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Paul McMorrow

The dark side of happy hour

By Paul McMorrow
October 18, 2011

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CASINOS LIKE handing out complimentary drinks because as long as a crowd is laying money on the table, the casinos are coming out ahead. The booze puts a nice warm fuzz on games that have been mathematically rigged to favor the house. Free drinks are a lubricant for those stepping up to the table, and the consolation prize for the majority who walk away as losers.

What works in the gambling hall appears to work wonders in the State House, too.

Last week, the Senate passed a casino bill that will make a few gambling companies very rich. In return, the casino companies just might help bring happy hour back to Massachusetts. It’s the perfect symbol of everything that’s wrong with casino economics, served up by a legislature too blinded by glitz to bother with simple math.

Drunk driving concerns caused Massachusetts to ban happy hours back in 1984. Now, instead of discounted cocktails or two-for-one drink specials, bars draw in the after-work crowd with cheap quesadillas and 25-cent Buffalo wings and the like.

An amendment to the casino gambling bill would roll back the prohibition against selling alcohol on the cheap. The amendment is the work of Robert Hedlund, a state senator who’s also a Weymouth restaurateur. Hedlund believes the current proposal to legalize casinos in Massachusetts would put local restaurants at a competitive disadvantage, since casinos would be exempted from the state’s happy-hour restrictions, and allowed to ply their customers with free alcohol.

During last week’s casino debate, Hedlund offered his colleagues two choices: Either take free drinks off the table, or put restaurants on equal footing with casinos by lifting the happy hour ban for everybody. The Senate declined to wrest free drinks from the gambling halls that will soon sprout up across Massachusetts, and instead decided to scrap happy hour regulations altogether. The measure is among a small list of differences to be sorted out by a legislative conference committee.

Hedlund’s happy-hour amendment wasn’t intended to be a sweeping indictment of casino economics. But in throwing a bone to local bars and restaurants, the Senate has unwittingly exposed the very real pitfalls that come when a casino opens its doors.

The Senate’s happy-hour amendment is tied to the admission that homegrown businesses lose out when casinos come to town.

The closer people live to a casino, the more likely they are to gamble. The Legislature’s gambling plan calls for three casinos, spread throughout the state - that way, there’s no demographic center left untapped. The arrival of a casino doesn’t magically multiply the amount of disposable income nearby residents have. Instead, casino patrons shift their spending habits. Retail and restaurant spending is especially ripe for diversion.

In 2004, the St. Louis Federal Reserve Bank looked at how the arrival of casinos shift employment patterns in the casinos’ host counties. The bank’s researchers looked at six counties in the Midwest and the South. The opening of a casino only coincided with an uptick in retail employment in one of the counties the Fed looked at; in the other five, retail employment plummeted, with job losses ranging from 25 to 50 percent. Casino-related employment muted some of those losses. But casinos didn’t just add to local economies - they muscled aside existing businesses. (It’s worth noting that Massachusetts Governor Deval Patrick was given a copy of this Fed paper when he first wrestled with casino legalization, in 2007. He also had reports showing that casinos didn’t have significant effects on states’ budgets and unemployment rates. He backed casinos anyway.)

By linking happy hours and restaurant competitiveness to the legalization of casinos, the Senate is admitting that the local businesses and casinos are, in fact, competitors. Some portion of the predicted $1.8 billion Massachusetts gambling market will come from tourists, but a sizable chunk will be money that’s been diverted from being spent elsewhere in the state economy.

The Senate errs, though, in assuming that a couple hours of discounted drinks will be enough to put local restaurants on even footing with the casinos that will be gunning for their customers. The Legislature is just playing the part of a slot machine cocktail waitress, handing out free booze and hoping it eases the sting of losing to the house.

Paul McMorrow is an associate editor at CommonWealth magazine. His column runs regularly in the Globe.