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Central Banker | Fall 2003

Employment Effects of Casino Gambling in the Eighth District

Casino gambling has become a major industry in the United States over the past two decades, amassing revenue of $27 billion in 2001. Prior to the early 1990s, casino gambling was legal only in Nevada and Atlantic City, N.J. Riverboat casino gambling first began in Iowa and Illinois in 1991; it now exists in Indiana, Mississippi and Missouri. Additionally, Louisiana and Michigan have legalized land-based casino gambling within the last decade.

The primary reason many states have legalized casino gambling is because casinos are seen as a potential tool for economic growth. The greatest perceived benefits are:

  • increased employment,
  • greater tax revenue for state and local governments, and
  • growth in local retail sales.

Casinos also have gained more appeal and acceptance because of:

  • increased fiscal pressures on state budgets during the 1990-91 recession,
  • the fear of lost revenue to neighboring states' casinos and
  • a more favorable public attitude.

Recent research from the St. Louis Fed discusses several issues regarding the potential effects of casino gambling on local employment. One issue is the casino's location and the required skill level of its work force. Most casino jobs require skills such as accounting, dealing cards or security.

If a casino is planning to move to a rural area that has few residents with the required skills, then the casino probably will draw skilled labor from outside the area. If workers remain outside of the local area and commute to the casinos, then local unemployment will remain unchanged. If, however, some of this skilled labor decides to move near the casino, then the local unemployment rate will fall because the number of local residents employed has increased.

It is the latter scenario that often is used as evidence that casinos have improved local employment, but this is misleading. Unemployment for the original population essentially remains unchanged—only the new arrivals have found employment with the casino, and this is what decreases the unemployment rate.

Another issue is the effect of casino gambling on non-casino employment. When a new casino opens, existing local businesses may close, resulting in layoffs. However, new businesses may open—ones that complement casinos, such as restaurants and hotels.

Past research has provided mixed evidence, but researchers generally agree that a casino's impact on local business and employment depends on where casino patrons come from. If most casino patrons live or work in the local area, their patronage may have a negative impact on local businesses because they can spend their money at the casino rather than at local businesses. However, if the casino is part of a tourist attraction that brings in patrons from outside the area, this new money may foster increased business activity in the local area.

Our research estimated the employment effects of casino gambling in four rural counties and two urban counties, most of which are located in the Eighth District. As a direct result of adopting casino gambling, three of the four rural counties experienced increased household employment (the number of people in a county who are working regardless of location) and payroll employment (the number of jobs in a county, regardless of employees' residence). This seems to be true even though casino employment is usually dispersed over several counties outside the home county. We also found that employment gains are much greater in the rural counties that have adopted casino gambling as a major or predominant industry.

Our research also indicates that it's harder to detect the impact of casino gambling in urban areas because employment fluctuates more, and casinos only constitute a small portion of total employment. However, urban casino gambling can constitute a significant portion of net payroll employment gains or losses, even though it is a minor industry.

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