Diane talks with Damian Paletta, economics editor at the Washington Post.
More states than ever are turning to casino gambling to boost their coffers. Maryland’s new Horseshoe Casino generated nearly $6 million in its first week. And Massachusetts just approved a $1.6 billion gaming resort to be built on a plot of polluted land north of Boston. But casinos are far from a sure bet. States like Delaware and New Jersey that adopted gambling earlier than their neighbors are seeing their casinos close and revenue drain away. Guest host Steve Roberts and his guests discuss winners and losers in the casino industry and how its fortunes are affecting state coffers and local communities.
- Geoff Freeman President and CEO, American Gaming Association
- Richard McGowan, S.J. Casino specialist and adjunct associate professor of economics, Boston College.
- Tracy Gordon Senior fellow, Urban Institute Tax Policy Center
- Rachel Volberg Research associate professor of epidemiology, University of Massachusetts. She is principal investigator of a large study of the social and economic impacts of casino gambling in Massachusetts.
MR. STEVE ROBERTSThanks so much for joining us. I'm Steve Roberts of the George Washington University, sitting in today for Diane Rehm. She's feeling much better and will be back in this chair on Monday. The casino industry is anything but a sure bet these days. Yesterday, the Massachusetts Gambling Commission approve a $1.6 billion casino north of Boston. At the same time, the Trump Plaza just became the fourth casino in Atlantic City to shut down this year.
MR. STEVE ROBERTSHere to discuss current trends in the casino industry and what its future might hold, Geoff Freeman of the American Gaming Association, and Tracy Gordon of the Urban Institute. Joining me from a studio at Harvard, Richard McGowan of Boston College. And by phone, from her office at the University of Massachusetts, epidemiologist Rachel Volberg. Welcome to you all. Good morning.
MR. GEOFF FREEMANThank you.
MS. TRACY GORDONGood morning.
ROBERTSAnd we want to say…
MR. RICHARD MCGOWANGood morning. Great to be with you.
ROBERTSAnd we want to say a special welcome this morning to our live listeners from WHQR Public Radio, Wilmington, N.C., 91.3 FM. A wonderful town, Wilmington. And of course the hometown of one of America's greatest broadcasters, David Brinkley. So we're particularly honored to have you with us as regular listeners here on "The Diane Rehm Show."
ROBERTSLet's start with, Geoff, the state of gambling today. I was looking at the figures, it's a $38 billion industry, but it was in 2007, it was a $38 billion industry. It's gone -- it's an industry that seems to have plateaued and gone through some hard times.
FREEMANYeah, actually we're quite proud of where the industry is today and where it's going in the future. The favorability for gaming has never been higher. Those that embrace gaming as acceptable for them or others, has never been higher. You see the results that are being delivered in places like Pittsburgh, Philadelphia, Columbus and beyond. There's a model out there that works. Vegas is…
ROBERTSWhat's the model?
FREEMANWell, I think the model that works is one where gaming is one component of a multifaceted economic development plan. Gaming's not the panacea that's going to save an entire states. It's one component. And those that have a strategy to build an economy with gaming as one component of that, where gaming can be an entertainment provider, gaming can be a hub to work with small businesses, gaming can help employ those who have struggled so much since the recession in 2008. If you have a vision, if you have a plan, if you have a diversified economy, gaming can be a great addition to that.
ROBERTSBut New Jersey had all of that. They had a vision, they had a plan, and Atlantic City is in terrible trouble.
FREEMANYeah, I think Atlantic City's a great message to other communities at a great juxtaposition with Las Vegas. When you look what's done in Las Vegas, the diversification of that economy, two-thirds of the revenue on the strip is non-gaming revenue. It's coming from meetings and conventions, restaurants, entertainment programs. Then you look at the diversification beyond the strip with Zappos, Tesla now identifying Nevada as the place where it's building its next factory.
FREEMANThe Nevada economy, the Las Vegas economy is diversifying. Atlantic City is taking some important steps, but by all accounts that economy did not diversify early enough. That economy did not take advantage of some of the opportunities that were expose when this new-found competition came into Pennsylvania, Ohio and elsewhere.
ROBERTSRichard McGowan, I want to bring you in because I know you study this issue as well. What lessons are you drawing from this mixed picture that Geoff talks about? Some states doing well, New Jersey, a very notable exception. And of course up there in Boston, just a decision yesterday to go ahead with a huge new casino outside Boston. What's your take here?
MCGOWANI mean, one of the things that does strike you is that most of the casinos -- in fact, all of the casinos are regional casinos for the most part. And so you're only -- you're really going to just attract people from a region. Vegas is certainly the mecca of casino gambling. So people will come from all over. And as Geoff pointed out, people go there for -- to be entertained totally. If you think about -- it's an interesting bet that Massachusetts is making -- at least the gaming commission -- thinking, you know, that.
