US cannabis industry’s $100 billion economic impact varies by state

By Andrew Long, Data Reporter
May 11, 2023

Medical and recreational cannabis markets continue to have a growing impact on the broader U.S. economy, but the state-level impact differs based on each market’s size, maturity and type.

And while highly populated states with bigger markets have a larger dollar amount of economic impact, some smaller, less-populated states are generating more impact per person.

The total U.S. economic impact generated by cannabis sales is expected to top $100 billion in 2023, up more than 12% from last year, according to a fresh analysis from the newly published MJBiz Factbook.

Looking ahead, upward of $160 billion in additional spending will be added to the U.S economy in 2027, thanks to the opening and/or expansion of new recreational and medical markets in states such as New YorkMarylandMissouri and Kentucky.

To measure the industry’s economic impact, MJBizDaily analyzed similar industries, consulted with economists and applied a standard multiplier of 2.8 on projected recreational and medical marijuana retail sales.

The projections are a best estimate given the unique nature of the rapidly expanding marijuana industry, which is governed by a patchwork of state laws but remains illegal under federal law.

Marijuana businesses encompass a range of agricultural, manufacturing and retail operators as well as non-plant-touch ancillary companies such as lighting suppliers and law and accounting firms.

Some markets also include cannabis events and hospitality businesses, which tend to have an even higher economic impact than other industries.

The economic impact of the marijuana industry is not the same as supply-chain revenue that is often used to estimate the “total size” of an industry.

The total amount of U.S. adult-use and medical cannabis sales, for example. is expected to reach $34 billion in 2023, up from a revised $30 billion in 2022, according to the new MJBiz Factbook.

By contrast, the economic multiplier paints a picture of the cannabis industry’s impact on the broader economy.

In this case, for every $10 consumers and patients spend at marijuana retailers or dispensaries, an additional $18 will be injected into the economy, much of it at the local level.

The marijuana industry has a large impact on the broader economy, both locally and across the nation.

That impact comes directly from the day-to-day needs of workers in the cannabis industry, including spending on life’s necessities such as housing, transportation, entertainment and more.

Taxes collected from cannabis businesses and consumers play a role, too.  Marijuana businesses, consumers and patients pay hundreds of millions of dollars in state and local taxes that are used to fund government activities at those levels, including schools and roads.

Real estate also receives a boost from new retail, manufacturing and agricultural businesses moving into an area, or established companies expanding, increasing broader demand for commercial properties.

In many markets, cannabis companies are restricted in where they can operate, but they often bring new business activity to areas that previously were blighted or couldn’t attract such enterprises.