How Inflation is Affecting Cannabis: Prices, Closures, and the Job Market

As perhaps one of the most talked-about topics for U.S. consumers and businesses, inflation dominates current news headlines because of how much it affects every one of our wallets. Since COVID-19 rocked the economy, cannabis businesses and supply chains claim to have been playing catch-up to get back to business as usual. However, the question remains–just how bad has inflation been affecting cannabis prices, cannabis business closures, and jobs in the cannabis sector?

Inflation and Cannabis Prices

As a massive industry estimated to be worth over 100 billion dollars, U.S. states with Adult-Use and recreational cannabis markets generate huge amounts of tax revenue from recreational sales. This windfall shows no signs of slowing down either. According to a survey conducted by YouGov, almost 7 out of 10 cannabis consumers plan on spending the same amount, if not more, going forward in 2025. However, that statistic doesn’t mean prices have been dropping in many states. 

Last year, the price of an eighth of weed ranged from about $25 to $60 in states with a legal recreational Adult-Use market. However, in some legal states like New Jersey, the price for top-shelf flower can often go as high as $70 per eighth. Legacy states like Colorado offer recreational customers an eighth of premium, top-shelf weed for around $35–$40, making prices in other markets noticeably higher by comparison. Prices of recreational weed are often a result of how long the state market has been around and how many cultivators it has operating. 

Profits Drive Prices, Prices Drive Consumer Decisions

Once competition and a surplus have been created, it still doesn’t mean that dispensaries are lowering prices for customers in certain states anytime soon–profits being the main driving force. According to Beau Kilmer, a cannabis market authority from the Rand Drug Policy Research Center, in an interview with NPR, “When you move from prohibition to legalization, it takes time [to lower prices].”

Since cultivators grow cannabis domestically in the U.S., they can’t fully attribute high prices to COVID-era supply chain issues unless they factor in items like growing equipment that are commonly manufactured and shipped from overseas. Another factor at play for cannabis consumers is that dispensaries are cash-only businesses due to current federal banking laws, eliminating the option to use credit to make their purchases.  

To mitigate high prices, many folks in states where prices remain high seek out items on sale, downgrade in quality, grow their own, or just smoke less to afford their bud. These cost-control measures hurt everyone, but they especially impact medical patients who rely on specific strains and more expensive, hard-to-DIY products like concentrates to potentially treat their symptoms—without coverage from healthcare providers.

Black and Gray Markets Remain Strong

Another potential safety threat to medical patients and adults seeking out more affordable weed is the black and legal market. The uncertainty of the source, the potential for contaminants like molds and pesticides, and questionable quality are always at play when navigating both options.  

Kilmer also mentioned in the NPR interview, “After [states] pass legalization, they’ll spend a couple of years coming up with the licensing regime and figuring out what the regulations are going to be and issuing licenses, but there hasn’t been a lot of focus on what to do about the illegal market. And in a lot of places, enforcement just hasn’t been a priority.

For many consumers, if it means cheaper weed, then they don’t mind meeting up with the plug in the Pizza Hut parking lot or grabbing some type of “legal” D8 or THCA product at a local smoke shop or online. No matter the risk or quality involved, the bottom line is that these markets remain strong in many legal states strictly because they are more affordable. 

Inflation and Canna-Businesses

Despite featuring retail prices that often range from affordable to flat-out expensive, business is still booming for many dispensaries, both medical and recreational, along with plenty of multi-state operators (MSOs). According to CRB Monitor News, last year, approved and pending cannabis licenses surged to their highest level since 2021. 

Despite heavy competition in the last few years, the cannabis market may have finally started to stabilize. Experts estimate this shift may be the result of a significant number of mergers, acquisitions, and consolidations of MSOs scooping up smaller growths and brands in the last few years. 

IRS Code 280

The classification of cannabis as a Schedule I drug on par with heroin by the U.S. government has the potential of being a thing of the past this year. Rescheduling can help lift the restrictive nature of the current federal tax rate for cannabis-based companies. 

Most cannabis businesses currently face a tax rate double that of any other sector due to IRS Code Section 280E. This unusually high tax rate tends to lead to increased costs, which are passed onto the consumer. However, if repealed as a result of rescheduling, more businesses have the potential to stay afloat with improved cash flow since no banking services are available for cannabis businesses.

Oversight and Insurance

Access to banking isn’t the only thing affecting cannabis business profits. Marijuana is one of the most heavily regulated markets, subject to an incredible amount of oversight by each legal state government’s specific regulatory body. Staying in compliance means avoiding heavy fines and possible revocation of licenses. 

Cannabusinesses stay compliant by investing massive amounts of capital to ensure all phases of cultivation, production, and retail adhere to their state’s laws. Companies that can’t afford to be compliant or fail to create a culture of compliance often find themselves out of the industry in no time. On top of compliance, business insurance can be another costly endeavor for cannabis businesses since it’s already difficult for many insurers to justify the risk. 

READ: The Cost Of Medical Marijuana: A State-By-State Breakdown

Inflation and the Job Market

When cannabis businesses are successful while also remaining in compliance, jobs are plentiful. However, high turnover rates for employees still prevail, as evidenced by a report by data firm Headset, which found that 55% of budtenders don’t even last a year at any given job. As it turns out, there is a lot of dissatisfaction among employees working in the cannabis industry, but why is this so?

For budtenders, long hours with low pay and too few job protections often mean they’re on their way out the door just as soon as they enter it. For others working in cultivation and processing facilities, safety and health issues, along with long hours, often plague them. 

Increased Unionization

Workplace protections, decent benefits, and fair pay are often at the root of the high turnover rate, as well as being the grounds for increased unionization of cannabis employees. While wages remain stagnant and job protections are too few, unions such as the United Food and Commercial Workers Union (UFCW) continue to spread their influence and membership, representing more than 10,000 cannabis business-based workers across 290 different dispensaries and 36 grow facilities. 

Despite a plethora of available jobs, for cannabis-based businesses to retain top talent and maintain a steady workforce free of high turnover, they need to listen to their employees’ needs as well as accept unionization as a valid option for their workforce. 

Going Forward

As we continue to navigate the added costs of inflation and perhaps retail prices being affected by tariffs, the bottom line is that people are still spending a lot of money on legal weed. Meanwhile, large businesses like MSOs are still very competitive and profitable. Removing barriers to cannabis businesses, such as excessive taxes, can hopefully have a domino effect that works its way from the C-Suite to the workforce and down to lower costs for the consumer. 

However, the always-uncertain nature of the cannabis sector, coupled with more financial insecurity on the way for many Americans, may ultimately be the true driving force for spending habits, businesses staying open, and jobs in the cannabis industry.