MCGOWANBecause if you look at the plan that Mr. Wynn has for Everett, he's trying to make it a national destination casino. That's going to be an interesting thing, whether that breaks that up. Because one of the things -- revenue he wants is to bring in the really high rollers. And it's going to be interesting if the high rollers would fly over Vegas to come all the way to Boston to go to one casino.
ROBERTSNow, Richard McGowan, I know you're also a Catholic priest. And I want to ask you this question, which is, part of the lure of Vegas is it's Sin City. Right? What happens in Vegas, stays in Vegas. Does what happen in Everett, stay in Everett? Does what happen in Baltimore, stay in Baltimore? Is it anything like that same attraction of Vegas, which has a very special mythological place in America?
MCGOWANNo. And that -- and I think that's the point I was trying to make, is that -- it -- they're regional casinos. And so, for instance, the Everett one, to be successful, is going to have to get people to leave Boston to go to Everett. Now, it's not that far of a trip. And I think, obviously, again, there'll be other -- clearly there are other attractions in the Boston area that people will want to come to see. So that's what, you know, Mr. Wynn is going to have to…
ROBERTSUnfortunately for you, though, the Red Sox are not one of them this year. But…
MCGOWANNo, they are not. But the Patriots might be. And by the way, my Boston College Eagles might be, after we beat USC. But, again, there's various things that you have to take into account. And there's where, I mean, you -- the total entertainment package that Geoff talked about has to be established.
ROBERTSRachel, I want to bring you in because you -- there at the University of Massachusetts, I know you've been asked to do a study. And I know it's in the early days. But what is your take on the impact -- and not only the economic impact that Geoff was talking about, but also the social impact. Just the fact that the State of Massachusetts asked you to do this study, does this reflect ongoing concerns of the -- some of the negative social impacts of brining in casino gambling?
MS. RACHEL VOLBERGWell, I think it's important to make the point first that the study that I am heading up here at UMass Amherst is actually required as part of the law that was passed to create casino gambling in Massachusetts.
VOLBERGSee, I -- the statute says that the gaming commission must conduct, not just a baseline study, but also must monitor the impacts of the introduction of casino gambling over time and provides for the funding of a public health trust fund, as well as a community mitigation fund, to minimize and mitigate those impacts as they're identified through the research agenda.
ROBERTSSo the answer is yes, they were concerned about this.
VOLBERGYes. They were concerned. And the idea here is to sort of create a virtuous circle, if you will, of, you know, regulating through the use of ongoing empirical evidence of what the impacts are so that those can be addressed in a sort of a rapid way, before they spiral out into, you know, things that are so big that they are very difficult to address.
ROBERTSNow, as I say, I know that this is still in the early days, but do you have any working hypotheses, at least, of the kinds of social impact you're going to be looking at?
VOLBERGWell, we're going to be looking at a lot of different things. We have both a large number of social and health indicators that we're going to be monitoring over time. As well as a large number of economic and fiscal indicators. You know, the work that we're doing is informed by a theoretical framework for conducting impact studies of gambling, that's based on an exhaustive review of the existing literature. And the impacts that we're going to be tracking are all things that, you know, have emerged from the past 30 year of research as being of importance…
VOLBERG…to monitor over time.
ROBERTSRight. Now, Tracy Gordon, I want to bring you in from the Urban Institute because you focus on the economic impact. And a lot of states, as Geoff said earlier, there's no panacea. Well, that's obviously true because it has not worked as well in many states as people had hoped. Revenues lower -- as I read the studies -- revenues lower than the projections or aspirations in many states, and of course the example of New Jersey being particularly in the front burner right now. What -- give us your take on the economic impact. What's the plus side, in terms of development, and perhaps what's the downside or the failures that you see?
GORDONWell, I tend to focus mainly on state revenues. And so I would say it's a small, but not inconsequential share of state revenues. It's about 2.5 percent, which might sound very small, but when you're trying to close a budget deficit and you have voters that don't want to increase taxes, that extra increment can come in pretty handy. The other nice thing about gaming revenues is that they tend to be sort of gradually increasing and not really dropping, except for during the recession.
GORDONThere was the first year-over-year drop that we've seen, in 2009. That came back in 2010, but mainly because of expansions of gaming, especially in Pennsylvania, which accounted for about half of that increase. So I would say it's the sort of thing that's not easily dismissed and gotten rid of from a revenue standpoint, but it's certainly, again, as the other panelist was saying, it's not a panacea when it comes to state budget crises.
ROBERTSNow, one of the things you said, Tracy, that's so interesting is this isn't a context. Right? And one of the contexts is the inability of state legislatures to raise revenue in other ways, given the anti-tax feeling from the Tea Party and other political forces. And does this help enhance the appeal of casino gambling as a source of revenue in a state like New Jersey? In New York, Governor Cuomo has been talking about this in his State of the State Address. Is this part of the context that we have to understand?
