Freakonomics Radio - 459. Let’s Be Blunt: Marijuana Is a Boon for Older Workers

Episode Date: April 22, 2021

The state-by-state rollout of legalized weed has given economists a perfect natural experiment to measure its effects. Here’s what we know so far — and don’t know — about the costs and benefits of legalization.

Hey there, it's Stephen Dubner. Before today's episode, I'd like to tell you about a brand new podcast that I think you'll be interested in. It is called Sudhir Breaks the Internet. Sudhir Venkatesh is a sociologist at Columbia University who, during the first couple decades of his career, embedded himself with drug gangs and gunrunners and sex workers. He then wrote a fascinating book called Gang Leader for a Day. One person who read the book was Mark Zuckerberg. He asked Sudhir to come work at Facebook. Sudhir then spent three years at Facebook and the next two at Twitter. Both companies wanted him to apply the tools of sociology to address things like hate speech and bullying, maybe any incipient plans for an insurrection. Now that Sudhir is

out of Silicon Valley, he's taking a long, hard look at the people who run our digital universe, the massive promise of these platforms and the massive problems, too. The result is Sudhir Breaks the Internet. It is the latest show from the Freakonomics Radio Network. You can get it now on any podcast app that is Sudhir, S-U-D-H-I-R, Breaks the Internet. And let us know what you think. We are at radio at Freakonomics.com. Here now is today's Freakonomics Radio episode. Let's have a little thought experiment. Imagine that civilization had somehow gotten to where we've gotten in 2021 without the use of either marijuana or alcohol, and they're both discovered overnight. How would you imagine that those two substances would be regulated, distributed, priced, etc., compared to how they are now?

I think that's a great question. I think it would be hard if they were just discovered today not to treat them as equal. My opinion is it's more of a social construct. That is Catherine McLean. She is an economist at Temple University in Philadelphia. She researches substance use and mental health and how they intersect with government policy. You might call this a bit of me-search. Members of my family have suffered and continue to suffer from both mental illness and substance use.

So I have seen the implications for families and individuals. So in our thought experiment, if McLean had to endorse either alcohol or marijuana? I think in this counterfactual world where both are discovered today and regulated similarly, I think I'd go with marijuana. Because why? My sense is that it is less correlated with a lot of adverse outcomes. And this is already in a context where the two substances are regulated quite differently. So if they were on an even playing field, if we'd be removing a lot of the

criminal consequences and such, it would be hard for me to think about a case where a drug like marijuana that has different euphoric properties from alcohol, it's less likely to, of course, this is on averages, individuals respond differently to different types of drugs. It's less associated with aggression, violence, these sorts of things. So that would be my opinion. Just to acknowledge any possible conflict of interest, let me ask, are you now or have you ever been a marijuana user? I have consumed marijuana in the past, yes. But you didn't inhale, I'm sure.

And how would you describe your experience? I have used the product recreationally in the past. I would not only medical marijuana, but recreational use as well, Catherine McLean helps us move from thought experiment to real world experiment. They reported less chronic pain, better self-assessed health. We look at some unintended consequences. Well, I think that's a bit of a loophole.

And we try to extrapolate what we know so far about marijuana use to what we'd like to know. Extrapolation can be a bit of a dangerous tool. This is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner. On the federal level, marijuana is still illegal in the U.S., but many states have either decriminalized it or made it legal for medicinal and even recreational use. California was the first state to allow medical use. That was in 1996. In 2012, Colorado and Washington became the first states to allow recreational use. As of April 2021, marijuana has been declared fully legal in more than a dozen states, with many others allowing medical use only. As you have likely learned from Freakonomics

Radio over the years, this kind of staggered policy rollout can be useful to an economist like Catherine McLean. It provides a natural experiment to help isolate and measure the impact of the policy change. So we're comparing outcomes in states that adopt versus those that do not adopt a particular policy. In our case, a medical marijuana law or a recreational marijuana law. The body of research on the effects of marijuana is, to be blunt, mixed. Some research shows that heavy use is tied to serious cognitive impairment. Some research shows that marijuana can reduce aggression, as McLean told us, and relieve chronic pain. But the truth is, we don't know nearly as much about the effects of marijuana

as you might think. Why don't we know more? So currently in the U.S., marijuana is a Schedule I drug. That's according to the Drug Enforcement Administration. So that's alongside drugs like heroin. It means lots of things, one of which it's very challenging to test in randomized controlled trials. Why is that? Because randomized controlled trials that are funded by the government, which many of them are, you can only purchase marijuana through a couple of labs across the entire country. There's actually just one authorized grower of research-grade marijuana at the University of Mississippi, although the DEA says it plans to allow more.

