Lotteries are Doing More Damage to Those Who Can Least Afford It
(Bloomberg) -- Americans spend tens of billions of dollars on government-run lotteries each year. But as income inequality widens, low-earning households spend a disproportionate amount of money on lottery tickets, according to a new study.
The lowest-income households in the U.S. on average spend $412 annually on lottery tickets, which is nearly four times the $105 a year spent by the highest-earning households, according to a study released on Wednesday by Bankrate.com. And almost 3 in 10 Americans in the lowest income bracket play the lottery once a week, compared with nearly 2 in 10 who earn more than that.
The Bankrate.com study was conducted by research firm GfK, which surveyed a national sample of 1,000 American adults on Aug. 17-19.
“Lotteries have become an alternative mechanism of social mobility—a way of achieving financial success in an economy that’s increasingly bereft of those opportunities,” said Jonathan Cohen, a Ph.D. candidate at the University of Virginia who’s completing his dissertation on American lotteries. “There’s an understandable belief that the economy is rigged and your best chance of making it out and getting rich is through the lottery, not through your job or savings.”
Americans making less than $30,000 a year are most likely to buy multiple lottery tickets each week, the study shows. These low earners spend 2.5 percent of their take-home pay on lottery tickets, or about $8 a week. And though the highest-earning group Bankrate.com measured makes more than eight times the lowest group’s average income, they spend three times less on lottery tickets.
“It’s similar to alcohol,” Cohen said. “A small percentage of consumers are responsible for a large percentage of sales.”
Americans spent $80.3 billion on lotteries in fiscal year 2017, up from $57.4 billion in 2006, according to the North American Association of State and Provincial Lotteries. Of the 43 U.S. states that have government-operated lotteries, New York sold the most in lottery tickets, producing $9.7 billion in revenue. (An enormous figure, that is still less than 2 percent of the state’s budget.) Thirty percent of all lottery sales are ultimately directed to public programs within the state, ranging from education to health care to environmental protection, according to La Fleur’s, a lottery trade publication.
The rise in spending is due to the expansion of multi-jurisdictional lottery games such as Powerball and Mega Millions, along with the creation of instant games, according to David Gale, the executive director of the NASPL. Such innovations have broadened the player base, he said.
However, Cohen attributes the increase in sales to widening income inequality and other sociopolitical factors. “While lottery profits account for a very small percentage of each state’s overall revenue, it’s costly to the state’s poor, the less educated, and communities of color,” Cohen said.
“I don’t think it’s a coincidence that state lotteries started emerging in the 1970s and 1980s when rates of social mobility in the traditional economy stagnated and then declined,” Cohen said. “Lotteries are a runaway train, seeing increased spending over time. But the communities playing the lottery get a lot less out than they put in.”
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