GORDONRight. So you often here, you know, let's go tax those people that are currently gambling just over the border and get them to come to our state. And I think that that can make a lot of sense in the short term. The problem is that the people who come over the border might decide to go over the border again tomorrow. So you've got states like New Jersey, which is now suffering, in large part, because of competition from Pennsylvania. You know, Connecticut is worried about Massachusetts. Indiana has to look out for Illinois and Ohio.
GORDONSo in economic development, you know, everyone wants to be the next Silicon Valley. And I think in the casino world, everyone wants to be the next Las Vegas. The question is sort of what's in the special sauce? How do you replicate and then keep that success?
ROBERTSWho's the ones that have been most successful?
GORDONWell, Nevada certainly gets most of its -- or the larger share of revenues from gaming, about 12.5 percent in the last year for which we have data. And it's followed by Rhode Island and West Virginia. You know, I would just say that I don't think people point to, you know, some of those states as sort of paragons for economic development. As we were talking about earlier, you know, you really want to have a diversified strategy. One of the quotes that really caught my eye in the coverage of New Jersey was "we tried to go after industry, but we didn't have the education base." So let's invest in that.
ROBERTSTracy Gordon of The Urban Institute. I'm going to be back with more comments, your calls, your questions. Stay with us.
ROBERTSWelcome back. I'm Steve Roberts sitting in today for Diane. Our subject this hour, the casino gambling industry with the collapse of casinos in New Jersey, and yet yesterday announcement of a major new project outside of Boston. Geoff Freeman is with me from the American Gaming Association, Tracy Gordon of the Urban Institute. By phone from Boston, Richard McGowan, professor at Boston College and epidemiologist Rachel Volberg at the University of Massachusetts.
ROBERTSWe have some lines open, 1-800-433-8850. Give us a call and share your views on this expanding dimension in the American economy -- American entertainment industry. Geoff, I want your take on this question. You mentioned that it's not a panacea. Gaming is part of a strategy. But have some states made a mistake? Have they relied too heavily on it? I mean, New Jersey clearly had very high hopes. And has the industry been overbuilt? Is there a saturation point here where it's like the housing industry, you know. Everybody builds houses and then there are too many of them. Is that what we're seeing?
FREEMANYeah, Steve, I think the mistake that could be made today is one of two prominent mistakes. One is relying on the industry to the exclusion of developing other aspects of your economy, expecting the industry to reach some unimaginably high bar here that no industry could possibly meet. That's one potential mistake. Another potential mistake is ignoring basic economics and thinking that you are still dealing with a novelty situation. As everyone has pointed out, gaming is much more omnipresent today than it was 10, 15, 20 years ago.
ROBERTSI mean, and I read in one of the figures, in 1988 two states legalized gambling. Today it's 39. I mean, a huge difference.
FREEMANSure. Yeah, when you include the tribal gaming as well as commercial gaming you're looking at 39 states. And yet in many of these states you have public policy that pretends the industry is a novelty that pretends supply and demand doesn't exist. And that's where you run into tax rates for the industry well over 60 percent. Regulatory policies that inhibit the industry from innovating, from reinvesting, from operating efficiently.
FREEMANWe're in an environment now where if you bring gaming into that environment you're looking for a partner. You're looking for a partner in economic development, a partner with whom who you can work in attracting visitors, in building an incredible destination, whether it be regional, as professor pointed out, or national.
ROBERTSBut also, you know, the other point here, and Tracy raised it in terms of giving the figures, that really the other problem you ran into in building this industry was the recession of 2007, 2008. And it's now well-known that American wages have plateaued. People are not feeling wealth in America. All the polls show people quite gloomy over the economy despite the records on Wall Street. Is this part of the picture that people have to confront, that the post-recession blues are still inhibiting the kind of spending that might help boost revenues at casinos?
FREEMANAll aspects of the economy that operate as casinos do, other aspects of the hospitality industry, all things that are wants more so than needs are particularly effective when we get into a recessionary environment. What that means though from our perspective is the industry has to be more competitive. All the more reason we need to be able to reinvest in that product and build the next thing that the customer wants. Bring in those new high-end restaurants, bring in the most attractive new name when it comes to retail and other activities.
FREEMANIf you don't allow innovation at a time when the economy is difficult, you're going to see customers driven to other disposable areas where they can enjoy themselves.
ROBERTSAnd Richard McGowan, let's talk about another issue. You know, Rachel Volberg was talking about how the State of Massachusetts set up this study. Clearly concerned put it into law to monitor the social impact. And from your perspective, are there negative elements that come with the introduction of gaming, the obvious one of some people becoming addicted? We have an email from one listener, Jim in Florida who brings up the issue of organized crime that certainly has been associated with gambling in the past. What's your take on this dimension of the story?
