The Relationship between High School Marijuana Use and Annual Earnings among Young Adult Males

I. INTRODUCTION Data from the 2002 National Survey of Drug Use and Health indicate that 16% of youth between the ages of 12 and 17 had used marijuana in the past year and 8% had used in the past month (SAMHSA 2002). These levels of use among youth are troubling given the negative outcomes that are associated with marijuana use. Among other things, marijuana use has been linked to reductions in educational attainment (Bray et al. 2000; Ellickson et al. 1998; Yamada et al. 1996), reduced cognitive ability (Block et al. 1990; Pope and Yurgelun-Todd 1996; Solowij 1998), and negative labor market outcomes (Brook et al. 2002; DeSimone 2002; French et al. 2001; Kaestner, 1991, 1994; Register and Williams, 1992). Although it is not clear that these relationships are causal, they do indicate that at the very least, early marijuana use is a signal for a variety of negative outcomes that can have long-term economic implications. Because of these long-term implications, both researchers and policy makers have considerable interest in developing a better understanding of the relationship between marijuana use and subsequent labor market outcomes. Such an understanding could guide policy makers in their efforts to alleviate problems such as economic disadvantage that are associated with marijuana use. The relationship, however, is complex and may work through several different pathways. An observed association between marijuana use and labor market outcomes may be causal, or it may merely reflect a spurious correlation due to unobserved individual-level factors that affect both marijuana use and labor market outcomes. Even if the relationship is causal, it is not clear in which direction the causality runs. Marijuana use may cause labor market outcomes, but labor market outcomes may also cause marijuana use. If marijuana use causes labor market outcomes, the effect of marijuana use on employment and earnings could be through either a direct or indirect relationship. In the first case, marijuana use may impact cognitive ability or motivation (Block et al. 1990; McGlothin and West 1968; Pope and Yurgelun-Todd 1996; Solowij 1998), thus reducing labor market productivity through such mechanisms as reduced job performance, increased absenteeism, or reduced labor supply. As a result, marijuana users, both current and prior, would be more likely to be unemployed or earning less than those who abstain. Moreover, the cognitive effects of marijuana may be cumulative over time, and thus prior use could have an effect on current job performance independent of current use patterns. In the second case, a negative relationship between marijuana use and employment or earnings could reflect the prior effect of marijuana use on human capital investments, such as education and training, that affect the accumulation of job-related skills. If labor market outcomes cause marijuana use, however, the relationship could be either positive or negative. Economic theory suggests that the increased disposable income associated with higher earnings would lead to an increase in the consumption of marijuana, so long as marijuana is a normal good. This argument would suggest a positive relationship between earnings and marijuana use. However, it could also be argued that poor labor market outcomes (e.g., unemployment) lead to increased marijuana use either because the individual now has more free time and a lower opportunity cost of marijuana use or because the individual uses marijuana to cope with the stress of unemployment. This type of argument would indicate that there is a negative relationship between labor market outcomes and drug use. In either case, the relationship between early marijuana use and later earnings should be minimal once later marijuana use is taken into account. Finally, the observed association between marijuana use and labor market outcomes may not be causal at all, reflecting a spurious correlation attributable to unobserved factors that could affect both marijuana use and labor market outcomes. …