With gambling, marijuana, NYC’s new vice economy is set up for failure
In August, New York mayor Eric Adams stood before a banner festooned with
cannabis-leaf emblems, making what he billed as a major announcement. “Today, we
light up our economy,” enthused the mayor. Referring to recreational pot sales, he
continued: “The regulated adult-use cannabis industry is a once-in-a-generation
opportunity … Cannabis NYC will plant the seeds for the economy of tomorrow.”
Welcome to New York’s post-pandemic economic-development policy: the promotion of
vice. In this New York, vice isn’t something to tolerate, operating on the edges of the
law, in a black market in a dense, wealthy city; it’s a premier growth industry.
And pot isn’t the only vice that New York is encouraging. Gotham is also eagerly
courting multiple full-service casinos. It’s a path that struggling and far weaker American
cities — including Atlantic City, New Orleans and Detroit — took out of sheer economic
desperation, born of policy failure. Adams is unabashedly cheering the expansion of
“gaming,” as he calls it, to “create at least 16,000 good-paying jobs.”
New York’s new emphasis on pot and poker — even as the city ignores the day-to-day quality-of-life concerns of its core high-paying industries in finance and business and its highest-earning individual taxpayers — comes despite decades’ worth of evidence that vice-oriented cities don’t thrive.
The public sector’s embrace of vice as a moneymaker began more than 50 years ago, when states, starting with New Hampshire and New York, began establishing lotteries in the 1960s. During the next decade, states and cities outside Nevada began turning to full-service casinos as both a savior of public coffers and private-sector employment numbers, claiming they would create tens of thousands of jobs. Over the past four decades, casino gambling has moved from being considered an undesirable underworld-linked activity to a key tenet of economic development for distressed states and cities.
Desperation was behind these shifts, as it became clear in some regions of the country that abandoned resort towns and de-industrialized cities weren’t going to bounce back. New Jersey was an early adopter. In 1974, with Jersey residents already accustomed to everyday gambling via their own state lottery (launched four years earlier), Atlantic City officials pitched state voters on a proposal to legalize broader gambling, claiming that it would boost tourism and jobs.
Voters approved the proposal in 1976 after initially rejecting it, and Atlantic City got its casinos — but not the promised long-term economic benefits. In 1990, after slightly more than a decade of casino operations, and with the industry at its local peak, casinos employed 46,700 people. By 2019, the city claimed just 24,600 such positions, a drop of
nearly half. Atlantic City had 3 percent fewer private-sector jobs overall in 2019 than in 1990, suggesting, too, that legalized gambling had no broader positive effect on prosperity.
These dismal results failed to deter other down-on-their-luck cities. New Orleans, reeling from middle-class population flight and the loss of port-related jobs, opened its downtown Harrah’s casino in 1999. Harrah’s swiftly went bankrupt and tried to get out of its promise to maintain a payroll of 2,400 people, winning major revenue concessions from the state and city to keep people employed.
Similarly, Detroit’s three downtown casinos, authorized in the late 1990s, employed just 7,000 people in 2019, down from a peak of 8,300 in 2008, and they haven’t stemmed Detroit’s job losses over the same period.
For two reasons, casinos don’t have much of an economic-multiplier effect. First, the house always wins: casinos are extractive entertainment. People who lose money gambling have less to spend at competing attractions, such as restaurants or sports stadiums.
Second, casinos do not create, on balance, high-paying jobs. Nationwide, the average gambling-industry worker earns $18 in mean hourly wages, federal data show — not much above New York’s statutory minimum wage of $15. The average casino worker does not command the personal spending power to support jobs across other industries or be a significant source of state or city tax revenue.
Casinos don’t save cities economically. In a 2016 survey of the effects on economic growth of establishing a casino in a particular area over three- and ten-year periods, North Dakota State University professors Siew Hoon Lim and Lei Zhang found the benefits of casinos to be “short term and small” and their harm to society “long term and potentially irreversible.” One might argue that for distressed, badly governed cities such as New Orleans and Atlantic City, courting casinos, and with them a few thousand additional jobs, is better than nothing, but that’s debatable.
All this makes the latest news on New York casinos alarming. As part of her first state budget, Kathy Hochul accelerated the long-dormant process for awarding three casino licenses in downstate New York. In mid-September, even as more than half of well-paid Manhattan office workers regularly stayed away from their desks, in part to avoid street and subway crime, the developer behind Hudson Yards announced that it would bid for a state license to build a casino there. A major Times Square developer is interested in competing for the same license.
A Manhattan casino would be the culmination of incremental expansion of state-
sponsored gambling — from the lottery a half-century ago to sports betting during the pandemic. As state comptroller Thomas P. DiNapoli wrote in 2014, “expansions over more than four decades have been driven, in part, by the imperative to balance the state budget, and have typically taken place in years when the state needed additional revenue to close projected gaps.”
