Cannabis Legalization Could Help The U.S. Financially Recover From COVID-19

Posted by Dave Kaplan
4 years ago / May 28, 2020

Cannabis Legalization Could Help The U.S. Financially Recover From COVID-19

Cannabis Key to U.S. COVID Recovery


COVID-19 has wreaked havoc on the U.S. economy since the middle of March, when President Trump first declared a national emergency.

Since then, the unemployment rate has spiked from 3.5% to a staggering 14.7%, with experts projecting it could surge to 25% in the coming months. Manufacturing production has also plunged at unprecedented clips from pre-pandemic levels and non-essential businesses have been forced to close their doors to the public. Sadly, many of those doors will never open again.

The situation is dire, to say the least, and some forecast models predict it could get even worse before it improves. Yet, not every industry has been equally affected by COVID-19. While the vast majority of them have experienced considerable setbacks and some are even teetering on the brink of extinction, the cannabis industry has weathered the storm and is even thriving in some jurisdictions. So much, in fact, that some industry experts believe cannabis could provide the U.S. with the economic boost it will so surely need in the aftermath of the pandemic if state governments decide to legalize it at the recreational level.

How Has The Legal Cannabis Industry Fared During The Pandemic?

The industry has certainly benefited from most medical and all recreational states other than Massachusetts declaring cannabis an “essential item”. This has allowed plant-touching and ancillary businesses within the industry to remain open, and sales have surged as a result. In California, cannabis sales increased to an all-time high of $319 million for the month of March following the state’s issuing of stay-at-home orders. Although they dipped to $300 million in April, more cannabis is still being sold now than prior to the pandemic.

California's Adult-Use Market Size Since March 2018

California’s Adult-Use Market Size Since March 2018. Credit: Headset Insights Pulse

Washington’s cannabis sales have also spiked due to COVID-19, according to Headset. Cannabis sales there totaled $115 million and $112 million in March and April respectively, an average of approximately $20 million more per month than the 5-month average that preceded the pandemic. Oregon, too, has seen a tremendous boost in its cannabis sales over the last two months. In March, the Beaver State set a new monthly record with $84.5 million in cannabis sales and then broke it again in April after doing $89 million in sales.

Medical marijuana sales and registrations have also increased significantly in the wake of COVID-19. Arizona’s medical sales increased by 50% in March as a result of patients purchasing 17,000 pounds of cannabis during the month. In Florida, medical sales have risen by 30% over the last two months and 30,000 new patients have registered for cannabis cards since mid-Janury. And in Massachuetts, the only state that shut down its recreational cannabis retail operations due to the pandemic, medical marijiuana card registrations have skyrocketed by 245%!

Cannabis is clearly booming and has become, to an extent, a driving force in these economies. So how could it help struggling states that are considering legalizing cannabis when normalcy eventually returns to our lives? In two ways:

(1) It Would Provide Needed Sales Tax Revenues

With non-essential businesses closed and non-essential workers at home in a vast majority of the U.S., people simply aren’t out spending money. This has resulted in a drastic drop in state tax revenue, which has been restricted to online purchases and limited sales at essential brick and mortar businesses.

The U.S. Census Bureau recently reported that nationwide retail sales dropped 8.3% from February to March and then plummeted another 16.4% in April. This sharp decline is obviously problematic everywhere in the U.S., but potentially catastrophic for states whose budgets are particularly reliant on sales tax revenue. In 2016, sales tax revenues accounted for more than 25% of total state tax revenues in 22 of the 50 states. Yet, of the top 15 states that led the way in this statistic, only Washington and Nevada have legalized the sale of recreational cannabis and are generating substantial sales tax revenue from this sector. It won’t be enough to offset all of their sales tax revenue losses, but every dollar helps given that this money is used to fund infrastructure, education, and emergency services.

US State Reliance on Sales Tax Revenues

Credit: tax

Recent estimates suggest that $56 billion worth of cannabis is sold annually in the U.S. Of this amount, 90% is purchased through the black market, which means that state governments are missing out on windfalls of potential sales tax revenue every year! How long do you think that will continue to go on in the aftermath of COVID-19 if the U.S. economy falls into a recession?

Several states, including New York, New Jersey, and Connecticut, were starting to recognize cannabis for the untapped cash cow it is and were making strides toward legalization before the pandemic struck. Now we’re even seeing some conservative states that have historically taken anti-cannabis stances start to consider the economic benefits that recreational legalization would bring.

(2) It Would Create Jobs

COVID-19 has resulted in the worst unemployment rate since the Great Depression. Over 26 million jobs have been lost since the pandemic struck the U.S. and an additional 5 million Americans have had their work hours reduced. Many have also been forced to take pay cuts. Unemployment claims have skyrocketed as a result, with more than 33 million Americans filing for unemployment benefits over the last two months.

To help struggling Americans make ends meet, the federal government created a $2.3 trillion stimulus package that over the next four months provides an additional $600/week in unemployment benefits for anyone who qualifies. These stimulus checks, for the most part, have been welcomed by Americans, many of whom are now earning more over the next four months than they did prior to losing their livelihoods. But they don’t solve the larger issue of getting Americans back to work or help to create jobs. In effect, they’re a short-term patch. Not a long-term solution, especially for those who previously worked in industries that may never return. Cannabis legalization, on the other hand, would create jobs. Lots of jobs!


Cannabis creates jobs


The legal cannabis industry is the fastest-growing job market in the country and employs more than 240,000 full-time workers. The industry also pays better than most, with median salaries approximately 10% higher than the national average. Of course, the cannabis industry doesn’t just consist of grow operations and retailers. It employs an expansive ecosphere of non-plant-touching ancillary businesses and supply chains that are vital to the industry’s success. Moreover, because cannabis cannot be transported across state lines due to its federal classification, separate supply chains and infrastructures would need to be established in each state, creating myriad job opportunities throughout the country.

Although cannabis’s quarter-million U.S. employees are split among recreational and medical states, the lion’s share comes from the recreational side. Colorado’s cannabis industry, for instance, employs 35,000 full-time employees. Compare that to New York, a state with a population roughly 3.5x that of Colorado’s, whose medical cannabis program employs less than 3,000 full-time workers. Experts estimate that New York’s legal cannabis workforce would increase to approximately 115,000 full-time workers if legalization at the rec level were to occur. Not every state’s cannabis industry would be able to support such a large workforce, but we’d still be looking at the creation of hundreds of thousands, if not millions, of jobs across the country if recreational legalization catches fire across the country in the aftermath of COVID-19.

Is It A Pipe Dream?

It certainly won’t be a smooth sail to legalization. The cannabis industry has a lot of opponents at the political and grassroots levels who will likely pull out all the stops to prevent it from happening. But desperate times don’t only call for desperate measures; they require outside-of-the-box thinking and solutions. The establishment of state-regulated adult-use cannabis markets across the country could play a major role in America getting back on its feet once again. Talk of COVID-related recreational legalization is already underway in Pennsylvania, and it will only be a matter of time until the idea starts getting discussed by state governments around the country.


cannabis is the missing puzzle piece


Plus, the general public’s perception of the legal cannabis industry seems to be at an all-time high at the moment as a result of the efforts the cannabis industry has taken during the pandemic to aid their communities and emergency workers. Dozens of cannabis companies are using their supply chains and production facilities to supply hospitals and essential workers with personal protective equipment and hand sanitizer. Others are donating meals or portions of their sales to local charities and those in need. These efforts are actively helping to remove the long-standing stigmas associated with the industry and cast the sector in a new, more positive light among non-users.

If ever there was a golden opportunity for sweeping cannabis reforms, this would surely be it!

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