A Look At New Economic Impacts from USA Gambling

When a local community is considering legalizing casino gambling, one of the major benefits expected is an increase in local employment and the average wage rate. Yet, analyzing the effect of a new industry to a community can be tricky. Foes the new industry creates new jobs on net, or are jobs merely shifted among industries? This is an important issue that is commonly raised by researchers. Is the community better or worse off if the gambling industry “cannibalizes” existing industries?

It is possible that a community would benefit through increased wages or increased competition among employers for qualified employees. This would occur, for example, because the casino industry is more labor intensive than many other tourist or service industries. Even if other industries are harmed by the presence of casinos, employment and average wages may increase as a result of the introduction of casinos. The effects of gambling on local markets have not received adequate attention in the economics literature. Clearly, the effect of casinos could be different in different economies.

Quality academic treatments of the economic effects of legalized gambling are still rare. Proponents of the industry – usually the industry itself and politicians – argue that legalizing gambling will create new employment and boost tax revenues in a region, state, or country. Although they have obvious conflicts of interest, the claims have some merit although the magnitude of the benefits is debatable. But there are other potentially more important arguments for legalizing casino gambling. Even gambling proponents often ignore these.

Overall, there are probably significant employment benefits from the expansion of gambling industries at least in small economies. Often a new industry will attract an inflow of labor from neighboring areas. This inflow of labor effectively shifts the production possibilities frontier outward increasing productive capacity in the area.

In the event no new labor is attracted to the area, some researchers have argued “there is no gain to the economy from shifting a job from one location to another, unless it increases profits to the economy.” This view ignores the effects the expanding industry has on consumer welfare. If the new job creates more value for consumers than old job, consumers certainly benefit. Furthermore, Grinols and Mustard (2001) ignore the fact that workers who switch jobs to work at casinos must benefit from the new job; otherwise they would not have accepted it.

Indeed, casino jobs must be the best employment opportunity available for all casino employees or they would work somewhere else. This benefit is certainly difficult to estimate in monetary terms, but its abstract nature doe not mean it is irrelevant.

Additional Reference: www.library.ca.gov/CRB/97/03/Chapt9.html