Gambling is on the rise in America and Canada. Estimates conclude that gambling has increased anywhere from 8% to 12% in 2007. It is interesting how something that used to be taboo early last century is now something that is common in almost all 50 states. It doesn’t appear that the growth is stopping anytime soon either. With the gambling activity rising the casino industry is looking to expand outside of Las Vegas. Which raises many questions on how it will affect our economy. Will the casino industry provide valuable tax dollars while we are in a recession? Or will casinos bring social costs that wouldn’t make it worth the risk?

The biggest problem with watching the economic growth of the casino industry is that is just begun to in the late 1980’s and earlier 1990’s. So it’s harder to make long-term predictions on the industry. But the short-term gains from the casino industry have been fruitful.  In 2007, the casino industry alone made $92.27 billion dollars in revenue. Out of the $92 billion, $5 billion went to state and local taxes. If the casino industry generates so much money why not legalize it for the whole country? Would we see real economic growth in the future? Could the casino industry help up with unemployment?

Economic Growth of the Casino Industry

In 1995, Arthur Anderson conducted a study on behalf of the American Gambling Association to determine the influence of casino gambling on the American economy. They found that in 1995 revenues generated from casino gambling equaled $25 billion and generated $3 billion in taxes. It also directly employed 300,000 people, paid an average national wage of $26,000 (which exceeds pay in most related fields). On top of the 300,000 jobs the casino industry also generated 400,000 indirect jobs paying about $12.5 billion in wages. It becomes obvious that gambling drives in money and equally creates jobs. The casino industry has also taken an interest in economically depressed areas. These areas may have had an industry before to rely on, but now the industry has left and the town has nothing. This is where the casino industry sees potential to build new casinos. Here they will generate millions of dollars, while employing the depressed area that had high unemployment. A perfect example is the town of Gary, Indiana. When the steel industry left there were 70,000 jobs that needed to be filled. But it was very difficult for the town to convince other manufacturers to move to northwest Indiana. Indiana legalized gambling in 1993, and a few years’ later casinos moved to Gary.  Later Gary came out of its depression and was able to repair streets and replace outdated police cars with the tax money from the casinos. In towns where casinos found new homes NORC reported this statistic “unemployment rates, welfare outlays, and unemployment insurance decline by about one-seventh.” Additionally, NORC found increased per capita income in the construction, hotel and lodging, and recreation and amusement industries. However, “no change is seen in overall per capita income as the increases noted above are offset by reductions in welfare and transfer payments as well as a drop-off in income from restaurants and bars…” In other words, there were more jobs in the communities NORC studied after casino gambling was established than before. Although income in those communities stayed the same, more came from paychecks and less from government checks than before. The dependence on the federal government decreased while the areas with casinos started to become independent on their own. It becomes clear that installing a casino in a depressed town can turn its economy around, but what about the societal costs? Are the risks the people of the town face worth the turnaround economy?

Social Costs

While the casino industry may be able to stimulate the local economies and lead them back to their glory days, there are also social implications. Looking at Exhibit 1 there are 12 different social costs that have been determined to be the cause of gambling. They range from depression and divorce to corruption of public officials. These are lead to be caused by mostly pathological gamblers, but low-risk gamblers and non-gamblers have been arrested as well in cities with casinos. The percentages are a third of pathological gamblers have been arrested, while 10% of low-risk gamblers and 4% of non-gamblers. The main problem seems to lie in where pathological gamblers get involved. Not surprisingly, the findings reveal that many pathological gamblers steal or commit other crimes to finance their habit. The Commission heard repeated testimony of desperate gamblers committing illegal acts to finance their problem and pathological gambling, including a Detroit man who faked his own son’s kidnapping to pay back a $50,000 gambling debt, a 14-year hospital employee in Iowa who embezzled $151,000 from her employer for gambling, and the wife of a Louisiana police officer who faced 24 counts of felony theft for stealing to fund her pathological gambling. In a survey of nearly 400 Gamblers Anonymous members, 57 percent admitted stealing to finance their gambling.

