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Recreational Marijuana Laws and the Workers' Compensation Implications for Older Adults: Analysis of NBER Study

July 22, 2021 (8 min read)

By Hon. Susan V. Hamilton, Former Assistant Secretary and Deputy Commissioner, California Workers’ Compensation Appeals Board

Today an overwhelming majority of Americans support the legalization of marijuana, either for recreational use or medical use or both. (Pew Research Center, April 16, 2021, Federal law, however, has prohibited possession, importation, cultivation and/or distribution of marijuana since adoption of the Marihuana Tax Act of 1937. (Pub. L. 75-238, 50 Stat. 551; see also, In line with the magnitude of favorable public sentiment, states have begun to legalize marijuana for medical and/or recreational purposes. As of December 2020, 33 states and the District of Columbia have passed laws legalizing marijuana for medical use. Generally, those laws allow individuals with specified medical conditions to legally use marijuana to treat symptoms associated with their specific medical condition. Of course, not all medical conditions are covered under these laws. Other states, 16 to date and the District of Columbia, have adopted laws allowing adults 21 years and older to legally use marijuana for recreational purposes. Still, legalization of marijuana is controversial. Some believe that it will lead to increases in crime and addiction. Others argue that it will have a deleterious impact upon productive work and may even contribute to workplace injuries.

The National Bureau of Economic Research (NBER), a non-profit research organization, sponsored a study conducted by university researchers and the RAND Corporation to evaluate whether state laws legalizing marijuana for recreational purposes affect work capacity i.e., the ability to engage in paid employment among “older working adults,” those aged 40 to 62 years. This age group was selected because older adults are more likely to experience health conditions for which marijuana may provide effective symptom management. Chromic pain, for example, is significantly more prevalent among older adults. The research focused on workers’ compensation indemnity receipt as an important measure of work capacity for this population of older adults. (It is important to note that other types of benefits typically provided by workers’ compensation systems, such as medical expenses and vocational rehabilitation vouchers, were not included as workers’ compensation indemnity in this study.) Because workers’ compensation indemnity benefits are paid when an individual becomes injured or ill on the job and requires time away from work for recovery, the receipt of workers’ compensation indemnity payments is an indication of diminished work capacity. The results of the study, Does Marijuana Legalization Affect Work Capacity? Evidence From Workers’ Compensation Benefits (NBER Working Paper # 28471 [] February 2021), may surprise you. In fact, the conclusions are rather astounding.

Foremost, the study identifies a 20% decline in workers’ compensation indemnity receipt in the 40 to 62-year age group after states legalize marijuana for recreational use. Similarly, the researchers found that annual indemnity payments received by the target age group from workers’ compensation declines by 20.5% after laws legalizing recreational marijuana are adopted. These findings might suggest an overall reduction in labor supply or a widespread, systemic shifting of the workforce into safer industries. But neither is the case. Instead, the researchers observed large reductions in non-traumatic workplace injuries and work-limiting disabilities. Those findings are consistent with improvements in work capacity among older adults. The study revealed that the controlling factor for these reductions is an increase in the ability of older adults to engage in productive work. The most likely explanation for improved work capacity among this target group is the availability of an additional form of pain management therapy—marijuana.

The study revealed evidence that use of marijuana, but not misuse, increases after states legalize marijuana for recreational purposes. This finding suggests that recreational marijuana laws enable older adults to freely use marijuana for medicinal purposes. This conclusion is further bolstered by evidence that prescription fills for medications used to treat chronic pain actually decreases after adoption of laws legalizing marijuana for recreational purposes.

Moreover, the researchers are emphatic that the 20% reduction in workers’ compensation indemnity receipt is not due to a concurrent decrease in labor supply. In fact, the study identifies an increase in labor supply after recreational marijuana legalization laws are adopted. This finding, the study states, is consistent with the conclusion that the ability to engage in paid work among older adults is improved after marijuana is legalized for recreational use. Other findings include observations that non-fatal workplace injury rates decline after states legalize recreational use of marijuana.

