The Economic Impact of Legalized Gambling - Part II

Writer's note: Many critics believe gambling is a self-destructive vice that does harm to society. They cite purported increases in crime, bankruptcies, divorces, suicides, and other social ills – presumably caused by gambling's growth. However, the facts do not support these assumptions. In fact, most recent studies clearly contradict them. Last issue, my column addressed the behavioral impacts of legalized gambling and cited several recent studies that refute the charges made by gambling's opponents. In this column, I will examine the economic impact of legalized gambling.

Myth No. 1: Gambling does more harm than good to communities where it has been legalized.

Fact: Gambling has led to dramatic growth in new jobs and higher wages in communities where it has been legalized – especially for minorities and women. Two economic studies completed in 1996 and 1997 by Arthur Andersen clearly and unequivocally verified this point, thus destroying the "social costs" arguments of critics. The study (Economic Impacts of Casino Gaming in the United States, Volume 1: Macro Study, December 1996) showed that casinos provide an extensive economic stimulus by providing more jobs, capital investment, and tax revenues all across the country. In a 1997 follow-up study (Economic Impacts of Gaming in the United States, Volume 2: Micro Study), three specific jurisdictions where legalized gambling exists were examined – Gulfport/Biloxi, Mississippi; Shreveport/Bossier City, Louisiana; and Joliet, Illinois. After gambling was approved, each jurisdiction experienced a surge in retail sales and tax revenues, and a decline in public assistance programs such as welfare, food stamps, and Aid to Families With Dependent Children (AFDC). The second study also showed that in each jurisdiction, the introduction of casinos led to substantial growth in retail sales, commercial and new housing construction, and new restaurants. Contrary to the widely held view that the casino industry harms local business and is a "predatory industry," most cities with legalized gambling now have more new retail development and restaurants than cities without gambling. Las Vegas, for example, has more casinos than any other city in the nation – and it also has a booming economy. Nevada has led the nation in job growth for six out of seven years since 1994. Smaller gambling markets have seen economic growth, as well. "This study, in effect, disproves the arguments made by anti-gaming advocates that … the social costs outweigh the economic benefits," said Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association. "The findings enable us to take anti-gaming theories out of the classroom and into the real world by demonstrating the astounding economic and social impacts the industry has had on real communities and real people."

Myth No. 2: Casinos provide lower-wage jobs than most other industries.

Fact: Casinos employ more people than the soft drink, cellular phone, or video/cable TV industries – according to the first Arthur Andersen study released in December 1996. According to the report, the average casino wage was $26,000 (in 1996), compared to $20,000 for other amusement and recreation businesses, $16,000 for the hotel/motel industry, and $22,000 for the motion picture industry. The study also found that the casino industry not only pays above-average wages, it also generates more new jobs per $1 million in revenue than other industries providing discretionary products and services. For every $1 million in revenues generated by casinos, 13 new jobs were created – compared to only seven jobs in the video industry, five jobs in the cellular phone and cable TV industries, and three jobs in the soft drink industry. In addition, the growth of the casino industry has a direct link to workers in all 50 states. The economic impact of gambling reaches far beyond just the 26 states where casinos are legal. Casinos ordering products and services from other areas of the country means that related businesses and workers benefit, as well – including manufacturing, airlines, construction, and many other businesses. The man or woman working in a paper mill in Oregon, the pilot living in Miami and flying to Las Vegas, or the brewery worker in Missouri benefits from the expansion of the casino industry, because those businesses rely on casinos and their customers, in part, for profits.

Myth No. 3: Casino employees have a minimal impact on economic development in their communities.

Fact: A survey released at the 1998 World Gaming Congress that was conducted by the accounting firm Coopers & Lybrand asked more than 178,000 employees from 97 casino companies in 10 different states about the impact of gambling. In an overwhelming number of cases, respondents emphasized that they received better job benefits after joining the casino industry; 63 percent indicated they now have better access to health care, and 27 percent said that health care coverage had not been available to them in their previous jobs. Also, 43 percent reported they have better access to day care for their children at their casino jobs. In addition, 8 percent of employees reported they were able to get off welfare because of their jobs in the casino industry. Approximately 16 percent stopped unemployment benefits because of casino jobs. Approximately 9 percent of employees surveyed no longer receive food stamps because of their employment. Furthermore, casinos make a powerful contribution to the communities where they operate. In 1997, U.S. casino employees purchased the following: 66,000 homes, 176,000 automobiles, and 173,000 major appliances.

Each month, casino gaming employees and their families purchase an estimated 840,000 meals in local restaurants, 1.4 million fast food, take-out, or delivered meals, and 1.3 million visits to entertainment venues.

Many employees in the casino industry have acquired new job skills as a result of their jobs, according to the survey. Approximately 65 percent said they developed new job skills because of their work in the gambling industry. Additionally, 33 percent said they were able to improve their education, including 17 percent who said employers (casinos) help them pay for external schooling, such as GED programs and college classes. Finally, the survey showed that the neediest members of society benefited from $58 million given in charitable contributions and approximately 884,000 hours of volunteer time a month by more than 92,000 casino employees across the nation.

Myth No. 4: Most community leaders are opposed to gambling once they see the social costs and its effects on crime and quality of life.