MCGOWANWell, I mean, certainly there's some economic down -- I mean, falls. You know, for instance you can -- occasionally you could cannibalize local businesses. Sometimes you can actually help local businesses. The Massachusetts law, by the way, is that local businesses, the local restaurants and everything have to be invited first to open up restaurants in the new casino and so -- in the Boston area. So there'll be actually, I mean, legal seafoods and places like that will try to open up restaurants. I don't know if legals is definitely -- but, in other words, there'll be the local restaurants.
MCGOWANI mean, the social costs clearly, you have -- there can be rises in bankruptcy, increases in divorce rates, things -- and alcohol use. And again, the addiction problem -- and Rachel can probably speak much more to this than my -- you have a core morbidity problem there where people who are addicted to gambling are also addicted to another substance. And so you -- it's definitely, you know, it's -- how the state deals with a compulsive gambling issue is vital. And it gives legitimacy to the casino industry.
ROBERTSDo you worry about the social costs?
MCGOWANVery much so. I mean, and I also worry about the economic cost. At the same time, you know, one of the things that does strike me is that sometimes, to be quite honest, the biggest social cost is how states get addicted to the gambling revenue. And, for instance, I always -- New Jersey got itself in trouble because that revenue was being used to fund Medicaid and Medicare. And so when it went down the state has all kinds of problems.
MCGOWANTo me gambling revenue should be used for rainy day funds. It should not be used for day-to-day functions the state government should be providing. Gambling revenue should be used for rainy day funds that allow the states to do special projects that now, if things go bad then they can cut -- they don't have to raise -- excuse the pun here, raise the ante on gambling.
ROBERTSAnd Rachel, as Richard McGowan just mentioned, and you mentioned earlier in your comment, that you did an exhaustive review of the literature. And having done that, share with us and our listeners what you see from the literature as the red flags here. Geoff Freeman has made the case for the revenue and that obviously can be helpful in terms of jobs and state revenues. But what are the red flags here that people should be aware of?
VOLBERGSo one of the things that the theoretical framework report did that was very useful to us in developing our study was to identify some of the major key positive impacts and key negative impacts. So as Geoff pointed out, and Tracy as well, you know, there are positive impacts in terms of increases in government revenue, increases in public services. The new gambling venues add to the assets of the communities in which they're located.
VOLBERGBut there are also key negative impacts. And the one that most people focus on and talk about the most is the increase in problem gambling and related indices that, you know, bankruptcies, divorce, suicide, people seeking treatment for various physical and mental health problems.
VOLBERGThe crime impacts are actually quite complex. And the various studies that have been done have had very different methodologies and the results have been quite mixed. There is evidence that gambling -- casino gambling does contribute to a small extent to an increase in socioeconomic inequality. And there 's also, interestingly enough, documented increase in negative attitudes towards gambling in studies that have looked at the impacts of casino gambling in particular over time.
ROBERTSOkay, thanks. And Tracy, you were nodding your head when Richard McGowan said that one of the serious addictions of states to this revenues and New Jersey being the case study of sort of the downside here. Pick up on that point and then explain what it looks like from your point of view.
GORDONWell, I guess I was thinking about his point that they should put it in a rainy day fund. And, you know, I was thinking, good luck with that. I have all kinds of revenue sources that I would love to see put into a rainy day fund like volatile income taxes. And that doesn't seem to happen. But typically lottery revenues and particularly earmarked for education. And my concern with that is that it gives voters the illusion that they're off the hook when it comes to funding education. And, in fact, it's a pretty small share. I think New York has the largest share that goes to education, about 5.5 percent. In California where I'm from it's about 2 percent.
GORDONAnd so then, you know, things come along like recessions. Education budgets get cut and voters think, well, wait a minute, we approved that lottery recently. How come the education budget isn't fine? So I think it's a way for policymakers to kind of get off the hook of explaining these tough tradeoffs.
ROBERTSNow you mentioned lotteries, which is not the gaming industry but it's a form of gambling. When I grew up in New Jersey, the local candy store had 20 payphones in the back. And I couldn't figure out what they were until I realized they were the headquarters of the numbers runners in my hometown. And there's always been gambling in these communities. And if it wasn't official in the state, it was going to happen under the surface and the state was not going to get any revenue from it. So I can see that case. But it's a -- you're making an interesting point about letting taxpayers off the hook, as if this somehow is a painless way of raising revenues.
GORDONRight. I think it's important to think about all of the costs and benefits, as we've talked about. And we've talked about some of the social costs potentially. The problem is there's just a lot of uncertainty about this. And so, you know, when it comes to the benefits we want to know how many of those jobs would've existed anyway in other kinds of, excuse me, entertainment, things like restaurants and bars, and how many of those jobs are going to go away when you put in a new casino. And then how much of it is really benefitting people in the state.
GORDONRichard mentioned the local restaurants sort of having first dibs. You know, that's a way of trying to keep the jobs in the state, but what if it's an outside contractor that's getting all the money? So these are just the kinds of things you have to look at (unintelligible) .
