A recent study conducted by the National Economic Research Associates (NERA) sheds light on the impact of online gaming in New Jersey, a sector that has been legally operational since 2013.
The research, commissioned by the Campaign for Fairer Gambling (CFG), highlights both positive and negative aspects of the igaming industry in the state, especially in the wake of the 2018 repeal of the Professional and Amateur Sports Protection Act (PASPA), which legalized sports betting.
NERA’s research reveals that the igaming industry’s financial contribution to the New Jersey economy is “net negative.”
While the sector has experienced exponential revenue growth since 2016, with Q3 2023 reaching quarterly highs of $469.6 million, it falls short in terms of its impact on employment and wage reinvestment in the state.
The study demonstrates that online gambling companies require fewer human resources compared to land-based casinos, resulting in limited revenue reinvestment in the local economy through wages.
NERA’s model breaks down each dollar spent on various sectors, revealing that igaming contributes only 0.9¢ per dollar spent in new spending, whereas non-gambling recreational activities contribute 8.3¢ per dollar spent.
In 2022, NERA estimated that igaming generated $110 million in total wages. However, the report suggests that if consumers’ money were spent on other recreational activities, up to $1 billion could have been generated.
Additionally, igaming allocates less than 5% of its revenue to wages, contrasting with labor-intensive industries where a higher percentage goes toward wages.
While igaming brings substantial tax benefits to New Jersey by increasing first category income tax (FCIT) collections, NERA acknowledges the fiscal cost of problem gambling.
A study on problem gamblers in the UK serves as an example, revealing that healthcare and welfare payments for these individuals amounted to £1.4 billion out of the UK’s gross gambling yield of £9.9 billion.
Applying these findings to New Jersey, the study estimates $350 million in social costs attributed to problem gambling, which nearly offsets the additional tax revenue generated by the igaming sector.
In contrast, land-based casinos in New Jersey are seen as a positive contributor to the state’s economy.
They employ a larger workforce and encourage wage reinvestment, making them an essential economic pillar in the region.
Furthermore, these casinos attract out-of-state tourists who contribute money to New Jersey’s economy and have established deep connections with local hospitality businesses, fostering economic interdependence.