The essence of gambling is economics – gambling involves money. Money is put at risk, and money is won or lost. Money goes into the coffers of organizations such as racetracks, casinos, lotteries, or charities, and that money is redistributed in taxes or public funds, profits, wages, and various supplies. The money of gambling can help economies of local communities and regions grow, but gambling operations can also cause money to be drawn out of communities. The existence of gambling represents an opportunity to express personal freedoms, and these have values, although they are not easy to measure in a precise manner. On the other hand, gambling can also impose costs upon societies because of problem behaviors of persons who cannot control gambling impulses.
Gambling enterprises, specifically casino resorts and racetrack operations, involve major capital investments. These may come through expenditures of individual entrepreneurs, sale of stock at equity exchange markets (e.g., the New York Stock Exchange), bond issues, or other borrowing mechanisms. Gambling enterprises are subject to a wide range of competitive forces. Participants in each form of gambling compete against one another, but they also compete against other entertainment providers as well as all other services and products that can be purchased with the consumers’ expendable dollars.
The vast array of economic attributes tied to gambling has led to many studies that focus upon gambling economics. Most concentrate upon positive sides of the gambling equation, and they tend to overlook a very basic fact: Gambling revenues must come out of the pockets of players. In my lectures on gambling, I like to point out that Las Vegas was the fastest-growing city in the United States during the 1980s and 1990s, with the greatest job growth and wage growth. Yet Las Vegas is in a desert – it does not have trees. On the other hand, the wooded areas of the United States have suffered economic declines – albeit during a prosperous period for the general economy. The point is, quite simply, that “money does not grow on trees.” A large casino may generate great revenues that can be translated into many jobs; however, those revenues do not fall out of the air. They come from people’s pockets. I also like the story of the man whose life is falling apart. As he is driving to church, he sees a sign that says “Win the Lotto, and Change Your Life”. In church he prays that he will win. He hears the voice of God telling him, “My Son, you have been good; you shall win the lottery.” Convinced his problems are over, the man is much relieved. But he does not win the lottery. The next week, instead of praying to God, he is angry and asks God why He lied, why He has forsaken him. God replies, “Yes, my son, I understand your anger, because I did promise. But my son, you have to meet me half way. You have to buy a ticket”. All the money that is discussed in studies of the economics of gambling is money that has to come out of people’s pockets. Unless individuals “buy the ticket,” there is no gambling phenomenon – no lotteries, no racetracks, and no casinos. The formula for understanding gambling economics is not difficult. It can be expressed in but a few words: It involves where the money comes from and where the money goes. In the second section of this entry, we will return to this basic formula. First we will look at the revenues in gambling.
Gambling Revenues
In 1998, gambling players spent (another way of saying “lost”) $54.4 billion on legal gambling products in the United States (this is called the gambling “hold”) (Christiansen 1999). The $54.4 billion represents the money that gambling enterprises retained after players wagered $677.4 billion dollars (this is called the gambling “handle”). In other words, casinos, lotteries, and tracks kept 8 percent of the money that is played. The greatest share of these players’ losses was in casino facilities of one kind or another, followed by purchases of lottery tickets.
Since the statistics of all legal gambling began to be compiled in 1982, the gambling revenues have increased an average of 10.4 percent every year. Overall, the growth in revenues has been more than 530 percent, compared with a 150 percent increase in the Gross Domestic Product (Christiansen 1999). The gambling growth has been seen in all areas, although only minimally in the pari-mutuel sector of gambling. Much of the growth is due to the fact that new jurisdictions have legalized forms of gambling and that new gambling facilities have been established.
If all gambling were conducted in one enterprise, the business would be among the ten largest corporations in the country. Gambling revenues in the United States represent the largest share of entertainment expenditures. Indeed, the revenues surpass those of all live concerts; sales of recorded music; movie revenues, theater and video; and revenues for attendance at all major professional sporting events combined! The revenues surpass the sales of cigarettes by 13 percent. The gambling revenues approach 1 percent of the personal incomes of all Americans.
In 1998, the commercial casinos attracted 161.3 million visits from customers representing 29 percent of the households (or 28.8 million households) in the United States. The average visitor made 5.6 trips to casinos. The visitors spent an average of $123 during each of those visits. Visits to venues in Las Vegas, Atlantic City, and other resort gambling areas will be for days in length, accounting for larger expenditures, whereas those visiting casino boats usually confine their gambling to two or three hours of time; many boats impose time limits. A typical boat visitor will lose $50–$60 per visit. With approximately 200 million adults in the country, each spends an average of $100 per year in commercial casinos, but $147 in all casinos, including those operated by Native Americans and charities.