ROBERTSAnd also since you’re an expert on tax policy, I want to follow up on another point. The assumption is that lotteries are regressive tax, that they tax the poor much more than wealthy people. And that's one of the criticisms of them. What's the picture in terms of casinos? I gather it's a little different than that.
GORDONYeah, I mean, I think, in general, the concern is this is regressive. Casinos do fall under that category. In general, taxes on consumption are aggressive. People who are low income devote a bigger share of their budget to consumption than people who are high income.
ROBERTSSure. Any kind of a vat tax or a value...
GORDONExactly, or a sales tax. But casinos of gambling taxes are probably the less regressive. It's the scratch-off games that are really regressive, I think the research has shown, or sort of the instant gratification video lottery terminals that people have some concern about.
ROBERTSI'm Steve Roberts and you're listening to "The Diane Rehm Show." Geoff, we're talking about New Jersey, talking about Massachusetts, sort of two different vectors here. And given the fact that both Richard McGowan and Rachel are talking about Massachusetts trying to prepare for this new innovation, if you were sitting down with the governor or talking to the voters of Massachusetts, what would you say in terms of the benefits and what would you say -- I asked the question earlier of Rachel, the red flags. What are the red flags as well as the benefits here?
FREEMANThe first point I would make to anyone considering gaming is understand the facts versus a lot of the rhetoric that's been out there over the years, the antiquated myths, whether it be of organized crime that's been out of regulated gaming for many decades at this point or whether it be this idea of who the customer is that goes into the casino. The fact is that the casino-goer today is a portrait of America, a plurality or earning between 60 and $100,000 a year. Three-quarters of them are setting a budget. Most of that is $200 or less.
ROBERTSA budget for what they'd lose...
FREEMANA budget for how they will enjoy themselves when they're there. You know, is it loss when I go to the baseball game? Is it a loss when I go to the movie theaters? Or is it am I buying an entertainment experience?
ROBERTSFair enough. Sure.
FREEMANAnd the same is true within a casino. The difference but you have the opportunity to win as well. And this customer really is that diversified picture of America. It's a much different image than the myths that have been perpetuated over the years. When you're looking at bringing gaming into the community, the first question you have to ask, are you willing to overcome that? Are you willing to take a hard look at the law enforcement data coming out of Columbus, Ohio right now, out of Philadelphia, out of Pittsburgh where it shows actual decreases in crimes since the casinos have come in? You see a much different environment.
FREEMANWhen you do that as well, are you willing to look at the industry, not for every last little bit you can squeeze out of it at the end of the day, but something where you want to build a world class entertainment center that is the next hub of innovation, of the entertainment experience. And I think too few are looking at it more of a -- the way you would've looked at it 20 years ago.
ROBERTSFair point, and certainly people can get addicted to baseball too. But at the same time there is a difference. This is not just another -- this is not going to the movies. This is potentially a dangerous addiction for some people. And as Rachel pointed out, there are studies which show divorce, bankruptcy and other social dangers here. Does the gaming industry have a responsibility in any way to deal, not only with the economics, but also with the potential social costs?
FREEMANYeah, no matter how you slice the numbers, whether it's 1 percent or some would use a bigger number of 3 percent or 5 percent, no matter how you slice the numbers, more than 90 percent of those going to casinos are doing so responsibly. Now that leaves a small portion of people who may not be doing it responsibly. As was pointed out earlier today, some of them have other addictions, perhaps an addictive personality to drugs, to alcohol, to other things. It's important that those people get the help they need.
FREEMANAnd that's why the gaming industry is the largest funder of research in this area. We sponsor or support a foundation, the National Center for Responsible Gaming that funds research in this area. We're quite proud of the research that's being done, the learning that's taking place. We're supportive of other efforts in this area. We do certainly have a responsibility to make the customer aware, to make our employees aware of how to identify issues and how to prevent things from growing into challenges. We have that responsibility. We take that responsibility seriously. And we're excited to be a partner with people like Rachel Volberg and others for years to come.
ROBERTSRichard McGowan, is this a fair account of the attitude of the gaming industry? Do you find that they are responsible and responsive or is there more that they could be doing?
MCGOWANWell, I mean, any industry could be doing a lot more. I mean, for that matter, you could say the cigarette industry and the alcohol industry also would have to -- should do more for their addiction problems.
ROBERTSGood point. Sure.
MCGOWANBut the gaming industry I think just -- that is their Achilles heel, let's face it. I think that the compulsive gambling issue is the issue that's going to make or break this industry. And to keep its, what you call, political legitimacy. And they do support -- in fact, I was a member of that commission for ten years looking at the various projects. And they do support some very interesting research about, you know, the complex gambling problem. So the industry -- and also -- but the state also has a responsibility.
MCGOWANAnd, you know, for instance, in Massachusetts last year, the state made $971 million on the lottery and gave $250,000 for compulsive gambling. Well, you know, the state has to throw -- now in the new gambling law...
