Effect Of Gambling On Economy

Effects Of Gambling On Society
Effect Of Gambling On Economy Definition
Negative Effects Of Gambling On Economy

'Examining the effects of casinos after at least four years of operation, the authorsfind that positive changes include: young adults moving back to reservations, fueling an 11.5percent population increase; adult employment increasing by 26 percent; and a 14 percentdecline in the number of working poor. In counties with or near a casino, the employment-to- population ratio has increased and mortality has declined.'

Indian tribes are sovereign nations under federal law, and states may not enforcetheir civil codes on reservations within a state's borders. After the federal government gavetribes more control over their economic development, some began operating gaming placesthat conflicted with state and local laws. A number of states challenged these operations, buta series of Supreme Court cases were decided in the tribes favor. To clarify the law, theIndian Gaming Regulatory Act was passed in 1988. Tribes could operate full-scale casinogambling on reservations in any state that allowed such gambling anywhere within itsborders, provided the details of the operation were set forth under a tribal-state compact. InThe Social and Economic Impact of Native American Casinos(NBER Working Paper No. 9198), authors William Evans and Julie Topoleski summarize the history of Indiancasinos over the last 20 years and examine their effect on employment, poverty, and crime.

As the authors point out, the 'speed with which Indian-owned gaming operationshave developed is staggering,' suggesting that there was 'an incredible pent-up demand forcasino-style gaming' in the United States. In Connecticut for example, a federal court ruledthat because the state allowed nonprofit organizations to have casino nights as fundraisers, ithad to allow the Mashantucket Pequots to add table games to its bingo operations. In 1991,the tribe expanded its bingo hall into a casino. It now runs Foxwoods, the largest casino inthe worls. In 1992 the Pequots offered the state either $100 million a year or 25 percent ofits slot machine take, whichever was greater, provided the state would allow it, but not anyother group, to install slot machines. The agreement was modified to allow the Mohegantribe to operate slot machines after it received federal recognition. According to the authors,payments from the tribes were estimated to be in excess of $350 million in 2002, and'effectively prevented the state from granting a license for a proposed non-Indian casino inthe Bridgeport area.'

How large are short-run multiplier effects of casino gambling? Multiplier effects refer to indirect and induced spending from the remainder of an economy. This economic backdrop is the same whether a casino or a new auto parts plant is placed in its midst, though initial linkages vary between the two. The economy of a country could get better when players win or lose but the effect of multiple players losing a bet over time can be very detrimental and can also be a threat to a country development. When people get addicted to gambling it can be pathological thus they are referred to as pathological gamblers.

Nationwide, 'half of the Indians on or near reservations now belong to tribes thathave opened Las Vegas-style casinos.' Many of these are in rural areas and draw fromclienteles who drive an hour or so to get to the casino. The casinos have changed theeconomic climate in and around the reservations. Examining the effects of casinos after atleast four years of operation, the authors find that positive changes include: young adultsmoving back to reservations, fueling an 11.5 percent population increase; adult employmentincreasing by 26 percent; and a 14 percent decline in the number of working poor. Incounties with or near a casino, the employment- to- population ratio has increased andmortality has declined.

The negative changes include about a 10 percent increase in auto thefts, larceny,violent crime, and bankruptcy in counties four years after a casino has opened, and anincrease in bankruptcies within 50 miles of a new casino. The authors caution againstapplying their results too generally. Job generation 'does not necessarily mean that grantingreservations a monopoly in a particular industry is also a desirable policy,' and becausecasino profits are not taxable, 'their presence in many states possibly diverts funds from ataxable activity.' Finally, little is known about the distribution of benefits. 'In many cases,'the authors point out, 'most of the people employed by casinos are not Native Americans.'

-- Linda Gorman

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.

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As a result of gambling, some are driven to extreme lengths to cover debt. Severely addicted gamblers spend most of their energy following their addiction. They cost companies loss of productivity and profit. Gamblers themselves may suffer from depression and bankruptcy. Some may go into severe debt and suffer anxiety because of it. The social costs to society are varied and include unemployment benefits, family services and medical treatment to gamblers.^[1]

During times of economic success, casinos tend to take labor supply away from neighboring businesses. Since casinos offer higher wages than regular neighboring businesses, such as restaurants, employees leave the neighboring business and works for the casino. Customers who normally go to the neighboring restaurants now instead go to the casino for food. This demonstrates how not all growth by a casino can be attributed as economic growth; sometimes casinos merely transfer growth from other businesses into their own.^[2]

Economic benefits[edit]

Effects Of Gambling On Society

Gambling provides jobs since all commercial games require labor. Casinos require intensive labor including security guards, technical support staff, gaming staff, among others. In 1996, around 300,000 employees earned a total of US$7.7 billion within the US nation. This number does not include those who are indirectly involved with gambling, such as racing organizers. Employment resulting from gambling is difficult to estimate since gambling involves employees in many different stages. Entertainment is interlinked with gambling as well, for instance, the many shows available in casinos in Las Vegas. Hotel services and chauffeurs are also in higher demand because of gambling. Gambling increases aggregate demand for goods and services in the economy. In 1996, Americans spent one in every ten dollars on commercial gaming. This money goes directly toward stimulating the economy. This expenditure on gambling can also be magnified when considering the multiplier effect.^[3]

Reasons for gambling institutions[edit]

In a study by Grinols, it was found that in the US, even though a state may not want to support a gambling institution, it would be economically beneficial for them to do so. If they did not support the institution, there would be many repercussions. This is because, neighboring states have gambling institutions. Residents of the local state will travel to these institutions and gamble nonetheless. This would take away profit and revenue form the resident state. Since these gamblers will gamble anyway, it is economically beneficial for a state to allow and support gambling institutions.^[2]

Another study compared personal income to personal gambling expenditure and found that gambling occurs whether or not the country is in a recession. This aspect will attract states to invest in an institution that is basically recession-proof. During the Early 1990s recession, GGR (Gross Gambling Revenue) increased 9.4% even though the recession slowed personal income to 5.95%. This shows resilience of gambling to the effects of recessions.^[3]