Association for Public Policy Analysis & Management

Workers Compensation (WC) programs compel employers to provide wage replacement and healthcare benefits to employees who become injured or ill while working. In exchange for this insurance, workers relinquishment their right to sue their employer for negligence in the event of such an injury or illness. In the U.S. the annual cost of WC programs to employers is estimated to be $103.0B. While these programs are costly, they are valuable to individuals who are injured or become ill while working as the programs provide time to recover from an injury without fore-fitting earnings and other benefits.

One of the most controversial drug policies in the U.S. is the legalization of marijuana for medical and/or recreational purposes. At the federal level, marijuana possession and distribution are illegal. Given this federal prohibition, states have passed laws (MMLs) that provide legal protection for medical use of marijuana among patients suffering from a select set of chronic health conditions. To date, 34 states and DC have implemented an MML. The available clinical trial literature suggests that marijuana is an effective treatment for symptoms associated with a range of chronic health conditions including anxiety, chronic pain, depression, psychosis, sleep disorders, and spasticity. Surveys of patients offer additional evidence that marijuana is effective in treating symptoms associated with these conditions.

In this study we provide the first evidence on the effect of state laws that legalize medical use of marijuana (MMLs) on WC claiming. MML passage could increase or decrease WC claiming depending on whether marijuana obtained through an MML is used medically or recreationally, and the effectiveness of medical marijuana for symptom management among injured and ill workers. Qualification for WC benefits requires that a worker is injured or becomes ill on the job. For example, through back or joint injuries due to over-exertion or work-related traffic accidents that could plausibly lead to chronic pain. Thus, an injured or ill worker may be better able to treat symptoms, and hence return to work more quickly or possibly not require a work separation to recuperate from an injury/illness, post-MML. If marijuana is less effective than other treatment options available to an injured or ill worker, then WC claiming may increase, either by extending the duration of a claiming spell or inducing marginally injured/ill workers into claiming. MMLs may also increase recreational use of marijuana and this substance, used for medical or recreational purposes, can lead to intoxication, which could increase the likelihood of a workplace injury/illness.

Given the complex set of pathways from marijuana to WC claiming, the net of effect of MMLs is unclear. Our objective is to provide the first empirical evidence on this relationship. We couple data on WC claiming from the Current Population Survey over the period 1990-2012 with a differences-in-differences model. Our findings suggest that, post-MML, WC claiming decreases, along both the extensive and intensive margins, leading to annual program savings of $0.3B. Our findings are robust to various sensitivity checks and suggest important benefits to injured/ill workers and their employers.