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The Rise of Gambling and Its Impact to the Economy

Written by:
Payton
Published on:
Nov/12/2019

The gambling industry has witnessed tremendous growth in recent years. This development is largely attributed to the significantly increased public acceptance of gambling as a form of recreation which is directly linked to the fact that instead of being routinely condemned by the government and the majority of the public, gambling is now being embraced as a legitimate means for economic development.

 

This, in addition to the promise of possible substantial rewards, has given the gambling industry plenty of room to thrive, making it one of the fastest-growing entertainment industries in the world. In this article, we’ll overview the effects that gambling can have on the economy, so let’s dive right in.

Gambling Generates Tax Revenues

Tax revenue is perhaps the most prominent economic benefit of casinos. In fact, it’s one of the biggest motivations for gambling legalization. You see, when residents gamble at a local casino, hundreds of millions of casino revenue will be kept locally, which translates to additional tax revenue for the city or state.

 

Moreover, when a casino opens in a small, rural area, it will help bring other businesses, such as restaurants, hotels, and gas stations which will bring in more revenue for the city and boost the local economy of the area.

 

Through the taxation of gambling venues and online gambling operations, governments around the world can earn revenue from gambling. This is a method commonly adopted by state governments in the US, Australia, and all around Europe, where the tax rates for gambling tend to be much higher than those for other industries.

 

Additionally, governments in many countries earn gambling revenue by enforcing taxes on gambling winnings which is especially profitable in online casinos. As the gambling experts at Jom. Fun explain about online casino Malaysia, the payout RTP (return to play) rates of online casinos are much higher than those of land-based casinos because online casinos usually offer better cash bonuses. The better bonuses attract more players, and more players equals more tax revenue.

 

Another way through which governments gain more revenue is by getting directly involved in the provision of gambling. In many jurisdictions, official governments provide various forms of gambling such as lotteries, electronic gambling machines, sports betting, and online gambling and directly receive their revenue.

 

Although in most cities the taxes provided by legalized gambling (both online and offline) represent only a very small proportion of tax receipts, casino taxes can certainly still make a difference in state budgets. Additionally, gambling taxes make it a lot easier for politicians and government officials to reduce government debt and avoid spending cuts or other tax increases, which is another reason why gambling is associated with increased government revenue.

Casinos Often Perform Public Services

Because gambling has a bad reputation for so long, casinos often organize charities and participate in fundraising initiatives in hopes of eliminating the stigma that’s commonly associated with the industry. In many states, certain forms of gambling, usually raffles and bingo, are often provided by charitable or community organizations and sponsored by gambling establishments to raise awareness and funds for charitable causes that directly contribute to the economy while giving back to the local community.

Gambling Establishments May Contribute to Local Economic Development

Legalized casinos, especially those who are part of the bigger chains, are known for attracting tourists from all over the world which, in turn, generates significantly more revenues. Aside from increasing profit, casinos also play an important role in increasing the employment rate in big cities and rural areas alike by providing numerous employment opportunities even with minimum qualifications.

 

This is clearly evident through studies that report an approximate 8% increase in the employment rate as well as a higher overall wage rate in countries where casinos are legalized. This means that not only do casinos contribute to the local economy, but they also can have a positive impact on the average residents. By bringing in new money, gambling establishments can act as an economic stimulus by offering hundreds of low-wage jobs, consequently increasing the average personal income and decreasing poverty rates.

 

Unlike the common misconception, casinos can offer opportunities for career development; for instance, a person starting off as a dealer can climb up the career ladder and be promoted to a higher managerial position. Additionally, casino workers usually earn a significantly higher income than what their paychecks entail because customers tend to be pretty generous with their tips when they’re having a good time.

 

The rise of the gambling industry calls for the construction of new gambling venues which often leads to greater business developments and wage increases, adding to the wealth of the local community. The economic impacts of new casinos are especially significant in cases where the new gambling establishment is associated with infrastructure upgrades such as electrical and sewer system improvements.

 

The increased popularity of gambling is also linked to a booming real estate business. You see, to take advantage of the increased traffic, new casinos usually stimulate the establishment of complementary businesses such as hotels and restaurants which consequently increases the infrastructure value of the area.

 

Adding to the benefits of casinos to the local economy, new gambling venues also create vast employment opportunities for the local community through contracting with local businesses, drawing people to dine in local restaurants, and encouraging tourists to stay at local hotels. This way, whether the gamblers go home as winners, or as losers, they will have injected new wealth into the local economies.

Sports Betting Can Boost Tourism

The rise of the gambling industry has paved the way for gambling enthusiasts and sports fans to combine their passions through sports betting. Sports betting is nowadays one of the most profitable segments of the betting world, this means that the taxes that governments earn through sports betting are surely lucrative. However, the benefits of sports betting don’t stop there; sports betting also offers numerous business development opportunities and can tremendously enhance tourism in an area.