ROBERTSYou're going to have to hold that thought because we have to take a break right now. I'm Steve Roberts sitting in for Diane. Back with your calls and your comments and your questions on this issue of gambling, so stay with us.
ROBERTSWelcome back. I'm Steve Roberts sitting in for Diane today. And our subject this hour, casino gambling with the announcement yesterday of a major new establishment north of Boston at the same time, the closing of several major casinos in Atlantic City. So two things happening at one. Geoff Freeman of American Gaming Association is with me, also Tracy Gordon is a tax expert at The Urban Institute, Richard McGowan of Boston College and epidemiologist Rachel Volberg, University of Massachusetts, both on the lines with me from Boston.
ROBERTSAnd let me read some emails of folks who want to join the conversation and here's one that came in. "I suspect a bait and switch," says Adam. "Gambling is sold as a way to raise money without taxes, but who spends the money and who collects it? For every dollar spend in a casino, what proportion goes to a state?" Tracy?
GORDONYeah, most of it goes to the state, not very much to the local government so I hear what the caller is saying in that regard if you think some of the social ill effects are happening at the local level. It's up to the state to decide whether to remit some of those revenues back to the locality.
ROBERTSSo most of the time, it's the state who takes the lion's share of the...
ROBERTSAnd here we have an email from Nat. "Would you have your guests weigh in on the aging of America and how the gaming industry plans to adjust? I think the industry will be surprised how gaming is viewed ethically by new generations." Geoff?
FREEMANWell, one thing we know is that gaming is viewed more favorably today than it's ever been viewed before. More people than ever view it as something that's acceptable for themselves or others. So as the population ages, I think that younger population looks at gaming, which is more present today, and they see it as just another entertainment source that they need to be responsible with, as they would be other areas.
FREEMANBut they see it as just another entertainment source. The big question, when it comes to aging, is what does the casino look like 10 years from now, 15 years from now? Because it probably doesn't look the same as it does today. The machines that people are using, how they interact with that, the social element of it. Obviously, the younger generation today is doing things a bit differently than the older generation and that's one of the biggest issues on our radar screen.
FREEMANHow do we adapt to our customers' changing needs?
ROBERTSAnd that includes promotion. I mean, all the ads for casinos, young people, you know, drinking far into the night, you know. It's not older people, don't show up in any of those ads.
FREEMANWell, and again, when you look at Las Vegas, which is a model that works for Las Vegas, may or may not work elsewhere, two-thirds of the revenue non-gaming, from clubs, from restaurants, from retail and other things, much of that attracting a younger population. It's a changing population. One thing we know about the gaming industry, however, is that we can change with that population.
FREEMANWe have a history of doing that, of providing people the entertainment experience that they're seeking.
ROBERTSAnd Rich McGowan, let me read this email from Jim in Florida. "When the states of Nevada and New Jersey were facing problems with organized crime and other criminal aspects of the gaming industry, new laws and changes to the industry had to be fought for and implemented. What lessons has the gaming industry learned and will be applying to new expansions to gambling establishments to keep the crime out of gaming?"
MCGOWANWell, I mean, one of the ironies, that there's so much money to be made in gaming that, you know, let's face it, the casino firms themselves are fairly large firms and they're -- and to keep the crime element out, I mean, I doubt if the casinos themselves, by the way, are certainly not going to cheat customers. There's no reason. They're going to win. The long run, they are going to win.
MCGOWANSo in that sense, you know, the crime is the people who get addicted and then try to commit crimes to graze more money at the other casinos. So I don't -- again, it's a little bit out of the -- how's the industry's been...
ROBERTSBut what about the organized crime element? Now, Geoff said that the industry has dealt with this years ago, but, of course, at least the mythology and the history in Nevada and New Jersey, to take two examples, where organized crime was very involved in the gaming industry.
MCGOWANWell, I mean, again, I think the states that you've seen, Pennsylvania and Indiana and Illinois, you really have not heard about any organized crime problems in any of these states. They're pretty -- I mean, now I'll grant you, one license in Pennsylvania was given to a used car dealer who ended up having a felony record. So I mean, the states have to take an incredible long time looking at who they're going to give licenses to and why they're going to give license to.
ROBERTSOkay. Let's turn to some of our callers. And we have -- let's start with Jason in Cleveland, Ohio. Welcome. You're on "The Diane Rehm Show," Jason.
JASONHi. Long-time listener, first time caller. I wanted to share my personal experiences when we legalized gambling here in Ohio. I feel the way we did it was a way that we truly integrated with the local business. Like, in Ohio, you can't comp your rewards credits for free alcoholic beverages. So instead, what the casino here did, in Cleveland, they partnered with all the local restaurants in the downtown area so you could use your rewards credits at the various downtown restaurants.