In addition, the marijuana that can be purchased is very different, much less potent than what consumers are actually using when they purchase it legally or illegally. So you can see why McLean would be excited to exploit the staggered state-by-state rollout of marijuana legalization. She embarked on a series of research papers along with a crew of other economists, Rahi Abouk, Kesar Gamire, Lauren Hirsch-Nicholas, and David Powell. The idea was broadly the same for all of these papers, that marijuana can be used medically to treat many health conditions. They zeroed in on one particular demographic.

What we do is we focus on older adults. Why older adults instead of younger adults or even teenagers? Older adults are more likely to have the health conditions for which marijuana is an effective treatment. They're also the population most likely to exit the labor market due to poor health. The idea was, is this a medical intervention that can keep older adults working?

Because if we play things out, we can think about keeping older adults working longer. So this could be beneficial just for their own economic stability. Also, if we're thinking about Social Security, keeping folks working can potentially expand the lifespan of Social Security. You sound like such an economist all of a sudden. You're worried about milking all the extra years of labor out of these old people who have strained backs. Just have them smoke some dope and get back in there.

Even though 60% of Americans support fully legalizing marijuana, with another 30% in favor of at least medical use, only about 18% of Americans ages 12 and up are estimated to use marijuana. Also, of course, when everyone is doing research on substance use where we're relying upon self-reported data, which is what I'm doing, there's probably some under-reporting. Suffice it to say, however, most people are not using marijuana, correct? Yes. And the share of medical marijuana users is substantially smaller, anywhere from a fraction of 1% of some states' populations to nearly 8% in others. I think that's where the work that I'm doing on recreational marijuana is important because a lot of folks will think that the recreational is recreational only. A lot of folks may begin to use marijuana medically post-recreational marijuana law because either they weren't eligible through the medical marijuana laws or there may have been other concerns like stigma, safety, just

difficulty accessing the product. The first step in getting hold of medical marijuana is to have a qualifying health condition. These can be things like chronic pain, cancer, arthritis, nausea, several mental health conditions like PTSD. But qualifying conditions vary from state to state. Some states are very liberal. Some states, like Pennsylvania, are conservative. There's also other barriers. For example, federal health care facilities, because marijuana is prohibited federally, they're not able to engage with marijuana as a medical product because they are a federal facility. University of Michigan's Health and Retirement Study, a longitudinal survey that's been going on for years. It doesn't ask about marijuana use, but it does include a lot of information about employment and health. So we can look at things like, did you have arthritis in the past? Did you have cancer treatment? When we look at a group of people who have many of the health

conditions that would qualify them for medical marijuana in their state, those are the people who are most likely to take up medical marijuana. So we can really zoom in on a sample that's likely to use the product medically. So the researchers are isolating the people who might be most inclined to use medical marijuana, even though, again, they didn't have the data to say whether a given person did or not. They could then look at the employment status of the people in their sample. Did they work in the past year? Did they work full time? And so on.

And then, this is the important part, the researchers could see if those people lived in a state where medical marijuana had been legalized. Broadly, following a medical marijuana law, we found that implementation leads to reductions in self-reports of chronic pain and improved the probability of reporting very good or excellent health. We also saw that individuals were better able to work. That is, they were better able to engage in paid employment following a medical marijuana law. So we saw increases in the probability of working full-time. We saw increases in the number of hours worked. But what we didn't see is changes in the probability of working. We weren't seeing

folks being drawn into the labor market or perhaps returning from retirement. But amongst those who remained employed, we were seeing that they were more likely to work full-time, and they worked more hours per week. So this suggests that older workers are significantly more able to work if they have access to medical marijuana. The next couple studies McLean and her co-authors did looked at workers' compensation claims. These are workers who become injured or ill while working, and they require time away from work to recover from the illness. Once again, the researchers looked at how things differed in states that did and did not adopt a medical marijuana law.

