What We Don’t Know About the Black Market Workforce and Why it Matters for Successful Regulation of Recreational Cannabis

The danger of making assumptions about who makes up the black market labor force is illuminated by Keith Humphreys’s recent article – “The stereotype of the college-educated pot smoker is wrong.” In the article, Humphreys cites Professor Jonathan Caulkins, who is quoted as saying “Most of the marijuana market is more Wal-Mart than Whole Foods.” Yes, we all know that stereotypes are not often truly representative of the people they are trying to describe. But what was most interesting about the article (aside from the irony that Caulkins used a stereotype about where the poor shop in order to explain a stereotype we have) was the explanation for the college grad-stoner stereotype – that human beings “have a tendency to overestimate the representativeness of their own experience.” Meaning that the people who feed the discussion in our media and political culture (journalists, policy analysts, politicians, etc.) “portray and discuss the world they know, which in fact is a small slice of the U.S. marijuana scene.” Why shouldn’t we make assumptions about who makes up the black market workforce? Because successful regulation of the recreational marijuana market depends on turning the black market green, which requires transitioning the people within the black market to the legitimate market. Admitting there is a lot we don’t know about the black market workforce and their ability to transition to the state-regulated market is the first step in the process of determining what regulations best serve our purported state interests.

First off, it is important to establish that I am defining successful regulation as promoting public safety and preventing diversion of profits to illicit enterprises. Not only are these high priorities for California, these are the priorities of enforcement of the CSA outlined by the Cole Memo. Addressing these priorities serves the interest of the state and is the best option for avoiding the scrutiny of the federal government. From preventing distribution to minors to preventing growing marijuana on public lands, all of these goals are served by transitioning the black market workforce to the state-regulated market. While street level dealers don’t check identification, regulated marijuana storefronts will be required to. Legitimate business will pay taxes and keep financial records, preventing money from marijuana sales from going to criminal enterprises. Passing state regulations that present significant economic barriers and barriers related to criminal records will bar more individuals from participating in the legal market. Will those barred from operating in the legal market continue to operate their businesses illegally?

It is more likely we will have better information on this issue in California after state regulation. There is no good information on the black market workforce because it is not something that people discuss openly. The black market is characterized as such because it takes place in the shadows. It is meant to be a mystery to those on the outside looking in. Recreational marijuana is still illegal in much of the United States, and those on the supply side are unlikely to self-incriminate. If marijuana is legalized in California it is possible there will be more information about the black market because individuals won’t be silent for fear of prosecution. The information that we currently don’t know that would be valuable to this discussion is who it is that makes up the black market workforce and what their skills are, both within and outside of the marijuana industry.

For the purposes of this blog series, I am concerned with individuals currently working with illegal marijuana as their primary vocation, meaning people who do this as their main source of income (which does not necessarily equate to full-time). I am not focusing on the individuals who sell, trim, or grow as supplemental income for two reasons. First, they are less likely to have as large an impact on black market supply, therefore there are less worries about diversion if they continue to operate in the black market. Second, they already have an additional source of income. If they continue to work in the black market because they are barred from working in the state-regulated market, it is not because they are dependent on illegal work as their sole source of income. People who are willing to break the law for additional income should not be the focus of incorporation into the legal market because successful regulation will only work with individuals who follow the rules. There is something inherently different about those who break the law because it is the only way they can make a living or because they are politically or morally opposed to cannabis prohibition and those who break the law for some extra cash.

Now, within the group of people working in the marijuana industry as their primary source of income, there are different specializations, skillsets, and levels of skill. There are those on the production side, ranging from growers with years of experience to those who trim for a season, and then there are those on the distribution side. Within these groups it’s possible to discuss likelihoods and possibilities for transition to a state-regulated market in general terms. But the odds of an individual continuing to work in the black market if barred from entering the legal market depends on their skillset and reasons for working in the black market to begin with.

For those who are doing less-skilled work full-time, whether seasonally or steadily, any barriers may make a legitimate marijuana job not worth pursuing. Maybe even an application process would not be worth the trouble. The full-time grower and cannabis activist is more likely to jump through the hoops of the application process than someone just trying to make a dollar because they are personally invested in the concept of state regulation. This distinction is important when considering how barriers to entry into the recreational market will affect differently situated people in distinct ways. What will skilled growers with criminal records do if they can’t get a job in the newly legal recreational market? What if there are insufficient incentives to transition to the legal market? Odds are, like in Colorado, some growers will continue to operate in the black market.

While there is a lot of discussion about those growing marijuana, what about those selling it? This is the most important group when considering successful regulation as qualified above; dealers are making a lot of the money and are the access point to marijuana for users. It would seem that this group would be the most important to consider incorporating into the legitimate market. But unlike growing marijuana, where the necessary skills don’t change drastically moving from the illicit to legitimate markets, operating a storefront requires additional skillsets that the average dealer probably does not possess, i.e. managing employees and bookkeeping. Will there be a place for dealers or will we be leaving out those who may be the most important to include? If excluded, will they continue to operate in the black market?

The job market outside of recreational marijuana could affect an individual’s propensity to continue operating in the black market. Barriers to non-marijuana-related employment might leave some stranded. Work experience, education, and criminal records all affect an individual’s ability to find a job. When a person has been selling or growing marijuana illegally for a living, connections outside that industry might be hard to come by. Additionally, filling out the work experience section of a job application could be tough. Individuals with criminal records are the most likely to be barred from entering any state-regulated market in California, and they are also less likely to find gainful employment elsewhere. We know that communities of color are more likely to shut out by barriers based on criminal records because of disparate enforcement, creating a heightened inability to transition from the black market. We already know criminal records limit job opportunities outside of the marijuana business. It appears as though the one thing we can know for certain is that the communities most injured by the failed war on drugs could continue to be left behind in the new paradigm of state regulation.

Ultimately, every individual in the black market has a unique circumstance. Considering there is so much that is unknown about the makeup of the black market, it is best to operate under the assumption that there are certain ripples and effects of legalization that we can’t plan for. We don’t know if someone is going to continue growing and selling marijuana illegally, turn to selling harder drugs, or go into a different industry, and we don’t know what their motivations will be. If we want successful regulation, we need to turn the black market to the legal market, and frankly we don’t know enough about the existing black market to make sweeping statements about what people will do if they can’t work within the state-regulated system. This is why it is important to build a market that will be as inclusive as possible, without compromising the integrity of state regulation.

While the market needs to be inclusive enough to bring the black market workforce into the fold, there also needs to be the financial incentive for people to want to work in the state-regulated market. In my next post, I will explore the economic barriers to entry to existing marijuana markets with a focus on capital requirements and finding the balance between supply and demand. Specifically, I will be comparing the recreational markets in Colorado and Washington and notable medical marijuana structures in other states, looking ahead at what would be best for California.

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One response to “What We Don’t Know About the Black Market Workforce and Why it Matters for Successful Regulation of Recreational Cannabis

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