A Reality Check
Posted: Aug. 18, 2009
The findings from a new Ball State University study – “Racino Gaming’s Impact on Wages, Employment, Economic Diversity and Stability: Evidence from a Spatial Model of West Virginia” – represent an almost complete departure from reality. They tell a dramatically different story than the one that thousands of racino employees and gaming community members know to be true.
Author Michael Hicks claims that racinos create low-paying jobs that depress regional wages. He arrived at this ill-founded conclusion after employing an arcane economic model to analyze the impact of the four racinos in West Virginia. Any economist worth his salt would agree that Hicks’ findings defy logic and betray the basic principles of sound research.
In fact, a detailed analysis of the study reveals that its methodology and economic model are faulty. For example, Hicks’ model does not include “non-wage compensation,” even though tips alone generally account for about 22 percent of most casino/racino employees’ compensation. Further, the model ignores other factors – such as population changes and unemployment rates – that might have an impact on employment and wages.
Perhaps most outrageously, the study fails to explain that a reduction in regional compensation is not the result of racinos depressing wages, but rather the result of racinos providing new, entry-level job opportunities that wouldn’t otherwise exist. During these challenging economic times, one can hardly argue that new jobs are anything but a benefit to communities.
Ultimately, accepting Hicks’ conclusions requires a willing suspension of disbelief. They do not reflect the true realities of racino gaming.
West Virginia is home to some of the nation’s top racino markets. Its leading racino establishment – Charles Town Races & Slots – is its county’s largest employer. Last year, its employees earned more than $35 million in compensation, which translates into an average salary of $40,000 annually. Chris Schmehl, a Charles Town employee for more than nine years, recently said, “I earn a good salary and receive better benefits than most people I know.”
Hicks’ assertion that West Virginia’s racino employees are “paid less than $14,000 per year” looks rather dubious when compared to these facts. It is highly unlikely that the state’s other racinos pay their employees 285 percent less than their nearby competitor.
In addition, West Virginia’s racinos benefit their communities in many other ways. Besides employing more than 5,270 people, they return more than $430 million in annual tax receipts and frequently contribute to local charities. For example, Charles Town employees volunteer hundreds of hours each year to a variety of worthwhile projects, including the United Way of the Eastern Panhandle and the March of Dimes.
On the national level, though the commercial casino industry faced declining revenues in 2008, the racino sector continued to grow. Thanks to the opening of several new properties, racinos experienced a 17.2 percent increase in gross gaming revenue when compared to 2007, growing to $6.19 billion. Employment figures also steadily increased, with 29,051 individuals employed during 2008, a 6.6 percent increase over 2007 figures. Given these statistics, it is difficult for one to argue that opening new racinos is a bad economic bet.
Upon close inspection, Hicks’ conclusions are based on conjecture, not reality. Racinos have long provided communities with invaluable tax revenue, good-paying jobs and charitable support. Hicks, quite simply, needs a reality check.