What did they find? We found that there was a reduction in workers' compensation claiming of about 7%. That is a 7% reduction in workers' comp claims in the states that did legalize medical marijuana. So that was not huge, but perhaps not small. The researchers then divided the results by age. Anyone from 23 to 39 was classified as a younger adult and anyone from 40 to 62, an older adult. We found that the effects were concentrated amongst the older adults, where we saw about a 13 percent reduction in the probability of receiving workers' compensation income. Amongst the younger adults, we didn't find any statistically significant evidence that there were changes in workers' compensation income receipt. The researchers

then did the same analysis for states that did and did not legalize recreational marijuana. Now they found even larger declines in workers' comp claims among older workers. We're seeing a reduction of about 20 percent. Typically, when a state legalizes recreational marijuana, it has already made medical marijuana legal. So why would the addition of the recreational law trigger this further decline in workers' comp? I think it's many, many things. When nicotine replacement therapies went over the counter for smoking cessation, we saw increases in utilization simply from going from requiring a prescription to going to over the counter. There's probably a financial cost because the health care professional visit can be quite costly, particularly if someone doesn't have insurance or doesn't have generous insurance.

You can also think about the hassle costs that you have to go to the doctor, get a prescription and then fill the prescription where now you can just go to your CVS and purchase the product. So that's the analogy for nicotine replacement therapy. There may be even more layers to consider when you're talking about marijuana. You can also think about stigma. Consumers may view something that is now legalized and you don't have to go see the healthcare professional. Maybe that this is somehow a safer product. Perhaps there's just knowledge gains about this product could be helpful for you when it's more openly discussed and more broadly used. The people in your study, older adults who are using marijuana and you find that they are filing fewer workers' comp claims, which assumes that they are working, do we know

anything about when they're using their marijuana and if they're going to work high? And if so, is that a really bad idea? Those are excellent questions. I do not have the data to know that. What I can say is that in all of the states that have legalized that I have reviewed, the employer can still have a zero tolerance law on the book. So even if you are using recreational marijuana in a state where that's legalized, if you fail a drug test, you can lose your job. Really? Yes.

Doesn't that seem a little illegal? Well, I think that's a bit of a loophole. There's a really interesting discussion to be had, this trade-off that the employer may face in terms of drug testing when it comes into the space of marijuana. If you think about the different drugs, things like cocaine or other perhaps harder drugs than marijuana, many of those harder drugs or alcohol will leave the system much faster than marijuana will. Marijuana can remain in the system for weeks or perhaps even a month. So if you're thinking about drug testing, there's this sort of perverse incentive. You could incentivize workers to shift towards substances that leave the body more quickly, which may not be desirable. I've only heard this discussion amongst employers. I myself have not seen any evidence, but I do think it's an interesting question and highlights the difficulty with having these legalized substances. It also highlights the difficulty of making drug policy generally. It's not quite

Newton's third law. For every action, there's an equal and opposite reaction. But it's the same idea. There are a lot of potential benefits to legalizing marijuana. Fewer people in prison, more tax dollars, more enjoyment, more pain relief. But there are potential costs, too, including the unintended consequences. Anyone who says the policymaking is easy is wrong. After the break, winners, losers, and of course, some more gray areas. Also, please check out the latest podcast from the Freakonomics Radio Network. It's called Sudhir Breaks the Internet, and you can get it wherever you get Freakonomics Radio. We will be right back. Catherine McLean, an economist at Temple University, has co-authored several papers

