Restaurants and the Cannabis Effect—It’s Not What You Think

Legal marijuana and related tourism is big business in Denver, and according to a recent report by Bloomberg, the local restaurant industry is freaking out.

Yes, marijuana use stimulates appetite, and this ought to be good news for local restaurants. But an unexpected problem has emerged, one which does not involve eating in a restaurant, but instead working in one.

“Colorado’s restaurant labor market is in Defcon 5 right now, because of weed facilities,” Bobby Stuckey, a James Beard award winning restaurateur in Colorado, told Bloomberg.

“Our work force is being drained by the pot industry,” Bryan Dayton, who co-owns three popular dining destinations in the Denver/Boulder area, said bluntly. “There’s a very small work pool as it is. Enter the weed business, which pays $22 an hour with full benefits. You can come work in a kitchen for us for eight hours a day, in a hot kitchen. It’s a stressful life. Or you can go sort weed in a climate-controlled greenhouse. It’s a pretty obvious choice.”

Another problem is that liquor sales are down two percent.

But it’s the impact on the labor market that has heads spinning in the restaurant business and other industries. The work force in Denver was already tight. The population has been steadily growing, it’s consistently ranked as a great place to live and the culinary industry has been growing as well.

Restaurants operate on a tight profit margin, and they just can’t compete for labor with the high-paying cannabis industry. Imagine, as another restaurant owner explained to Bloomberg: a line cook doesn’t make a lot of money, they work long hours in an intensely busy environment, and for one reason or another has a particularly bad week. Why not trim buds for more money per hour? At a local Pizzeria chain someone “departs for the pot industry every few weeks.”

According to another restaurant owner:

“Cooks take trimming jobs and make $20 an hour, but it’s not just that. Pastry chefs are in high demand in the pot world. Laced candies and gummy bears are sought-after treats when they are made well, so pastry chefs and cooks can make them for three to four times the money a restaurant can pay. All this just exacerbates an already tight work force in Denver.”

The marijuana industry is the talk-of-the-town—mostly because it’s a good topic for funny stories “but it’s a serious part of business.”

The construction industry is having similar problems. There is a building boom going on, but a lot of construction workers “want to work in grow facilities.”

Talk to any economist, and they will explain that this is how the laws of supply and demand operate. Legal marijuana has created new demand for labor, and consequently, other industries are experiencing the impact of competition. This is one of the great attributes of a free market.

Over time, these economic forces will balance out, partly through changes in wages, partly though market saturation.

The opportunities for employment in the marijuana industry are not infinite, and the industry will eventually have all the labor it needs. In time, competition and technological efficiency will squeeze the profit margin and lower processing wages. Also, more people will move to Denver, for example, to take advantage of the job opportunities.

The restaurant industry will compete by raising wages, improving benefits, changing menus, adjusting prices and otherwise adapting their business models and strategies to cope with these changes to the labor market.

There is an important lesson here, though, that is central to the argument for legalizing marijuana.

It’s good to put people to work. It’s good to create jobs, and it helps not only those people with the new jobs, but it also creates economic pressure that increases wages for others. Marijuana legalization is good for the economy, and that’s good news for everyone.

The businesses that will pay higher wages may not agree with this, but that doesn’t matter because they will have to live with it. And they will, because this is what business is all about. The challenge for employers is to produce value, to get value for the expenses required to provide the public with goods and services. If they produce value, they will make a profit. It’s not easy, but that’s the way capitalism works.

Marijuana legalization is a value proposition that makes local economies better.

It creates jobs, it creates tax revenue and it enhances competition. That’s valuable, and while a pressing challenge to the restaurant industry in Denver, in the long run, this is good for everybody.