 

Take, for example, a big event like the Tour de France, which is a very popular race among cyclists, sports fans, and gamblers everywhere. Gamblers and cycling fans from all over the world regularly place bets and will gladly travel to watch the race in person which consequently results in a flourishing economy.

 

Besides being very profitable for tourism and the economy, sports betting can also help other businesses attract more customers. This includes local hotels in the area where the sports event is taking place, local bars and cafes that live-stream matches, games, and races, and shops that sell related merchandise.

New Casinos Can Put Small Establishments out of Business

While we can see that legalized gambling can be very beneficial to local economies, claims are stating that it can also have severe negative economic impacts on small local businesses. Aside from their traditional gambling venues, most casinos also offer hotels, restaurants, and entertainment venues. These associated facilities are likely to compete with similar establishments in the local area, potentially putting them out of business.

 

On the other hand, local hotels, restaurants, and entertainment venues may benefit in situations where the casino’s amenities are overflowing. However, in most cases, the bigger the casino, the higher the chances it has of accommodating its visitors and fulfilling their needs which leaves little to no chance for smaller businesses to compete.

 

New gambling venues can be especially destructive for non-gambling related  businesses. For instance, if a new casino opens in an area, the local theme park will not have the chance of rivaling on a level playing field because the casino gambling activities are likely to provide a potentially addictive market segment that overshadows the park’s services.

Gambling Establishments Can Affect Property Values

A casino can potentially affect the wealth of the community by increasing or decreasing the value of its neighboring properties. A new gambling venue can present a good opportunity for potential investors to establish contemporary businesses such as hotels, restaurants, and bars, consequently raising the value of the properties adjacent to the casino.

 

While increased property values are economically beneficial, they may sometimes have negative social consequences because the changes in property values will probably impact the amount of property taxes collected by the government. This can take a toll on local, low-income homeowners as well as those living in adjacent rental accommodations.

 

Additionally, a new gambling venue may also increase noise and traffic, resulting in parking difficulties, and attract unwanted clientele to the area. This, in turn, can significantly reduce the value of all properties in the neighborhood.

Gambling Contributes to Socioeconomic Inequality

One of the biggest issues concerning the economic impact of gambling is that in many cases, it can act as a form of regressive, unfair taxation where those who have lower income will be contributing disproportionately more to the gambling revenues than those with higher incomes because when a person with a below-average income gambles and loses, they tend to have more serious problems than when wealthier people do the same.

 

This problem originated when the leaders of the casino industry realized that they didn’t have to cater exclusively to a rich target audience in order to make profits. Because gambling is the stock-exchange equivalent to many low-income individuals, many tend to frequent casinos that are close in proximity. Research suggests that easy access to casinos and slot machines is a key factor in that case.

 

Regional casinos typically use slot machines to induce low-income gamblers make a huge number of small bets each time they visit, enticing them to make numerous periodic visits and sustain this pattern over a long time.

 

Nowadays, slot machines are carefully programmed to produce continuous betting by using their sophisticated computerized technology to further deepen the gamblers’ immersion to the point where they’re more interested in playing than they are in winning. This is why you’ll probably find gamblers obsessively tapping buttons on the machines as fast as their fingers can fly whenever you go to any casino.

 

It may not seem that way, but the goal of these machines is not to clean out the gambler in a single visit; it’s to provide an irresistible experience that will induce them to prolong the time spent on the device and keep them coming back for more. This essentially makes slots computerized pickpocket machines.

 

Slots manage to hypnotize the players by carefully regulating the tempo, rhythm, and sound ambiance of the game while occasionally giving out small wins and near-misses to overshadow the players’ increasing losses and prompt further play.

 

Besides the intricate engineering, slot machines will typically accept bets as little as a penny which is another reason why they are an irresistible attraction to low-income individuals. A penny may not seem like a large loss, but when multiple penny bets add up, after hundreds of spins the losses may be substantial.

 

Another way that casinos exploit low-income gamblers is by offering loyalty cards and other marketing programs through which they collect a vast amount of intel on their customers, enabling them to devise specifically-tailored strategies to get them to adhere to a frequent pattern of play over an extended time period. All these elements combined  are used by the gambling industry to cater to lower-income gamblers, furthering the socioeconomic inequality in their local communities.

 

The benefits of gambling may include tax revenues, increased employment rates, higher wages and income, and enhanced tourism, all of which can lead to overall enhanced economic growth. However, these benefits, should they occur, are not necessarily without costs. Problems with gambling, for example, can cause severe economic and social costs that are likely to be borne by gamblers and non-gamblers alike.

 

It’s important to note that despite the recent studies conducted in the estimation of the economic benefits and costs of gambling, this area of inquiry is still in its early stages and the effects of gambling on the economy remain relatively ambiguous. So, before you’re quick to judge, be sure to weigh both the pros and cons of gambling and remember, moderation and discipline are key to responsible, legal gambling.

 

 

 

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