A higher percentage of households participates in lottery games – 54 percent (or 53.5 million households). They play on a regular basis, buying tickets each week; hence they do not lose as much to this form of gambling at a single time. The average American adult spends $84 a year on lottery tickets or video lottery play.
Approximately 11 percent of the households participate in bingo games and 8 percent in racetrack betting. Considering all the forms of legal gambling, the average adult spends (loses) $272 on gambling each year. When that amount is spread over the entire population of 270 million, the per capita expenditure is $200 (Christiansen 1999).
Employment and Gambling
Employment is considered one of the leading benefits of gambling enterprise. Proponents of gambling initiatives usually make “job creation” a central issue in their campaigns. Gambling provides jobs. There is no doubt about that. Estimates suggest that well over 600,000 people are employed by legal gambling enterprises in the United States. Critics of gaming suggest, however, that specific gambling interests may not provide net job gains for communities, as gambling employees may be people who simply moved from other jobs. Moreover, gamblers themselves may lose jobs because of their behavior, and their gambling losses may also result in a loss of purchasing power in a community, leading others to unemployment. Critics also suggest that gambling jobs are not necessarily “good” in that they may offer low salaries, low job security, and poor working conditions. Gambling proponents counter these claims and add that jobs produced lead to indirect jobs through economic multipliers.
The different gambling sectors produce different job circumstances. Casinos are labor-intense organization. Racing provides fewer jobs at track locations but generates many direct jobs in the agriculture sector on horse breeding farms. Modern lotteries in North America are not job providers in a major sense. Government bureaucracies increase employment; however, a lottery distribution system using existing retailers adds few jobs to society.
The casino and racing sectors provide jobs in North America in the same manner as they do elsewhere. Lotteries, however, are quite different.
In Europe as well as in traditional societies, poor people and handicapped people find employment through selling tickets. For instance, over 10,000 blind and handicapped persons support themselves through selling tickets in Spain. They are able to have incomes of about $30,000 a year through their activities. Moreover, administration of a special lottery organization is staffed by the handicapped, and all of the proceeds from ticket sales are designated for programs for the handicapped. In many poorer countries, persons who could not otherwise secure employment buy discounted lottery tickets on consignment and resell them in order to support themselves and their families. In Guatemala City, Guatemala, and Teguicalpa, Honduras, the lottery sales force gathers in squares near cathedrals or government buildings and creates market atmospheres with its activities. The lotteries in these countries produce revenues for charities. In the United States, Canada, and other modern lottery venues, the sale of tickets is directed almost exclusively to provide general revenues for government activities. Therefore, the goal of the lottery organization is to maximize profits through efficient procedures. Sales are coordinated through banks and major retail outlets, which conduct lottery business along with other product sales. As the tickets are simply added to other purchases made by the gamblers, there is little if any employment gain through the activity.
Big corporations usually control the lottery retailers. In many cases, however, they are small businesses that may be aided considerably by volumes of ticket sales. Ticket sales may provide them with margins of profits enabling their businesses to compete with larger merchants. Video lottery machines (gambling machines) also provide revenues that allow bars and taverns to remain competitive with other “entertainment” venues and, hence, remain as employers in society.
According to industry reports, pari-mutuel interests that run horse and dog tracks as well as jai alai frontons employ about 150,000 workers in the United States. Less than 2 percent of this number are working at the nation’s ten frontons. 30,000 work at dog tracks and 119,000 at horse tracks. The numbers for tracks include 36,300 employed at track operations, 52,000 as maintenance workers, and 30,800 in the breeding industry (National Gambling Impact Study Commission 1999, 2.11–2.12).
Casinos are responsible for most of the gambling employees. A report of the American Gaming Association showed that in 1999 casinos in the United States directly employed almost 400,000.
The Nevada gaming industry indicates that the tourism in Nevada in 1998 employed 307,500, with 182,621 directly in gaming. In that same year, the state led the nation in job growth. Unemployment in Las Vegas was a very low 2.8 percent. Indirect employment led analysts to observe that in 1998 casinos were responsible for 60 percent of the employment in the state. Each of the casino jobs in Nevada leads to the employment of 1.7 persons in all—that is, an extra 0.7 employee (or seven employees for every ten casino employees). This multiplier factor (1.7) is considered rather low. It is low because Nevada is not a manufacturing state. In fact, with a 3-percent manufacturing sector, the state manufactures less per person than any other state. As the state produces few products, almost the entire casino purchasing activity is directed to imported goods and, accordingly, not to goods produced by Nevada workers.