Another surprising revelation from the study is that medicinal marijuana laws appear to have less of an impact on workers’ compensation indemnity receipt than recreational marijuana laws. The study looked at similar research focused on the workers’ compensation impact of laws allowing the use of marijuana solely for medical purposes. Those studies identified a 13% reduction in workers’ compensation indemnity receipt post law adoption in contrast to the 20% decline identified in the current study. That disparity, the study explains, actually makes sense for two primary reasons. First, laws that allow the recreational use of marijuana make it possible for all adults over the age of 21 to legally purchase marijuana without any further constraints. A prescription from a healthcare professional is not required, and marijuana can literally be purchased “over-the-counter.” Access to medicinal marijuana, on the other hand, is more limited. It requires a prescription from a healthcare provider. Second, some state medicinal marijuana laws restrict the medical conditions for which marijuana can be legally obtained even with a prescription. One example given in the study is Pennsylvania. While Pennsylvania does allow medicinal marijuana for some health conditions, chronic pain is not one of those.

For those curious about the data and methodology employed by the researchers in conducting the study and how the results were tested, sections 2, 3, 4 and 5 of the study provide that information. Some aspects of those sections are technical and can get fairly “weedy.” Overall, however, they will likely promote confidence in the study’s findings. The primary dataset used to evaluate how recreational marijuana legalization laws impact workers’ compensation indemnity receipt and income is the Annual Social and Economic Supplement (ASEC) of the Current Population Survey. This annual survey collects detailed information on income, insurance, poverty and other socio-economic variables from approximately 150,000 respondents. Workers’ compensation indemnity benefits are included in the “income” portion of ASEC and reflect workers’ compensation indemnity received over the previous calendar year. This dataset is commonly used by economists to study workers’ compensation outcomes. Over 517,000 respondents were included in the study, which covers the time-period from 2010 to 2018.

Public state-level biennial data from the National Survey on Drug Use and Health was utilized to assess the impact of recreational marijuana legalization laws on marijuana use and misuse. One limitation of this dataset is that it cannot isolate the target age group of the study (40-62) but includes ages 26 and above. The study identifies large increases in marijuana usage after laws legalizing its recreational use are adopted.

To study the misuse of marijuana following the adoption of laws legalizing its recreational use, the researchers used a national database called “Treatment Episode Dataset.” That database is used by the federal government to track substance abuse treatment. Marijuana-related admissions for substance abuse treatment for adults aged 40 to 64 was selected because that information would be expected to identify problematic use of marijuana by the target group. Interestingly, the study found no evidence that passage of recreational marijuana laws leads to an increase in troublesome marijuana use.

To test their hypothesis that after the passage of laws legalizing recreational marijuana workers may use marijuana rather than prescriptive medications, the researchers used data from the Medicaid State Drug Utilization Database. This particular database includes all prescription fills that are reimbursed by Medicaid. Of course, that aspect of the database is a limitation, since it only captures prescription fill information from one payment source. Nonetheless, the study demonstrates that increases in marijuana use after recreational use is legalized coincides with meaningful reductions in the use of opioid medications and also reductions in deaths related to opioid use. These results suggest the use of marijuana for pain management purposes.

Additional data sources included workplace injury data from the Bureau of Labor Statistics, and disability income data from the Social Security Administration. A four-and-one-half-page reference list identifies all additional sources of information considered by the researchers.

What do the study’s results mean for workers and their employers? To be sure, they seem positive. Certainly, a 20% reduction in workers’ compensation indemnity payments is nothing to scoff at. It is significant for employers in terms of reduced workers’ compensation costs, especially without any decrease in labor supply. If other types of typical workers’ compensation reimbursements (e.g., medical expenses, vocational rehabilitation payments) had been included in the calculations, it seems likely that the reductions shown by this study could be even larger. The study’s results are equally significant for older employees because they demonstrate improvements in their ability to engage in productive paid employment. That finding also suggests overall benefits to society. The study’s observation of a reduction in the use of opioid medications most likely due to the availability of recreational marijuana as a therapeutic alternative should not be overlooked. It provides a glimmer of hope in the midst of our country’s challenging opioid epidemic. Even beyond those notable findings, the study anticipates improved earning capacity, health and life satisfaction of older adults who are able to remain in the workforce longer because of access to recreational marijuana. While the results of the study are promising, the study period is quite limited due to the recent adoption of recreational marijuana laws. Further, only a small number of states (16, including Washington, D.C.) have actually legalized the recreational use of marijuana, which limited the volume of data available to the researchers. Will the results of this study be replicated by future studies if and when recreational marijuana is legal in all 50 states? Time will tell, but for now the workers’ compensation implications from the study are noteworthy and promising.

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