While many cannabis enthusiasts once welcomed the City of Vancouver’s efforts to regulate cannabis dispensaries, the consequences of these actions are becoming clearer by the day.
The city is effectively regulating entrepreneurs out of business and putting people out of work.
After the Apr. 29 deadline, “those not approved through the City of Vancouver’s new regulations must close their doors immediately, or be subject to enforcement action.”
But why would anyone oppose the proliferation of any business, let alone harmless cannabis dispensaries (assuming that the police already investigate those connected with organized crime)?
We know that competition keeps entrepreneurs honest, that competition among dispensaries ensures patients are provided with quality cannabis at the lowest possible price (other things being equal, prohibition still has its economic effects).
But what about the workers?
As I mentioned, the City of Vancouver’s dispensary regulations are literally shutting down businesses and putting people out of work.
But competition protects workers from arbitrarily low wages. From over 100 dispensaries, to the dozen that will make the cut, the worker’s bargaining power over wages will be diminished.
Employers can’t stop competitors from offering higher wages to win over underpaid employees, and in a free-and-fair market, competition ensures that workers aren’t underpaid for their labour services.
How does one determine the fair wage of, say, a bud-tender?
In economic terms, the employer calculates the marginal productivity of the bud-tender. Looking at her total business output, the employer calculates how much extra revenue her operation will bring in with the bud-tender on staff and with the additional output.
These calculations provide a ceiling on how much the employer would be willing to pay for the bud-tender.
Of course, in reality, the employer will try to pay less than the marginal productivity, just as she will try to charge customers a larger markup on goods. But competition prevents her from doing this.
For example, suppose a dispensary owner finds her place really busy. A major problem may be that patients are waiting in line for too long because there’s aren’t enough employees. Realizing that it makes sense to hire more employees, the dispensary owner finds a candidate and estimates that the new worker will allow the dispensary to serve four extra patients per hour.
If the typical patients pays $26 for cannabis that costs $20 wholesale, then the dispensary owner could be willing to pay the new worker up to $12 an hour.
Of course, the dispensary owner would like to hire for less than $12 an hour, and if she offered $10 an hour, then the worker could find other dispensaries to work at.
If one dispensary offered $4 per hour, then a competitor would offer $5. And so, the first dispensary would come back with an offer of $6 per hour, and thus the competitor would offer $7 and so on and so on until the wage reached the marginal productivity of how much extra money the labour services brought in to the dispensary.
Competition among entrepreneurs regulates wage rates, so workers can be paid for their contributions.
For some reason, Vancouver’s city bureaucrats are adamant about undermining this.