Chart of the Week: Small Companies Employ 74% of Cannabis Workforce

chart on marijuana employment

By Becky Olson

From a 30,000-foot perspective, the marijuana industry mirrors other sectors in a key way: 98% of all cannabis companies classify as small businesses.

That’s nearly identical to the breakdown for the overall business community in the United States. Furthermore, nearly 90% of small businesses in both the cannabis industry and the U.S. in general have 20 or fewer employees.

Drill down a bit deeper, however, and a huge disparity emerges.

Small businesses employ about 74% of workers in the cannabis sector, with medium-size companies accounting for the rest, according to the 2015 Marijuana Business Factbook. This is very different than the broader business community, where large corporations employ over half of the country’s total workforce, small companies employ about 34% and medium-sized firms account for 14% of the total.

The percentages for the cannabis industry come from a survey of more than 1,000 business executives conducted for the Factbook, while the national figures were reported by the U.S. Census Bureau.

No truly large corporations – those with 500 or more employees – exist yet in the marijuana industry. In fact, nearly 45% of cannabis employees work at very small companies with fewer than 20 employees total, compared to only 18% of the overall U.S. workforce.

So even though larger companies are emerging in the cannabis space, it truly is still a mom-and-pop industry and a nexus of small business.

The proportion of America’s overall workforce employed by big companies rose 5 percentage points to 52% between 2003 to 2012, and big businesses surpassed medium and small enterprises to become the country’s leading employers in 2007, according to Census data.

The marijuana industry can expect to eventually experience a similar shift in employment. Some dispensaries and recreational marijuana stores have opened multiple locations, while others are branching out into new states. Infused products companies are also tapping multiple markets, and ancillary firms are developing brands that extend industrywide.

More larger companies are sure to emerge within the next few years, and there could be a slew of merger and acquisition activity as some entrepreneurs look for an exit strategy and consolidation takes hold within the industry.

But it could be years before employment in America’s youngest industry looks like the broader workforce any time soon, especially if inter-state commerce of the plant itself and marijuana products remains illegal.

Becky Olson can be reached at [email protected]

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