The state has also used lottery and gambling revenue to save politically favored industries. In 2003, for instance, when New York was struggling to recover from the 2000 Wall Street downturn and from 9/11, the state allowed its fabled racetracks to install “video lottery terminals.” These terminals looked and behaved suspiciously like slot machines, a casino mainstay. But the state insisted that they were no different from paper lottery tickets, just in computerized form. The Aqueduct Racetrack in Queens, near JFK Airport, installed thousands of such VLTs, and promptly renamed itself a “racino.”
In 2013, then-governor Andrew Cuomo presented further gambling expansion as the solution to reviving upstate New York’s de-industrialized economy, asking voters to amend the constitution. Heavily influenced by a multimillion-dollar industry advertising campaign promising upstate jobs, New Yorkers approved the measure. Once again, casinos proved a bust, even with their higher-than-average wage for the industry. Of the upstate casinos, “none . . . have met projections,” noted DiNapoli in late 2020, “collectively generating approximately two-thirds of the amount forecasted.”
The idea of a casino in the middle of Manhattan might be somewhat less objectionable if Manhattan streetscapes were bustling. Yet it’s hard not to see the faint echoes of New Orleans and Detroit in this eagerness to award a casino license. New York City is still missing more than 2 percent of its pre-COVID jobs, even as the nation has fully recovered — a reversal of decades during which New York City outperformed the rest of the country. The leisure and hospitality industry, still missing 15 percent of its jobs, is particularly hard-hit.
The city could, of course, do the tough work of cleaning up Midtown, improving public safety and upgrading public transit in hopes that more people return. Instead, it’s going for the easy money, hoping to lure New Yorkers and tourists into a windowless, world-unto-itself casino where private security will manage these functions.
New Yorkers have had more than a year to grow accustomed to a pervasive gambling culture that goes far beyond the lottery. In 2021, the state legalized online sports betting, courtesy of a Cuomo-instigated change in that year’s April state budget.
For all its progressivism, the state doesn’t seem interested in assessing whether the universal availability of online sports betting has created new problem gamblers. In 2019, the state legislature asked for an updated report on problem gamblers, but it isn’t due until late next year. A deeply troubling 2007 study, however, found that 5 percent of New
Yorkers “suffered from problem gambling.”
If the case for casinos as drivers of economic growth is cynical and exploitative, the case for marijuana is even more so. How the rhetoric surrounding pot has changed in just a few years is telling. In 2014, as New York prepared to legalize highly regulated medical marijuana, proponents focused on compassion and harm reduction. The idea was not to encourage broad marijuana use as a mass-scale business but to reduce the penalty for existing users. No rational elected official focused on legalization as a powerful engine of jobs and tax-revenue growth in a major global city — a notion not just economically absurd but depressing. The city of finance, media, fashion, tech and medicine is now, to paraphrase its mayor, the “lit” city?
Legal-marijuana cultivation and sale is not a high-income business. The only reason illegal marijuana is, and was, lucrative is due to the risk incurred, by drug merchants, of going to prison or being killed. Legal pot is, by contrast, a workaday farming and retail business. Many people make decent livings in farming and retail, but the industries are hardly engines of good-paying jobs.
Outweighing the benefits of creating a few thousand more farming and retail jobs are the real costs—far worse than in the gambling business. A healthy industry needs to grow, which means that the state and city must encourage more people to consume pot regularly. And from a business standpoint, it’s best to create a new habit when a customer is young. The state and city are thus now in the business of encouraging people to become regular marijuana users as soon as they turn 21, the nominal legal age.
From a public-health perspective, the idea is catastrophic. Multiple studies connect marijuana usage with serious mental illness, particularly in young people.
“Clinical studies reveal a strong association between the psychoactive effects of cannabis and the symptoms of serious mental illness,” wrote Bryan W. Jenkins and Jibran Y. Khokhar of Ontario’s University of Guelph last year. Noting that “the lifetime cannabis-use rates for patients with schizophrenia, major depressive disorder, or bipolar disorder are 80, 17 [and] 24 percent, respectively,” the authors observe that “cannabis use,” especially among the young, “increases the risk for developing a mental illness.”
The final vice frontier is prostitution. Proponents of openly marketed “sex work” now use the same language that proponents of legal marijuana and casino gambling used over the years to make those activities centerpieces of New York’s economic policy. It’s not hard to imagine, during a future budget crisis, a proposal for a dedicated tax on prostitution that could reap hundreds of millions of dollars a year. Young women (and men) unhappy with their job prospects in the casino-greeter and pot-laced-baked-goods industry may soon find another exciting new career option.
Adapted from City Journal’s autumn issue.
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