FactCheck: would pokies reform in South Australia wipe out 'many' of 26,000 jobs?

This plan will decimate hotels across South Australia, wiping out many of the 26,000 jobs it directly creates.

Australian Hotels Association (South Australia) chief executive Ian Horne, quoted in The Guardian, February 21, 2018

… a majority of pub employees (over 26,000 in SA!) will likely lose their jobs.

Letter signed by the McCallum family, owners of The Lonsdale Hotel, February-March, 2018

SA Best leader Nick Xenophon has said that if his party wins the balance of power in this Saturday’s South Australian state election, poker machine reform would be “a key issue in any negotiations” about the formation of the next government.

Among other reforms, Xenophon has proposed a reduction in the number of poker machines in some pubs by 50% over five years, and the introduction of a $1 maximum bet per spin for machines in all venues other than the Adelaide casino.

The South Australian branch of the Australian Hotels Association (AHA SA), led by chief executive Ian Horne, says the SA Best policy would “decimate hotels across South Australia, wiping out many of the 26,000 jobs it directly creates”.

A letter signed and shared by the owners of one Adelaide hotel went further, saying “a majority” of 26,000 South Australian pub employees would “likely lose their jobs”.

Is that right?

Checking the source

In response to a request for sources to support the claim made in the Lonsdale Hotel letter, Keith McCallum referred The Conversation to the AHA SA.

A spokesperson for the AHA SA pointed The Conversation to a February 2018 newsletter from Ferrier Hodgson Adelaide partner David Kidman, and the ‘No Way Nick’ website, authorised by AHA SA chief executive Ian Horne.

The Conversation asked the AHA spokesperson to quantify what the association meant by “many” jobs, but did not receive a response to that question.

Verdict

The claim made by Australian Hotels Association of South Australia that proposed poker machine reforms would wipe out “many of the 26,000 jobs” in the South Australian hotel industry appears to be grossly exaggerated.

The Australian Hotels Association did not provide modelling or evidence to show how “many” jobs might be affected.

The number of gaming related jobs in South Australian hotels in 2015 was around 3,000. In the same year, less than 20% of the South Australian hotel industry’s revenue came from gaming.

The reforms proposed by SA Best aim to reduce the number of poker machines in some hotels, and reduce maximum bet limits, rather than removing the machines entirely.

Based on these factors, the Australian Hotels Association claim greatly overstates potential job losses.

In addition, at least some of the money not spent on poker machines would be spent on other recreational activities.

This means that potential job losses due to poker machine reforms may be partially offset by increases in employment elsewhere in the economy – or even within the same hotels.

What changes is SA Best proposing?

Among a suite of reforms, the SA Best party wants to reduce the number of poker machines in pubs with 10 or more machines by 10% each year over the next five years. This reduction wouldn’t apply to not-for-profit community clubs or the Adelaide Casino.

SA Best is also proposing the introduction of a $1 maximum bet per spin and a maximum win of $500 for machines in pubs and and not-for-profit community clubs.

SA Best leader Nick Xenophon said these reforms would reduce the number of poker machines in South Australia from around 12,000 to around 8,000, and reduce potential personal losses on pokies in pubs and community clubs from around $1,200 an hour to around $120 per hour.

The policy includes a poker machine buyback scheme, a “jobs fund” to assist affected employees, and the possibility of compensation for smaller poker machine operators.

Would ‘many of 26,000 jobs’ be wiped out?

First of all, let’s look at how many people work in the hotel industry in South Australia, and how many of those jobs are related to gaming.

This information is not available from the Australian Bureau of Statistics.

However, in January 2016, the South Australian Centre for Economic Studies published a report that examined the economic contribution of the hotel industry in South Australia.

The report was commissioned by the AHA SA, but it adopts a sound statistical approach to measuring employment in the hotel sector.

According to that report, a total of 26,250 staff were employed in hotels in South Australia in 2015. Of those, 3,048 were classified as gaming staff (or 11.6% of total employment).

Of the 26,250 people employed across the industry, the majority were casual staff (rather than permanent or part-time staff).

The SA Best proposal is to reduce poker machine numbers and maximum bets in some venues, as opposed to removing pokies entirely. So it’s clear that not all 3,000 gaming staff would be at risk.

However, the AHA SA is arguing that reduced revenue from pokies would threaten other jobs.

According to the same report, in 2015, 17% of the South Australian hotel industry’s annual revenue came from gaming. Around 80% of revenue came from liquor sales, food and beverage sales and accommodation.

So even in light of reduced gaming revenue, assertions that “many” or “the majority” of 26,000 pub employees would be affected appear to be unsubstantiated.

Jobs may be shifted elsewhere

To understand what might happen if Xenophon’s proposed reforms were introduced, we need to take two factors into account.

On the one hand, if less money is spent on poker machines, then the number of hours requested to service gaming activities decreases. This could result in less demand for labour, and hence a potential reduction in the number of those roles.

On the other hand, money not spent on gaming could be redirected to other recreational activities – like going to cafes, restaurants and cinemas – or to the retail sector. This would mean that new jobs would be created in other parts of the economy.

Spending diverted to food and beverage sales and other forms of entertainment could also see new jobs created within the same venues.

Another report conducted in 2006 by the South Australian Centre for Economic Studies, commissioned by the South Australian Independent Gambling Authority, found that following the introduction of electronic gaming machines in South Australia, employment in hotels did increase.

However, most of this increase came at the expense of other businesses, like cafes and restaurants. This shows that there is a strong substitution effect in employment between gaming activities and other recreational activities.

Having been published in 2006, the exact numbers in the report are dated. But the qualitative argument is unlikely to have changed. This conclusion is also supported by more recent studies.

In summary, while some of the 3,000 gaming-related jobs in the hotel industry may be lost as a result of the proposed poker machine reforms, claims that “many” or “the majority” of 26,000 jobs would be lost are grossly exaggerated, and not supported by available evidence or existing research. – Fabrizio Carmignani

Blind review

I agree with the conclusions of this FactCheck.

The assertions that “a majority” or “many” of the 26,000 jobs in the South Australian hotel industry would be lost if the proposals put forward by SA Best were to be implemented are gross exaggerations.

They might not be quite as gross an exaggeration as the analogous assertions made in Tasmania during that state’s recent election campaign, but they are an exaggeration, nonetheless. – Saul Eslake

The Conversation is fact-checking the South Australian election. If you see a ‘fact’ you’d like checked, let us know by sending a note via email, Twitter or Facebook.

The Conversation thanks The University of South Australia for its support.

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