analyzing how the legalization of marijuana affects workers, especially older adults. The evidence we've heard so far from workers' comp claims and from a longstanding health and retirement study suggests that marijuana is making it easier to keep working or get back to work after an injury or illness. McLean and her co-authors were also interested in how marijuana legalization affected disability claims. They looked at two benefits programs administered by the Social Security Administration, SSDI, or Social Security Disability Insurance, and SSI, or Supplemental Security Income. SSDI is for adults who have a disability and who have worked, while SSI is for adults and children with disabilities, regardless of work status. Based on their other findings, McLean and her colleagues hypothesized that access to marijuana might drive down

disability claims as well, especially for people who were on the fence about filing a claim. So our idea was broadly marijuana will allow for better symptom management for those marginal claimants. And when I mean marginal, I'm not placing a value judgment here. All I'm saying is that they are on the margin of whether or not to place a claim. For them, there may be some benefit. We're not thinking about severely disabled individuals. So did they find that disability claims also fell once marijuana was legalized in a given state? Following a recreational marijuana law, there are increases in applications for both SSDI and SSI. The effect sizes are not large. They run about 4 to 7 percent. Given that workers' comp

claims went down once marijuana was available, wasn't it surprising to see disability claims go up? It was a bit surprising, I will certainly say. But while disability claims rose after marijuana legalization. When we look at the new awards, so those are the applications that are deemed legitimate, we really don't see much change in the new beneficiaries. In other words, most of these new applications didn't land an actual benefit. Still, why would SSDI and SSI claims rise with marijuana legalization while workers' comp claims fell. There's a literature suggesting that, in particular, SSDI has become a substitute for paid employment for some workers. And what we're thinking is that the costs and benefits that come with applying for SSDI and SSI are sort of tilted in the favor of an application following a recreational marijuana

law. It could also be that marijuana wasn't as helpful to people applying for disability claims. Maybe marijuana just doesn't help those who need these benefits. Perhaps they are not effective therapeutic substitutes for the specific health conditions. In the broadest sense, when you look at these laws and what happens on the dimensions that you're examining, who would you describe as, the winners are individuals who, through the legalization of the product, medical or recreational, are able to use a product to better meet their health conditions, the symptoms associated with their health conditions, things like chronic pain, mental health, particularly in the space of workers' compensation. Many of the conditions

that lead to workers' compensation are related to things like strains. And marijuana, while we are not claiming in any of our papers that marijuana is going to improve your health, what we are saying is it is potentially going to allow some individuals to better manage symptoms associated with things like chronic pain. Now, some other winners might be individuals who will use the product recreationally and enjoy the product. What about employers? I would think that the workers' comp finding is good news for employers, yes?

I would think so, yes. Okay, but I would think that since you are an economist, what you really want to do here is say, hey, look, this is the effect of marijuana legalization on one narrow but important outcome, meaning workers' comp. If you take this effect and aggregate it across the country, let's say, and even backdate it 20 years, this is how many billions of dollars could have been saved from insurers, firms, and governments. Aren't you tempted to put a number on that? I would be tempted if I was focusing on the whole population. We were just more interested in the idea of work capacity in older adults in particular. So when you look at the full population, are you successful in putting any kind of number

on the cost savings of legalized marijuana? I don't think I would be for recreational yet because we really haven't looked at the younger adults. This is something that is very salient about both types of laws, the recreational and the medical laws, is that different groups are going to be using the products differently. So I think that question is something that I hope someone answers. Maybe we'll circle back to this at some point. Last year, we put out an episode about scientists who are using drugs, including ketamine and MDMA, to treat serious psychiatric ailments like depression and PTSD. It was episode 433, if you want to listen. We also talked about CBD or cannabidiol, one of hundreds of chemicals in the cannabis or marijuana plant. It is distinct from THC or tetrahydrocannabinol, the psychoactive chemical in marijuana that gets you high.

While marijuana remains illegal on the federal level, the U.S. government did recently legalize CBD. This has led to an abundance of CBD oils, drinks, lotions, and more. On that earlier episode, we spoke with Yasmin Hurd, an addiction specialist at the Mount Sinai Health System in New York. She has been researching the use of CBD to treat opioid addiction, and she made some useful distinctions for us between CBD and THC. I look at addiction from the perspective of what increases risk, and also I'm a neurobiologist looking at what happens in the brains of people who have a substance use disorder. And when we looked at risk factors, you know, early cannabis use, we see strongly increased risk for substance use disorders later in life,

as well as certain psychiatric disorders. And our animal models, you know, confirm that. When you say your animal models confirm that, that suggests that the correlation between early use and later problems is not behavioral, it's chemical, yes? Correct. So these rats, for example, their mothers, you know, tell them to stay away from certain other kids, but, you know, they still develop certain sensitivities to opioids, for example, later in life.

