New Jersey Study Suggests iGaming Is Bad for the Economy but Retail Casinos Are Safe

Article by : Erik Gibbs Jan 17, 2024

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A study conducted by the National Economic Research Associates (NERA) on behalf of the Campaign for Fairer Gambling (CFG) examines the impact of online gaming and sports betting in New Jersey, legalized in 2013 and 2018, respectively.

NERA’s findings suggest that the iGaming industry is a “net negative” due to the increased fiscal costs associated with problem gambling, which largely offset its significant tax contributions.

The research also highlights a notable employment disparity, with fewer individuals involved in providing iGaming services compared to land-based casinos, resulting in reduced reinvestment of employees’ wages in the New Jersey economy.

The research underscores the significant revenue growth in New Jersey’s iGaming sector, reaching $469.6 million in Q3 2023. However, it highlights a critical aspect, the limited workforce in online gambling impedes revenue circulation in the state’s economy through wages.

NERA’s model dissects expenditure across iGaming, land-based casinos and non-gambling activities, revealing varied contributions to wages at 4¢, 12¢ and 39¢, respectively.

The report emphasizes the economic impact, indicating that the scarcity of iGaming employees results in less reinvestment locally. NERA estimates that only 0.9¢ of every dollar spent on online gambling leads to new spending, compared to 8.3¢ for alternate recreational activities.

In 2022, iGaming generated $110 million in total wages, but the report suggests opting for other activities could have generated $1 billion. Additionally, directing funds to iGaming implies less investment in labor-intensive industries, where a higher percentage of revenue goes toward wages, contrasting with iGaming’s less than 5%.

NERA acknowledged iGaming’s positive impact on New Jersey’s first category income tax (FCIT) with substantial annual contributions to the state.

Highlighting three key reasons for its tax benefits, including specific iGaming taxes, high-margin business dynamics and efficient tax reporting for winners, the research firm noted potential fiscal offsets.

Drawing parallels with the UK, NERA projected that the $350m estimated social costs for problem gambling in New Jersey could rival the additional tax revenue generated by the sector, emphasizing the need to consider the broader impact of problem gambling on financial benefits.

While iGaming disrupts the wage cycle and diverts funds from labor-intensive sectors, land-based casinos in New Jersey contribute additional revenue that would be absent otherwise.

NERA’s assessment distinguishes land-based casinos from the negative impact attributed to iGaming on the state’s economy. The prolonged presence and heightened financial contributions of land-based casinos play a crucial role in this distinction.

The significant workforce required to operate these casinos results in more extensive wage circulation, ensuring that employees spend their earnings, contributing to the state’s economic cycle.

NERA also highlights the appeal of Atlantic City’s casinos to tourists, emphasizing their role in drawing visitors who contribute funds to New Jersey’s economy that would have been spent elsewhere.

Moreover, land-based casinos in the state establish substantial connections with local hospitality businesses, creating interdependence where these businesses rely on the existence of the gambling industry.