Fact: In a study funded by the National Institute of Justice, interviews were conducted with key individuals in seven communities that now have casinos. The communities were Biloxi, Mississippi; St. Louis (city and county) and St. Joseph, Missouri; Alton and Peoria/East Peoria, Illinois; and Sioux City, Iowa. The interviews were conducted by a research team consisting of two criminologists and one economist. Each community approved casino gambling in the 1990s and has had casino gambling for at least five years. The individuals selected for interviews were community leaders (including mayors, city council members, and business leaders) or worked in key professions (such as banking, law enforcement, or social services). They provided firsthand insight into the positive and negative effects of casinos on their communities. Each respondent was asked a series of core questions, followed by additional questions designed to elicit specific information based on the individual's position. The survey indicated that a clear majority (59 percent) are in favor of casinos in their community. Even more believe that casinos enhance the quality of life in the community (65 percent). And 77 percent believe that casinos have had a positive effect on their economy. Even among social service providers – alleged to be gambling's most ardent critics – 60 percent believed that casinos were a positive factor in enhancing the quality of life within their communities.

Myth No. 5: Casinos are not a real economic stimulus unless they attract customers from outside the area; otherwise, all local spending is merely cannibalized from other local businesses.

Fact: This gets back to the faulty notion that casinos prey upon local communities and harm individuals nearby. A 1998 survey of visitors conducted by the Illinois Gaming Board showed that 62 percent of patrons at Illinois casinos live 25 or more miles from the casino, thus challenging the assumption that gambling (in Illinois) draws primarily from the local population. The Arthur Andersen study established that casinos have a positive economic impact – demonstrated by retail sales figures for Bossier City, Louisiana, from 1994 and 1995, which increased by 24 percent and 11 percent, respectively; in Biloxi, Mississippi, retail sales growth rates increased from an average of 3 percent a year from 1990 through 1992 to approximately 13 percent between 1993 and 1995; and in Will County, Illinois, between 1992 and 1995, retail sales increased 25 percent. Furthermore, the East's largest gambling market, Atlantic City, New Jersey, is experiencing a renaissance of economic activity and influx of new investment – primarily due to better appropriation of state funds and the economic stimulus of casinos. On a smaller scale, public cardrooms in many suburban communities have enhanced tax revenues and helped to provide more services to local communities. Commerce, Gardena, Bell Gardens, Compton, and other Los Angeles districts where poker rooms are flourishing have experienced positive economic activity.

Myth No. 6: Legalized gambling causes bankruptcies to increase.

Fact: Is there a link between gambling and personal bankruptcies? Two years ago, Rep. Frank Wolf (Republican, Virginia) spent $250,000 of public money on a U.S. Treasury Department study, hoping to find such a link. The Treasury Department examined existing literature on gambling and bankruptcy and conducted empirical research. In the April 2000 report that followed, the Treasury Department found "no connection between state bankruptcy rates and the existence of or introduction of casino gambling." Furthermore, the National Opinion Research Center (NORC) at the University of Chicago analyzed data for the National Gambling Impact Study Commission report in 1998-99 and found, "The casino effect is not statistically significant for bankruptcy." Both studies were independently funded, yet came to the exact same conclusion. So, what might account for an increase in bankruptcies? While the spread of gambling may be consistent with an increase in bankruptcies over the past 20 years, the increase is likely due to changes in the 1978 federal bankruptcy law (which made declaration easier for individuals), as well as easier access to credit for most Americans. Someone please explain this to Rep. Wolf before he wastes another quarter of a million dollars.

Myth No. 7: Easy access to cash and credit should be banned inside casinos.

Fact: Legislation is pending in Congress that would impose federal regulation on the placement of ATMs and cash advance terminals inside casinos. The bill seeks to ban such devices from the immediate area of the gaming floor. While the notion of a "cooling off period" for gamblers may appear to have some merit, the larger question is what role (if any) federal authorities should take in superceding the rights of states and local communities in mandating these changes. "I think we would all agree that Federal Reserve Board Chairman Alan Greenspan has better things to do than carry around a tape measure to determine whether ATMs are far enough from the gaming floor," Frank J. Fahrenkopf Jr. said in a recent speech.

Myth No. 8: Since the majority of gamblers lose money, economic benefits to communities are insignificant.

Fact: It's true, the vast majority of gamblers lose money. The question is, where does the money go? The answer depends on what form of gambling we are talking about. For example, while most horse racing bettors lose money, the revenues go directly to the track and its employees; the horse racing owners, breeders, and trainers; related businesses; and the state (actually, the citizens of the state). While most casino patrons lose money, the revenues go to the casino and its stockholders; the employees; related businesses; and the state and federal government (again, all citizens). While most poker players lose money, the revenues go to the casino or ownership; local jurisdictions; related businesses; and fellow poker players (who then buy goods and services with the profits). While most lottery players lose money, the revenues go exclusively to the state, which funds education and other social programs from the proceeds. There is also charitable gambling, which benefits many needy causes in local communities. Finally, this does not even begin to touch upon dozens of Native American tribes, which have benefited enormously from legalized gambling. While every study cited in this report related to non-Indian gaming, if tribal gaming were to be included in the statistics, the social and economic benefits would be absolutely overwhelming. Would anyone in his right mind even begin to question whether or not Native American tribes with legalized gambling are now better off than before?

Nolan Dalla's conclusion: Does legalized gambling have social and economic costs? The answer is – yes. Does legalized gambling provide social and economic benefits to communities, and to the nation as a whole? The answer to this question also is – yes. This leads to the more fundamental question, "Do the social and economic benefits of gambling outweigh the costs? The answer to this question should now be obvious. "Yes." This two-part series, which cited several independent and government agencies, as well as leading institutions of research, indicates that on every key social and economic point, legalized gambling's advantages far outweigh the disadvantages. More than one million people employed by the gambling industry today, millions more who benefit in related businesses, and tens of millions of stockholders and casino customers are a growing force. Let us vow that we will no longer be ostracized by government officials and moral crusaders seeking to destroy the many contributions made by the gambling industry to society at large.

Note: To read more about the social impact of legalized gambling, visit the website of the American Gaming Association at: http://www.americangaming.org/. The AMA website provided much of the material quoted in parts throughout this two-part series.