But in our animal models, we study THC. And one day I said, let's at least look at cannabidiol, CBD. And there we actually saw an opposite effect. We saw it actually reduced harrowing seeking behavior in the rat model. And then we started thinking, wow, could this potentially work for our human subjects and started doing clinical trials. THC, and she is hardly the only scientist to argue this, that THC is not without its potential dangers. This is a point that has tended to get lost as more and more states embrace legalization. Catherine McLean, the economist, has also considered some costs of legalization. There's some recent work suggesting that recreational marijuana legalization can lead to increases in crime, and crime, in particular violent crime, is very costly to society. A lot of talk has been made that perhaps marijuana is going to be a boon to local economies. I think the jury is still out on that. You really have to think about all of the products that are related. That is, if you can now use marijuana, are you going to reduce using alcohol, both of which are taxed by the government and how that's going to flesh out? It's not entirely clear. intended consequence of marijuana legalization. My layperson's mind would think, well, if you

legalize marijuana, presumably a lot of people who might otherwise be using and abusing opioids, especially for pain relief, might instead use marijuana and that the health outcomes would likely be much better. Is that layperson's reckoning close to accurate or totally wrong? Medically, too. We see reductions, sometimes quite large, in terms of opioid-related mortality. And we see across Medicaid populations, Medicare populations, private insurance, we see reductions in opioid prescriptions. generally. Would your recommendation be that legalization of medical and even recreational marijuana is on balance good policy? I would be supportive of it, yes. So I'm looking here at a 2006 paper by Ringel et al. about the relationship between high school marijuana use and annual earnings among young adult males. And it finds that marijuana use in high school affects human capital formation, which means you earn less money in adulthood. If that's true, that suggests that widespread

availability of marijuana can be a pretty damaging consequence for a certain part of the population, at least. Yeah. One thing I want to clarify, I'm thinking about adult legalization. Now, I'm not so naive that if you say 21 is the age that no one under 21 is going to use the drug. So I think that is true. As I said earlier, no policy decision is easy. You have to think about both the costs and the benefits. What we have to think about is what is best for society. We look right now and we see people being incarcerated for many, many years for marijuana use, for marijuana sales. I have to think about that alongside some of these other costs that you have mentioned if we were to legalize. If we look at public support, it has been trending upwards over time. And I think that this is a different period than it was when the Ringo study came out. I have a question about that kind of finding, which argues that, again, the people who use marijuana more in high school have lower annual earnings later. I think it was at age 29. So in a case like that, I'm curious how confident one can be that that is a causal relationship

between the marijuana and the life outcomes. Because, you know, it could be that the population of people who use marijuana in high school are more likely to earn less. I think you have hit upon one of the problems or the challenges that every empirical paper faces, the emitted variable bias. It's very challenging to hold all else equal between those individuals who would use early and later. I think it's good to be cautious about some of these studies. The work that we are doing where we're exploiting the experiences of states, we're using what are referred to as quasi-experimental research methods. They have their limitations, of course, but these methods are generally viewed as providing credible estimates on causal effects of the policy, which is different from saying, do you use marijuana when you're young and do you not? It's just very challenging to think you're going to be able to

make everything else the same against someone who uses marijuana in high school and someone who doesn't. Okay, here's another possible confounding question. This is your own research. You found that people who drink alcohol tend to exercise more than people who don't drink alcohol. Yes. That seems potentially counterintuitive, potentially wildly counterintuitive. How can you account for that if you can? You dug deep into the Vita. That's an old one. Yes. So I interpret that as an association. I do not stock my claim as an economist saying that that's a causal effect. It probably isn't for many of the things that you've just highlighted.

