Raleigh, N.C. — Around 6,000 workers could lose their jobs as the result of a state Supreme Court ruling upholding North Carolina's ban on video sweepstakes, according to one estimate.
Julius C. (JC) Poindexter, a former professor of economics and finance at N.C. State, wrote a paper in 2011 that estimated that between 4,800 to 6,000 jobs could be directly tied to the sweepstakes industry in North Carolina. That paper, Poindexter said, was financed by those who manufacture software for the industry.
Poindexter's paper points out that the economic impact of the cafes goes beyond the workers themselves. It includes the services, such as electricity and phone lines, and rent that the cafes use. From the white paper:
An adding up of all the categories of expenditures believed to be typical of a representative Internet cafe results in total monthly payments (on all of the varied inputs discussed above) totaling $21,230 monthly, or $254,760 yearly. These payments (which do not include payouts back to customers) largely go to state of North Carolina citizens and businesses. Local income for an area with a typical Internet cafe, then, sees a direct spending boost from the cafe of more than a quarter of a million dollars, with direct employment (employees plus contracted service labor) of a likely 8 to 10 North Carolina citizens. With 600 cafes operating in the state, each, on average, like the representative cafe described above, yearly direct spending benefits generated within the state are at least $152,856,000.
The industry has survived legal challenges before. The state Supreme Court ruling actually upheld the legislature's third attempt to outlaw video poker and its kin since 2006.
And it's unclear when enforcement may begin. Some cafe owners say they expect to have to shut down Jan. 3, but spokesmen for the Attorney General's office and other law enforcement agencies did not confirm that date. Update: The N.C. Sheriffs Association says the Attorney General's Office has just confirmed enforcement may start on Jan. 3. If a shutdown does happen, Poindexter said Monday it would mean many people will be looking for work.
"It's troublesome because the class of worker that the Internet cafes employ is a class of worker that's been most impacted by the effects of the Great Recession," Poindexter said. Low-skilled workers, he said, have found themselves hardest hit by the economic downturn. "It's a little hard to see where those replacement jobs are coming from."
The owners of strip malls and other retail spaces may find it difficult to replace the monthly rents they received from the cafes as well, Poindexter said.