A recent headline from the Salt Lake Tribune raises questions about the future of Utah’s medical cannabis program. Indeed, the story behind the headline has national implications as well. It is a story about local unionization and its impact on the larger cannabis market.
According to the Tribune, Utah’s very first medical cannabis dispensary has gone union. Employees recently voted to join the United Food and Commercial Workers Union (UFCW) Local 99. All but six of the company’s three dozen employees are now represented by the union.
Is that good or bad? That depends on your perspective. Unionization in the cannabis industry is likely to have both positive and negative consequences. The question is whether the good will outweigh the bad. Time will ultimately tell.
Unionization Is Good for Employees
Unionization is obviously good for employees. Being part of a union almost always leads to higher wages, more competitive benefits, and a better working environment. But it all comes at a cost. A general rule among unionized companies is that they need to charge higher prices to make up for the higher costs associated with workers organizing.
It should be noted that Utah is a ‘right to work’ state. That means employers cannot refuse to hire a person or discriminate against existing workers based on union membership. That explains why the six previously mentioned workers can choose not to be part of the union.
Meanwhile, there are other medical cannabis dispensaries across the state. Beehive Farmacy operates two of them, one in Salt Lake City and the other in Brigham City. Will they unionize? No one knows at this point.
Potential Price Inflation
While unionization is generally good for employees, it is not necessarily good for employers. Honoring union contracts usually increases labor costs. Unionized companies either need to accept lower margins or pass their higher labor costs on to customers. The latter option is the more frequently chosen option.
This could mean potential price inflation within the cannabis market. In Utah specifically, Beehive Farmacy will probably benefit by continuing to offer lower prices while the unionized dispensary must raise its prices. But that’s just speculation.
Consolidating Smaller Operations
Regardless of how things go in Utah specifically, there is another concern that comes with unionization: its potential for consolidating the market. We are already beginning to see hints of that very thing as corporate players buy up smaller operations.
The cannabis industry is fractured nationwide, mainly due to conflicts between state and federal laws. And yet a small number of powerful cannabis companies are starting to emerge. These are corporate entities with deep pockets, entities capable of buying up state-level operations and adapting their business models accordingly.
Unionization, if it catches on, will only encourage more corporatization. Keeping up with labor demands is a costly endeavor that mom-and-pop operations might not be able to handle. And if they need to choose between selling and going out of business, how many will choose to offload their operations to corporate buyers?
It is a Fluid Situation
Unionization is just one of the things currently shaping the cannabis industry. Regulation, the black market, and a variety of other influences make the situation fluid right now. No one really knows where the industry will be in five, 10, or even 20 years.
One thing we do know for sure is that unionization will have both positive and negative impacts on the cannabis industry. Here’s hoping consumers do not pay too steep a price while the industry tries to figure things out. I don’t hold out much hope, by the way.