Struggling New York cannabis operators pay workers more than other sectors

Workers in New York’s $1.7 billion cannabis industry are paid more than workers in other “comparable sectors,” a survey released on Monday found.

And that generous compensation is eating into New York cannabis operators’ profits, according to the survey, commissioned by a coalition of businesses opposing state legislation that could see cannabis workers paid even more.

New York cannabis operators and workers are awaiting Gov. Kathy Hochul’s decision whether to sign a bill, passed by state lawmakers in June, that would replace a controversial pro-union state law with a new advisory board that would recommend cannabis industry minimum wages.

Businesses, who are staunchly opposed, commissioned a survey that revealed “an industry that is paying above-market wages while a majority of licensees struggle to make a profit,” according to a statement Monday.

Are New York cannabis operators not profitable because they pay workers too much?

The survey, conducted by Washington, D.C.-based business advisory firm FTI Consulting, found the average New York cannabis worker is paid $25.87 per hour, or roughly 19% higher than a $21.67 hourly statewide average.

It also found slightly more than one-third of cannabis businesses are profitable – fewer than the roughly half that the state Office of Cannabis Management said are in the green earlier this year.

The survey “confirms what our members already know: New York’s cannabis workforce is paid more than any other retail sector in the state, even as the businesses that employ them struggle to survive,” Osbert Orduña, the founder of The Cannabis Place, a retailer with a location in Queens, said in a statement.

The wage board proposal “threatens the very jobs it allegedly claims to protect!” he added.

Labor officials did not immediately respond to a request for comment from MJBizDaily on Tuesday.

The governor has until the end of the year to sign bills passed by the Legislature in the session that ended in June.

How much do cannabis workers earn?

The anonymized survey looked at 40 licensees and did not specify whether wages differed between small independent operators and the large marijuana multistate operators who hold one of the state’s limited medical cannabis permits that allow vertical integration.

According to the survey, which looked at the wages of roughly 1,400 workers, retail employees are paid $25.55 per hour, 25% more than the $20.47 statewide average. And “actual cannabis sector earnings are likely higher due to tips,” the survey added.

The high wages are eating into operator profits. As per the survey:

• 57% of operators recorded a loss in their most recent fiscal year, with 79% of those in the red for more than 15 months
• 57% of operators have either cut jobs or kept workforce stable
• Only 36% of operators are profitable

However, labor costs aren’t eating up a bigger share of revenue in cannabis compared to other industries. According to the survey, cannabis operators spend 22% of their gross revenue on wages, compared to 23% across other mainstream industries in the state.

But for retailers, labor costs took up 19% of revenue – “more than double the total labor costs” for other retailers in the state, as per the survey.

What is the status of pro-union cannabis laws?

The survey is the latest broadside in a long-running dispute between labor unions and cannabis industry operators.

Cannabis operators have asked Hochul to veto the legislation creating a Cannabis Industry Wage Board.

That bill would also strike from state law a requirement for licensees to sign a “labor peace agreement” with a recognized labor union. Such requirements are disappearing from other states amid federal court challenges that are finding them unconstitutional.

A court case challenging New York’s LPA requirement, brought by the parent company of a New York City-based cannabis retailer called Gotham, is ongoing.

Will marijuana rescheduling help New York cannabis?

New York marijuana operators also stand to gain less from federal marijuana rescheduling than businesses in other states.

April’s Justice Department final order reclassifying state-licensed medical cannabis as a Schedule 3 drug – and therefore exempt from Internal Revenue Service Code 280E – only applies to the handful of operators with a medical cannabis permit.

The vast majority of licenses issued since New York adult-use cannabis sales began in 2022 are for adult-use industry activity, which is still Schedule 1 under federal law.