With the legalization of recreational cannabis in 10 states and medical cannabis in 32 states, it is clear that the cannabis industry is becoming a major job creator in the United States. Legal cannabis sales increased 34% nationwide in 2018, to $10.8 billion and are projected to reach $146 billion by 2025. A February 2019 report from Leafly and Whitney Economics revealed some eye-popping statistics: the legal cannabis industry has already generated more than 211,000 full-time jobs across the country, with more than 64,000 of those jobs being created in 2018 alone. Including ancillary industries, the total number of jobs climbs to 296,000.
While these numbers are certainly impressive, Bruce Barcott, deputy editor of Leafly points out that actual job creation is undercounted for the cannabis industry. Since the U.S. Bureau of Labor Statistics reports lump any unspecified jobs from the cannabis industry in other categories such as "agriculture," "manufacturing" and "retail sales”, the actual number of jobs is much higher. Adding to this under-reporting challenge, the federal government and state governments each have their own systems and criteria for reporting employment numbers. Barcott estimates that these reporting issues have obscured an additional 200,000 or more cannabis related jobs in the U.S. over the past year. Even with this undercounting, the Leafly report suggests that legal cannabis now creates more direct, full-time jobs than any other U.S. industry.
Economic impact of the cannabis industry
- The cannabis industry’s total economic impact is expected to range from $39.2 billion to $48 billion in 2019.
- U.S. cannabis sales in 2018 were between $8.6 billion and $10.8 billion – more than U.S. spending on e-cigarettes.
- U.S. sales of cannabis in 2019 will be about 35% higher than 2018 and could reach $30 billion by 2023.
A closer look at regional employment trends in the cannabis industry reveals that California, which launched its legal adult use marijuana market in 2018, currently leads with 67,000 cannabis jobs followed by Washington State (47,000 jobs) and Colorado (44,000).
Even though the industry is heavily taxed in many states, highly regulated, and restricted by both state and federal governments, there is reason to be confident that the employment boom is just getting started for cannabis. With workforce increases of 21% in 2017, and another 44% in 2018, it is expected to jump another 20% this year, building on the 110% growth seen over the past 3 years.
Filling the need for skilled workers
As the industry boom continues, likely to increase exponentially once more states legalize cannabis, companies are actively looking to hire employees to fill numerous positions. Glassdoor's database revealed over 1,500 cannabis job openings in the U.S. in December 2018, a 76% increase from the same period a year prior. According to Green Entrepreneur, more than 52% of the openings are for higher paid professionals and technical workers such as accountants, lab workers, marketers, and tax experts. That’s led to a median annual salary, in the cannabis industry of $58,511, almost 11% higher than that of the United States overall. Due to the diverse nature of the industry, pay can reach upwards of $215,384 for positions like medical and legal professionals.
A tight job market creates major hiring headaches
There is no denying that the 2019 job market is tight across all industries. According to the Bureau of Labor Statistics, in the past year, the U.S. unemployment rate went from 5.3% to 4.9%—and the number of employed individuals rose by nearly 60,000. The Bureau of Labor Statistics also reports that with the employment market continuing to tighten, companies are facing a retention challenge as the number of voluntary separations keeps rising year-over-year. The assumption being that employees are leaving for better opportunities elsewhere.
This has created a situation where companies now have a surplus of positions opening up and not enough potential employees to fill them, giving candidates much more flexibility in their job selection as well as a rising level of power and choice. Currently, when an employer posts a job in the U.S. it yields, on average, less than one hire over the course of a month. In April 2019, the average opening resulted in 0.8 hires—an extraordinarily low job-filling rate.
Obstacles to attracting and hiring high quality candidates
Cannabis companies are operating in this highly competitive hiring market and should have the tools necessary to interest quality candidates, including attractive employee benefits. Providing a high-quality 401(k) Plan is one of those tools. Four in five employees indicate they prefer benefits and perks over a pay raise and a 401(k) Plan ranks in the top five requested benefits according to a recent Glassdoor survey. Already the largest workforce segment, millennials find benefits particularly appealing: for 90% of employees 18 to 34 years old, benefits are actually valued more than pay.
Top candidates looking for a long-term relationship with a company evaluate a 401(k) Plan offering when choosing which companies to apply to or deciding between multiple job offers. Therefore, a high quality 401(k) Plan can be a “tie-breaker” for candidates when determining which job offer to accept.
An unequal playing field for cannabis companies
Cannabis companies have been denied access to 401(k) Plans and other company sponsored retirement plans for their employees.
Clearly, cannabis companies face all the same hiring constraints as their counterparts in other industries. Considering the cannabis industry is growing at a faster pace than most, the pain of hiring is even more acute for cannabis firms. To add insult to injury, cannabis companies have not, until recently, had the ability to include a company-sponsored 401(k) Plan as part of their employee benefit offering. This has meant that cannabis companies are less attractive to potential hires and employees alike, who face an increasing number of attractive job options outside of the cannabis industry.
Leading Retirement Solutions has been supporting cannabis companies with their 401(k) Plan needs for the past 5 years. In early 2019, we teamed up with a number of other financial service and retirement plan industry veterans to craft The Leading Cannabis 401(k)® Plan, which overcomes the traditional barriers cannabis companies face when looking to put a 401(k) Plan in place.
Our Leading Cannabis 401(k)® Plan accounts for Internal Revenue Code 280E and COGS adjustments allowing for tax deductibility of company made contributions. We have overcome the barriers to accessing custodians who will accept cannabis employee contributions. The Cannabis 401(k) Trustees we work with accept employee and company contributions and direct investments. Cannabis firms continue to hold out hope that the federal government will soon suspend the legal prohibition on recreational and medical cannabis, making it easier to put a 401(k) plan in place. Recently, the House of Representatives overwhelmingly approved the Safe Banking Act (H.R. 1595) which would presumably authorize not only state but also federally chartered banking institutions, including those that support 401(k) Plans, to legally transact for and on behalf of cannabis enterprises. With that being said, the House of Representatives approval was only one, long awaited approval needed for the Act to pass. The Act next goes to the Senate for approval and then to the President for approval and signature. We don’t anticipate these approvals coming any time soon.
Not only are cannabis companies competing for employees on an unequal playing field, but they are not able to take advantage of the Federal tax savings associated with deducting contributions made to employees’ 401(k) accounts. Furthermore, the more than 211,000 employees currently in cannabis jobs are not able to save for retirement on a tax-deferred basis. Nor can they make loan withdrawals from their 401(k) based on certain circumstances such as emergencies or hardship.
Leading the Way
At Leading Retirement Solutions, we are committed to ensuring that all companies in all industries have access to retirement savings solutions and resources they need to support their employees in preparing for a financially secure retirement. Leading Retirement Solutions’ CEO, Kirsten Curry, says, “We are not new to supporting the cannabis industry. We have been supporting the cannabis industry with their business and employee benefits needs since 2014, nearly as long as the legal cannabis industry has been in existence. We have seen and experienced, with our clients, the growth of the industry particularly via expansion, mergers, and acquisitions. We have seen firsthand how this emerging industry is being impacted by the lack of access to reliable and secure financial and employee benefit services.” That is one of the reasons Leading Retirement Solutions continues to work with cannabis companies; to provide the knowledge and tools the cannabis industry needs to take full advantage of all opportunities legally available to help them realize their potential as a driving force in the U.S. economy.
For more tips and information regarding retirement plans, contact us.
