This memo was drafted in March 2019 for informational purposes for the City of Philadelphia Department of Commerce. It does not in any way represent the Department of Commerce’s opinion or policy on this matter.
Executive Summary
Medical marijuana is legal in thirty-three streets and the District of Columbia. Ten states and the District of Columbia have fully legal adult marijuana markets. Estimates show the United States marijuana approaching nearly $50 billion in sales annually. In PA alone, a fully legal market would be estimated at $1.66 billion annually, with tax revenues of roughly $600 million. The industry would create tens of thousands of new direct and indirect jobs annually, many requiring no advanced education. Innovations in policy, such as requiring diversity in leadership of marijuana businesses, preference to disadvantaged communities, and micro licenses, help ensure inclusive growth as the industry matures.
How many states have legalized marijuana? And to what degree?
As of March 2019, thirty-three states plus Washington D.C. have legalized marijuana for medical purposes. Another ten states plus Washington D.C. have fully legalized marijuana for adult use. Several more, including New Hampshire and New Mexico, are poised to approve legalization for adult use. While it is currently an illegal drug under federal law, recent reports suggest that Congress could soon introduce legislation for fully legalizing marijuana nationwide. More locally, New York, New Jersey, and Delaware all permit the sale of medical marijuana, and all three have also introduced legislation in the last year that, if passed, would make marijuana fully legal for adult use. New York Governor Andrew Cuomo has changed his view on legalization in recent months, in part due to fears of losing sales over the border to states such as Massachusetts or Vermont.
Current State: How have Pennsylvania and Philadelphia dealt with medical marijuana?
On April 17, 2016, the state of Pennsylvania’s Medical Marijuana Program was signed into law. It established three types of permits – Growers & Processors, Dispensaries, and Clinical Research – which allow for narrow permissions within each niche. Geographically they are spread across six regions – Philadelphia County is part of Region 1 (Southeast). Philadelphia is currently home to five Dispensaries, and zero Grower/Processor facilities. There are also five Clinical Research permits in Philadelphia, associated with some of the city’s top academic institutions: Temple University, Drexel University, University of Pennsylvania, Thomas Jefferson University, and Philadelphia College of Osteopathic Medicine.
Pennsylvania requires several Diversity and Inclusion items as part of their application for permits, which are scored to aid in decision making. In our preliminary research, there does not appear to be another state offering full adult legalization with a similar requirement for diversity and inclusion. These plans cover diversity of those hired by the organization – with a requirement of at least one diverse hire on the leadership team; Diversity in contracts – applicants must provide a percentage of contracts given to diverse contract firms; and a Community Impact Score – related to the number of jobs created, site selection, etc. These are well-intentioned incentives meant to avoid a direct transfer of wealth from the marijuana black and grey markets to a wealthy group of investors. Further policy innovations in full legal markets are addressed later in this memo.
What is the economic impact of the legalized marijuana market?
A 2015 report from the Marijuana Policy Group conducted a true input-output analysis – the best practice for measuring total impact. Their research team estimated a 2.4 multiplier for the marijuana retail industry in Colorado. In other words, for every $1.00 invested, $2.40 is generated to the economy. While this measure would need to be recalculated for Philadelphia, even a conservative estimate would place it in line with the largest economic drivers in the region. Additionally, multiplier effects from production of edible products and cultivation would be generated as well.
In July 2018, Pennsylvania Auditor General Eugene DePasquale released a report on potential economic impacts of marijuana legalization in the state. Using the average adult consumption from Colorado and Washington state as the basis, his office estimates a $1.66 billion sector, leading to approximately $581 million in annual tax revenue. This does not include any additional revenues gained through payroll taxes, indirect employment, or marijuana tourism. Studies have also shown that adult use actually increased by about one-third over the first three years of legalization, while underage use falls due to limited black and grey market sales.
How many and what kind of jobs would be created?
A recent survey by cannabis-specific recruiting firm, Vangst, shows a 690% growth in cannabis job listings between January 2017 and August 2018. Roles tracked in the survey include the full range of experience and salary levels relevant to the industry. As an example, Budtenders and Trimmers, who require the lowest level of experience, range from $11.50/hr to $16/hr. White collar work commanded a range of salaries from $45,000 on the low-end to a high of $250,000 per year. Due to significant competition for talent as the new industry blossoms, salaries measured by the survey increased 16% from 2017 to 2018. At less than half the population of Philadelphia, Colorado was able to generate over 18,000 direct and indirect jobs in 2015 alone. Examples of indirect employment created include security guards, commercial real-estate agents, construction and HVAC specialists, consulting, legal, and advisory services, and other business services.
One policy innovation being pursued in New Jersey would require a certain quantity of permits be reserved for Micro-licenses. Micro-licenses allow license holders to operate much the same way — growing, processing or selling marijuana — but at a smaller scale, which lessens the capital burden at the start. Lawmakers are also considering giving preference to license applications from areas disproportionately affected by marijuana arrests or, alternatively, to areas with high levels of unemployment. Both policies are aimed at more inclusive growth for the industry as it matures.
Conclusions and Recommendations
In terms of public opinion and legislative results, marijuana legalization may be more popular than anytime in US history. Momentum at the local, state, and federal levels, while varying, is moving in a clear direction in favor of legal adult use. Any discussion of policy should consider both the positive and negative externalities of such a decision, including:
- How might we address concerns about public health? While research does not show marijuana to be any more dangerous than cigarette smoke or alcohol consumption, issues such as tests for impaired driving and underage consumption must be addressed.
- If Pennsylvania law differs from neighboring states, how might law enforcement officials coordinate to ensure successful policing of residents?
- How might Philadelphia build on the state’s efforts to create an inclusive marijuana industry?
Joe Buckshon 