuana industry. Various studies suggest
On the other hand, higher tax rates could deter potential
marijuana use may have increased during the pandemic, as
consumers—especially those that may be new to
many people found themselves unable to engage in regular
recreational marijuana and unlikely to purchase from the
social activities. Figure 2, which provides recreational
black market—from using recreational marijuana at all,
marijuana sales figures for Colorado, shows that trend in
which may be a policy goal for some lawmakers. In this
2020, with slowing sales in the pandemic’s later years.
way, public health and economic development goals for
recreational marijuana could, to some extent, be at odds.
Figure 2. Colorado Recreational Marijuana Sales,
2014-2022
Partly due to its Schedule I classification, recreational
marijuana businesses often have difficulty accessing certain
financial services, including deposit accounts and
insurance. This can create uncertainty for recreational
marijuana businesses, and could make it harder for them to
grow and provide greater employment. In the 118th
Congress, the SAFER Banking Act (S. 2860) would, among
other things, restrict federal regulators’ ability to terminate
a deposit account for a recreational marijuana business and
create a safe harbor from federal law for transactions with a
state-sanctioned recreational marijuana business and any
entity handling that business’s proceeds. The Senate
Committee on Banking, Housing, and Urban Affairs
reported S. 2860 on September 28, 2023, and the bill was
Source: Colorado Department of Revenue, Marijuana Sales Reports,
placed on the Senate legislative calendar.
https://cdor.colorado.gov/data-and-reports/marijuana-data/marijuana-
sales-reports.
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Recreational Marijuana and Economic Development

IF12529
Adam G. Levin, Analyst in Economic Development Policy

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