When you say it's just an association, it may be that the kinds of people who drink a little tend to also be the people who exercise? Exactly. This simply could be an income effect. Maybe you have enough income to buy booze and you also have enough income to get a nice fancy membership at a gym. But the reason that caught my eye was because I have a doctor friend who tells me that her most serious patients, the ones who have the most serious conditions, are ones who drink a lot, which is not surprising because we know that alcohol consumption has a lot of health deficits. And she said the ones who don't drink at all, she said her abstainers have a lot of conditions. Now, again, I wondered

about that. Could it be that they abstain because they've had conditions and they're concerned? But do you know anything about that? What seems to be a health conundrum to me? I think that your doctor friend is very wise. I think you're right. So you can think about these two groups. There could be very heavy drinkers, and certainly this is not good for your health. You can also think about the abstainers. You have to think about why are they abstaining. Maybe they're abstaining because they had severe alcohol use disorders in the past,

and this has led to health conditions. Or a family history. Sure. Or maybe they just are unhealthy in general. Maybe they have a lot of complex health conditions that perhaps they're not allowed to drink. Remember, at the start of this episode, when we imagined a world where alcohol and marijuana were both newly discovered, Catherine McLean sided with marijuana. My sense is that it is less correlated with a lot of adverse outcomes. In the research we heard about today, McLean and her collaborators have gone deep on a

fairly narrow set of outcomes related to marijuana policy, the health benefits and labor possibilities for older adults. Most of the news there is encouraging, and as more states legalize, we'll continue to hear evidence for all sorts of other marijuana outcomes. A study by the Kansas City Fed found that in Colorado, one of the first states to allow recreational use, the marijuana industry contributed substantially to employment growth. And Colorado takes in nearly $400 million a year in tax revenues from marijuana, while alcohol sales bring in less than $50 million. That says less about the amount of

marijuana consumed in Colorado versus the amount of alcohol and more about the fact that marijuana is taxed at 15 percent, much, much higher than alcohol. And there's ongoing research on many related subjects, like the relative danger of driving drunk versus driving high. I do think there is room for more work. But that being said, legalization seems to be quite popular. If you look at public opinion polls, the support for legalization has been increasing over time. I think a caveat to all of the recreational marijuana studies at this point, including my own, is that we are focusing on support for legalization has been increasing over time. I think a caveat to all of the recreational marijuana studies at this point, including my own, is that we are focusing on these early adopters. You can certainly tell stories that early adopters may be different from later adopters

for a variety of reasons. So one always has to be cautious in thinking about how something from Colorado is going to extend to Texas. Extrapolation can be a bit of a dangerous tool. I have to say, I love episodes like this one. Catherine McLean does a great job reminding all of us that getting the right data can be hard, that policymaking is even harder, that things aren't always what they seem. And even when they are, there's a lot that we haven't yet seen that's worth considering. Thanks to Catherine and her co-authors for their thoughtful research. And thanks to you for listening.

Coming up next time on Freakonomics Radio. Here in Congress, there is a big movement to raise the minimum wage. What do the economists say? The estimates in the literature are kind of all over the map. Why don't economists know more about something as basic as the minimum wage? Well, I think we know a lot, actually.

We don't all agree, but that's okay. We'll tell you exactly why raising the federal minimum wage to $15 is a terrible idea. I mean, a wonderful idea. No, a terrible idea. A wonderful idea. People are not cogs and machines. They are people. That's next week. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio. We can be reached at radio at Freakonomics.com. This episode was produced by Mary DeDuke with help from Lyric

Bauditch. Our staff also includes Allison Kreglow, Mark McCluskey, Greg Rippin, Zach Lipinski, and Emma Terrell. We had help this week from Jasmine Klinger. Our theme song is Mr. Fortune by the Hitchhikers. All the other music was composed by Luis Guerra. The complete archive of Freakonomics Radio, more than 450 episodes, is now available on all podcast apps, and you can also hear on many NPR stations across the U.S. You'll have to coach me in the right direction if i go the wrong way i'm a professor and i i'm verbose but i'll do my very best the freakonomics radio network

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