JASONSo basically, because of that, you know, people got to experience restaurants downtown. And I can tell there was a huge difference with the downtown area because before we opened the casino, downtown was a dead zone. You know, ever since we opened the casino, it's been the place to be and, you know, a lot more people are living there. The shopping malls have expanded. So I feel, in a lot of ways, while the gambling revenue isn't what we expected it to be, it has helped our downtown.
ROBERTSThat's an interesting perspective. Tracy, what's your thought about that?
GORDONSure. I think, you know, there are examples of local economic development, stadiums, you know, other types of investments that do work like that where you get local businesses back on their feet. The key is just citing those investments correctly, looking at places that are experiencing some slack in their economies and providing incentives like the caller mentions.
ROBERTSAnd one of the trends, Geoff, that I gather is to look at cities like Cleveland, Pittsburgh, others, some of the aging industrial cities as new markets and not just the -- places like Las Vegas or Atlantic City.
FREEMANSure. Cleveland, Pittsburgh, Baltimore...
ROBERTSBaltimore has a huge new casino.
FREEMANBethlehem, where you have Las Vegas Sands. The industry continues to evolve, continues to offer its product in new ways, obviously. It's not just Las Vegas and Atlantic City. It's not just communities that people are looking for a savior. It's being done in many areas in an urban area. You look at what's being done here in the Washington, D.C. area with the MGM property that will be at National Harbor, just south of Washington, D.C., an already very developed area, a very strong economy, high incomes.
FREEMANAnd they're going to come in with a jewel of a product that will really make this area even more attractive than it already is.
ROBERTSLet's turn to Lisa in Leesburg, Virginia. Welcome, you're on "The Diane Rehm Show," Lisa.
LISAYes, hi, thanks. Yeah, it's great to think of it as an anchor to maybe promote other businesses that can grow with it, but whenever anybody starts talking about this as an employment opportunity, I always wait for the interview to ask exactly what does that mean. What percentage of the total jobs are going to be minimum wage jobs? How many of them are going to be part time versus full time? And when you break down the number of jobs in a casino and you break them down that way, you find that you are hiring an awful lot of very low income people that even with tips are not going to be tremendous, I don't know, providers or tremendous contributors to an area economy because you don't make a whole heck of a lot of money working at these places.
ROBERTSLisa, thanks very much for that perspective, very helpful. Richard McGowan, could you answer Lisa?
MCGOWANLisa, I thought, according to some of the statistics, that the average casino worker's -- his salary's a little above the median salary of the United States. And for the most part, casino workers are unionized. I mean, again, the industry is sensitive to that and I don't know if I necessarily agree with Lisa on that at all. I mean, I will grant you -- I mean, right now, I am sure in Atlantic City, there are a lot of unemployed casino workers who can tell you, you know, but their complaint is...
ROBERTSThousands of them.
MCGOWANYeah. How about that? And the reason, because they had pretty good jobs and all of a sudden never really wanted to let them go. And so it's an interesting industry that way because they're willing to allow their workers to unionize, for the most part, because they want to keep labor peace.
ROBERTSLet's talk to Michael in Miami. Welcome, Michael. You're on "The Diane Rehm Show."
MICHAELThank you very much. I've noticed that most of the casinos now that are opening are more regional in nature and it strikes me -- I don't have anything to back this up, but it strikes me as there's a lot of -- it's much older. So going forward, there's all this money being put into bricks and mortar for casinos. How much thought is being put into online gaming, which is really what younger probably would be much more attracted to than going a destination that has slot machines?
ROBERTSThanks for bringing that up because that was on my list of questions. And Geoff, what kind of challenge do the bricks and mortar casinos, like the ones closing in New Jersey, is online gambling? Give us a sense of this piece of the gaming picture.
FREEMANYes, it's fair to say that there's a lot of thought being put into online gaming and the industry is a bit divided as to their perspective on the future of online gaming. Many think that it is a great supplement to their brick and mortar properties. The rule in New Jersey was that the only companies that could offer online gaming are those that have a brick and mortar presence so truly is a supplement to what they're doing.
FREEMANThere are other companies who don't see the future in online gaming. Because of that, AGA is not taking a central role on the issue, but I can assure you the industry is...
ROBERTSAGA, of course, the American Gaming Association.
FREEMANBut the Gaming Association isn't out to act on it. But that said, the industry is giving the issue a lot of thought. How do we adapt to that next generation customer? How do they want to consume the product? How do we make ourselves more relevant?
ROBERTSNow, Rachel, as you think about this, having read the literature, but also think about the future, does online gaming present any kind of a different picture in terms of the social costs, in terms of the impact on families, from what you've read in the literature is it pretty much the same or is there difference we should be aware of?
VOLBERGWell, I think the main difference in online gambling versus brick and mortar gambling is, you know, sort of the context within which the games are played. So instead of sort of dressing up and going out for an evening or going, you know, to Las Vegas for week of fun with different amenities, you know, online gambling can be done in your bathrobe, you know, at your dining room table on a computer or, you know, on your Smartphone on the bus to work.