New Jersey casinos employ approximately 50,000 workers. The industry claims that this employment creates employment of 48,000 workers through purchasing activities of casinos and casino employees. In 1998, the 50,000 jobs produced a payroll of $1 billion, or $20,000 per job. Many of the jobs are not full time. Although the employment in Atlantic City gambling halls is extensive (averaging over 4,000 per casino), the casinos have not solved the problems of poverty and unemployment in the community, a city of 38,000. The population of Atlantic City has continually declined since the introduction of casinos in 1978, and its unemployment rate was 12.7 percent in 1998, a time when the national average and state of New Jersey average were approximately 4 percent.
Mississippi casinos employed 32,000 in 1998. As the casinos of the state were established in the 1990s, the effects of construction employment have been noticeable. For instance, from 1990 to 1995 an additional 1,300 construction jobs existed in Biloxi, one of the state’s casino centers. The jobs persisted through the end of the century; however, construction jobs must be tied to specific projects, and when the projects are finished, the jobs are finished. Although Mississippi experienced a boom with the introduction of casinos in 1992, the new employment witnessed in the state did not alter unemployment rates to a degree that was any different than that for the entire country. The 1990s were prosperous, and casino communities in the state experienced the same prosperity felt by noncasino communities.
A similar phenomenon has taken place in the Native American community. There, scores of casinos have generated about 100,000 jobs. Most of the jobs, however, are found in casinos on very small reservations. Overall Native Americans still experience the worst economy of any subsector of the U.S. population, with unemployment rates over 50 percent. Lots of people, mostly non-Native Americans, have obtained jobs in casinos, and small tribes have became extremely wealthy, but generally the Native American community has not “cashed-in”.
Other sectors of the gambling industry have not caused job creation. The National Gambling Impact Study Commission reported that there was no evidence whatsoever that convenience store gambling (machine gambling) created any jobs. Charity gambling has produced considerable funding for myriad projects, but it has not produced jobs either (National Gambling Impact Study Commission 1999, chap. 2).
A study of jobs produced by the onset of riverboat casino gambling in Illinois found that the multiplier of each job was less than one, but still more than zero. That meant that most of the new jobs were only shifted away from other enterprises, and the vacant jobs were not filled in all cases. Indeed, a multiplier of approximately 0.2 resulted as the casinos added 10,000 jobs, but the numbers employed overall increased by only 2,000. The unfilled vacant jobs were possibly not filled because the casinos extracted purchasing power away from the residential populations. Casino jobs can also cause undesired impacts for a community by depriving other businesses of workers. Atlantic City casinos drew many new employees from local school districts and local police forces. In free markets, people can make job and career choices on their own, and such job shifts indicate that some people may see casino jobs as better than other available jobs (Grinols and Omorov 1996, 19).
The industry jobs have been both praised and criticized. The positions run the gamut, from stable hand to chief executive, from minimum wage without benefits to seven-figure positions with golden parachutes. A stable hand working with horses may be residing in very substandard housing conditions, perhaps ever sharing quarters with the animals he or she cares for. The largest number of “good” positions is found in commercial casinos. The bulk of these jobs are unionized and carry very good fringe benefit packages, including full health coverage for families of workers. Dealer positions, for the most part, are not unionized, although they do have good fringe benefits. The dealers usually make low salaries, but they share tips. Where tips are not good (or not permitted, as in Quebec), salaries are higher. The best tip situations are found in Atlantic City and on the Las Vegas Strip. A typical dealer at a casino such as Caesars might expect an additional $50,000 a year in tips.
Working conditions in gambling facilities are often not the best. There is high job turnover due to job dissatisfaction and also to policies that sometimes allow firing at will. Traditionally, people were hired in Las Vegas casinos through friendship networks; however, this practice is now less pervasive, as the industry has grown considerably and it is more a “buyers,” that is, an employees’, market. Nonetheless, other adverse conditions surround casino employment. For years the casino atmosphere was one that was dominated by “male” values. Women employees were often placed into situations where they were degraded. This behavior came from fellow employees as well as from customers. It is unacceptable behavior today, yet in some ways it is still tolerated in the casino atmosphere. That atmosphere also has downsides from a health standpoint, as most casinos permit open smoking—and many players smoke—as well as drinking. Casinos can be very loud, and of course, employees work shifts over a twenty-four-hour schedule.
Most workers in the United States have indicated in surveys that job security and salaries are no longer the leading motivators, but rather that factors such as “ability to get ahead,” “recognition for work accomplished,” and “having responsibility” are more important. A survey of casino dealers found, however, that they desired security and financial compensation over the other factors. This is an indication of the insecurity that persists among the workforce (Darder 1991).