The problems from pathological gamblers also hits home. From divorce to suicide the problems for pathological gamblers is always on the rise. “A survey of nearly 400 Gamblers Anonymous members revealed that two-thirds had contemplated suicide, 47 percent had a definite plan to kill themselves, and 77 percent stated that they have wanted to die.” This report is disturbing as gambling is the main source of reason for their reason for suicide. If this is out of only 400 pathological gamblers that means almost 200 people had definite plans to kill him or herself.  This statistic becomes scary because nobody really knows how many pathological gamblers there are in America. What if there are 100,000 pathological gamblers in the United States? Are 50,000 people going to want to kill themselves? If so, I think that is more than enough reason to make sure national legalization of gambling is not the right answer. Suicide is not the only social cost affected by gambling. Divorce in gambling families is also on the rise. “In NORC’s survey, 53.5 percent of identified pathological gamblers reported having been divorced, versus 18.2 percent of non-gamblers and 29.8 percent of low-risk gamblers. Further, NORC respondents representing two million adults identified a spouse’s gambling as a significant factor in a prior divorce.” In a limited gambling economy, two million adults identified gambling to be one of the main reasons for divorce. What if gambling was legalized nationally? How many people would be affected then? It would be interesting to see of those 2 million adults admitting gambling to be a source of divorce, how many people in total were surveyed? This way it could give a percentage on the rate of divorce caused by divorce. While studying this data people must also take in the fact that even though these percentages seem fairly high, it could be believed that the most extreme pathological gamblers are already gambling. So most likely if it were to become legalized the percentages would most likely drop. Still even with these considerations, does that make it okay for the affected families to have to go through the pain of what having a pathological gambler does to your family? Looking at Exhibit 2 you can see that yearly a compulsive gambler societal costs are around $10,000. These costs range from lawyers for bankruptcy court to paying for child aid. It also incorporates the numbers that welfare will contribute.

Conclusion

Perhaps, the prohibition has shed bad light on the casino industry in ways that we couldn’t imagine? If gambling became legal maybe the states or federal government would also pass laws on using debt to gamble or even not allow bankruptcy to get rid of gambling debt. This way a pathological gambler cannot file for bankruptcy every time they hit rock bottom. Or even by making it harder to earn debt might be the best answer. Casinos might take a hit in the early years by such factors, but in the long run it could reduce the societal costs that casinos bring. Or casinos could even take the initiative and create more help groups that support gamblers in debt. Perhaps, even offering to pay for therapy if a person is identified as a pathological gambler. This way the community knows that the casinos want the best for the community and not just their money.

Legalizing gambling is definitely a topic that will rise in the near future. The money it generates cannot be ignored and with the United States currently in debt, we are looking for multiple ways to battle it. This may be one of the many solutions, but it also needs to taken with a grain of salt. If the legalization is not handled with care, we could see this nation become torn and ravaged by irresponsible gamblers that use debt to gamble. If there are not laws put in place the social costs of gambling could actually hinder the economic growth and jobs that the casino industry makes. But as mentioned earlier, the economic gains may become very appealing if we start a downward spiral into more debt. So America, are you willing to gamble on gambling?

Exhibit 1

Exhibit 2

References

Walker, Douglas M., and John D. Jackson. “Do casinos cause economic growth?” The American Journal of Economics and Sociology 66.3 (2007): 593+. Global Issues In Context. Web. 15 Apr. 2012.

National Gambling Impact Study Commission Final Report. Rep. National Gambling Impact Study Commission, 18 June 1999. Web. <http://govinfo.library.unt.edu/ngisc/reports/fullrpt.html&gt;.

Garret, Thomas A. “Casinos and Economic Development: A Look at the Issues.” Bridges(2002). Federal Reserve of St. Louis. Web. <http://www.stlouisfed.org/publications/br/articles/?id=638&gt;.

Walker, Douglas M., and A. H. Barrett. “The Social Costs of Gambling: An Economic Perspective.” Journal of Gambling Studies, 13 Sept. 1999. Web. <http://www.walkerd.people.cofc.edu/pubs/JGS1999.pdf&gt;.

Denvir, Daniel. “Casino Capitalism: As Gambling Spreads, Metaphor Becomes Reality.”Salon. 9 Mar. 2012. Web. <http://www.salon.com/2012/03/09/casino_capitalism_as_gambling_spreads_metaphor_becomes_reality/singleton/&gt;.

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