VOLBERGSo the sort of parameters around, you know, how you can do it and how you can get into trouble are quite different. We also know that the demographics of online gambling are significantly different. I'm involved in a study in Sweden, for example, where online gambling is available through the government operator of gambling services.
VOLBERGAnd what we've seen in Sweden over a number of years is that in addition to involvement in games of skill and betting on sports by the demographic that you would expect, which is younger men, there's also a growing sort of cohort of middle aged women who play basically slot machines online. And that's been -- it's an emerging concern for the Swedish government as the online gambling market in Europe expands much more rapidly than it has here in the United States.
ROBERTSAnd what's the concern? You know, Geoff made the point that for the perspective of the gaming industry, they see gambling as a part of a larger entertainment experience in many places, going to Las Vegas, seeing a show, going to good restaurants. And what is the -- you seem to be saying that, you know, that solitary gambler in front of her computer in a bathrobe, it's a different experience. And are there different concerns here about the social impact?
ROBERTSAnd hold on to your answer 'cause I got to do one bit of business. I'm Steve Roberts. You're listening to "The Diane Rehm Show." Go ahead. Go ahead, Rachel.
VOLBERGOh, I thought you were speaking to someone else. I think that the concern is that, you know, the time constraints and the sort of, you know, Geoff mentioned that many, many people go to a casino with a budget for what they're willing to spend for that experience. And I think one of the concerns that we have about online gambling and the context within which it takes place is that people may not sort of have the sort of the sense that they need to set those limits in place.
VOLBERGThat said, the potential for setting limits before a person gambles is actually quite high in the online environment, you know. So there are a number of companies and organizations that provide for pre-play, setting limits on what you want to spend in terms of money or how long you want to spend online. And those are very interesting to now see them sort of moving out into the brick and mortar operations.
ROBERTSOh, all interesting points. Let's turn to Robert in Sand Springs, Oklahoma. Welcome. You're on "The Diane Rehm Show."
ROBERTWell, thank you. I'm a first time caller. I live in a state where we have -- tribal gaming is the most prolific if not the gaming. And my comment is, well, it's maybe asking the participants about any sort of comparisons to tribal gaming in terms of success. My observation is I helped develop one casino, but with Osage Nation when I was working for the city in Sand Springs, but also Cree and Cherokee seem to bring, you know, a lot of positive benefits to tribal peoples in terms of educational.
ROBERTAnd this does drift off into local communities and I have good examples of that. But any comments on tribal gaming? I know it's a sort of a change-up and it could be that Oklahoma is an outlier, but I feel pretty good about what we've done here and yet, all those related issues of, you know, basically gambling addiction, that's true for any place. But I guess, I'll hang up and let you guys comment on tribal gaming as maybe an outlier or maybe perhaps as some examples that, you know, are a little different than some of the other state-run, you know, operations.
ROBERTSThanks very much. Tracy, have you looked into this question?
GORDONWell, I just have the same worry that I do with education budgets, that something like 55 tribes account for 75 percent of all gaming revenues for Indian reservations. And so there's a sense after the IGRA was passed in 1988 that tribes have been sort of okay in terms of economic development because of gaming. And that's not necessarily the case.
MCGOWANAnd the other thing is, let's face it, it's just -- as Geoff said before, it Say's Law, the supply does not create its own demand and the two native casinos in Connecticut were incredibly successful at first. Now, that they've gotten competition, they way over expanded and both of them went bankrupt.
FREEMANYeah. I would simply add to that, that by nearly all accounts tribal gaming has been successful in delivering great economic benefit back to reservations and to these tribes. They will face the same pressure the commercial casinos face, that local economies face. It's about diversification. There is no such thing as a panacea when it comes to the economy, but we think tribes mimic, in many respects, the success of commercial gaming in strengthening local communities and putting people to work and putting dollars in people's pockets and at the same time, proving that a lot of the myths are just that, myths about gaming.
ROBERTSBut it sounds like -- a theme we've come back to again and again and again is that people have to be realistic and that, at least in the case of some of the tribes, as for some of the states, there have been over expectations about the economic benefits.
FREEMANCouldn't agree more, as we look forward and as we build a stronger gaming industry and strengthen economies in states and communities around the country, having that realism, having a strategy, looking at gaming for what it is, one component of a multi-faceted economic development plan.
ROBERTSVery quickly, Tracy.
GORDONWell, some organizations have recommended doing a retrospective review of tax incentives and I think this would be a prime area to do that. How many jobs actually were created and should we keep providing those incentives?
ROBERTSTracy Gordon of The Urban Institute, Geoff Freeman of The American Gaming Association, on the phone, Richard McGowan of Boston College and Rachel Volberg from the University of Massachusetts. I'm Steve Roberts sitting in today for Diane. She's gonna be back in this chair on Monday. And thanks so much for spending an hour of your morning with us.
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