A recent study conducted by the National Economic Research Associates (NERA) has found that the igaming industry in New Jersey has a “net negative” impact on the state’s economy, despite its strong tax contributions. The research, which was commissioned by the Campaign for Fairer Gambling (CFG), highlights the detrimental effects of online gaming on the state’s economy.
Online gaming has been legal in New Jersey since 2013, and the legalization of sports betting in 2018 has further expanded the gambling market in the state. However, NERA’s study revealed that the increased fiscal cost of problem gambling largely cancels out the strong tax contributions from the igaming industry.
The research also found that the igaming sector in New Jersey has seen exponential revenue growth since 2016, reaching quarterly highs of $469.6 million in the third quarter of 2023. However, despite this growth, the lack of human resources needed to operate online gambling companies means that revenue is not being circulated back into the economy through wages and subsequent consumer spending.
According to NERA’s findings, igaming contributes only 4¢ in wages for every dollar spent, compared to 12¢ contributed by land-based casinos and 39¢ contributed by non-gambling recreational activities. This means that the small number of employees in the igaming industry results in significantly less economic activity for each dollar of revenue, with wages not being reinvested back into the local economy.
While igaming does offer strong tax benefits for the New Jersey government, NERA pointed out that the fiscal cost of problem gambling could cancel out those benefits. The research cited the UK as an example, where the social costs of problem gambling worked out to be £1.4 billion of the country’s gross gambling yield of £9.9 billion, similar to the additional tax revenue paid by the sector.
On the other hand, NERA concluded that land-based casinos in New Jersey do not have a “detrimental” impact on the state’s economy. The casinos provide additional revenue to the state and create more jobs, with employees cycling their wages back into the local economy. Additionally, out-of-state tourists who visit Atlantic City’s casinos contribute money to New Jersey’s economy that they would otherwise have spent elsewhere. These casinos also have deep links with local hospitality businesses, which depend on the existence of the gambling industry in the state.