Lottery fever is upon us once again. There were no winners in the multi-state Powerball lottery on Wednesday evening. The next draw on Saturday at 10:59 p.m. Eastern time will total $570 million (or $358.5 million cash value). Now, the bad news: The odds of winning are 1 in 292 million.The Powerball only becomes ‘progressive’ — when high earners spend more on tickets than more than low earners — when the jackpot is at least $806 million or more.
In fact, the Powerball only becomes “progressive” — meaning that high earners spend more on tickets than more than low earners — when the jackpot is at least $806 million or more, according to this study by Emily Oster, currently a professor of economics at Brown University.
Don’t miss: My brother-in-law asked my husband to hide a six-figure inheritance before his divorce
This Powerball website encourages people to participate: “Grab a ticket and believe in something beyond belief!” But critics say studies overwhelmingly show that those who buy the most tickets (and on a regular basis) are the ones who can least afford to do so.
It’s not the first time Americans have been given a chance to win such a big lottery prize. There was one winner of the $450 million Mega Millions jackpot in Florida. The draw for that was at 11 p.m. Friday. And, last year, a 53-year-old Massachusetts woman, Mavis Wanczyk, was the sole winner of a $758.7 million Powerball jackpot. She immediately quit her job.
But Les Bernal, national director of Stop Predatory Gambling, a Washington, D.C.-based nonprofit group, says the rags to riches advertising is fantasy for most people who spend a higher portion of their income on expensive lottery tickets.
Here are 4 reasons you should refrain from buying a ticket:
1. Lottery tickets are overwhelmingly bought by low-income Americans
Increased levels of lottery play have been linked with certain sections of the U.S. population — men, African-Americans, Native Americans, and those who live in disadvantaged neighborhoods, according to one 2011 study of over 5,000 people published in the Journal of Gambling Studies. (Susan Cartwright, a spokeswoman for Scientific Games SGMS, +0.00% which sells scratch cards, says a 2014 study by an independent research firm, Chadwick Martin Bailey, found that lottery players mirror the general public’s ethnicity, employment, and income.)
Americans in the lowest fifth socioeconomic status group had the highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (more than 26 days), the 2011 Journal of Gambling Studies research found. There were very few observed differences in lottery gambling for those in the three upper socioeconomic status groups — approximately 43% gambled on the lottery and the three upper groups averaged about 10 days of gambling on the lottery in the previous year of the study, a trend that was found in other countries with lotteries.
2. Most lottery winners in one study were receiving state benefits
Another study looked at winners. In 2015, the Maine Department of Health and Human Services analyzed data from the Bureau of Alcohol and Beverage and Lottery Operations on individuals who won money in the state lottery. Some 4,865 winning tickets of $1,000 or more were cashed in by 3,685 individuals receiving state benefits over the previous five years, reaching $22 million in lottery jackpots of various sizes. So — unless they were an unusually lucky group of people — they likely spent far more than any other group on tickets.
For that reason, Brent Kramer, a research associate at the Fiscal Policy Institute, a nonprofit research and policy organization, and others call lotteries a “regressive tax” by offering the poor a rich fantasy. “If the promised return is by far illusory — and it is — it would be hard to argue that those purchases do not constitute a tax on those who believe the state’s hype,” Kramer wrote in a 2010 paper. In the event that someone did win the latest $700 million Powerball lottery, Bernal says it will be “the single biggest redistribution of wealth” since, well, the January 2016 Powerball.
3. State lotteries are exempt from FTC ‘truth in advertising laws’
Even though some scratch cards costing as much as $50 in Texas and $30 in Massachusetts, state lotteries are exempt from Federal Trade Commission “truth in advertising laws” The Federal Communications Commission prohibits the broadcast of lottery advertisements, but has exemptions for lotteries “conducted by a state acting under the authority of state law. Hence, TV commercials like “The Possibilities are Endless.” (Lotteries raise over $70 billion a year, according to the North American Association of State and Provincial Lotteries. Profits from the Powerball are used to fund public projects approved by state legislatures.)
The North American Association of State and Provincial Lotteries dispute the findings of these various studies. Lottery retailers are located in areas where people work, not just in low-income neighborhoods, along with grocery stores, the organization says. This is why you will find more lottery outlets in the center of a city, just as you would find more grocery stores and convenience stores, the NASPL adds. Since the New Hampshire lottery was founded in 1964, according to the NASPL, it says lotteries have raised more than $200 billion for government programs in North America.
4. The gap between the rich and poor in the U.S. continues to widen
Meanwhile, American economic growth has been a double-edged sword for many Americans.In 1980, the U.S. and Western Europe had similar levels of inequality. And today? Not so much. While the top 1% of earners made up just 10% in both regions in 1980, it increased slightly to 12% in 2016 in Western Europe, but doubled to 20% in the U.S., according to a report released last month by the World Inequality Lab, a research project in over 70 countries based at the Paris School of Economics, and co-authored by the French economist Thomas Piketty.
The average chief executive of an S&P 500 company made $13.1 million per year in 2016 — equivalent to 347 times more money than the average worker, according to separate data released by Executive Pay Watch, a report conducted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). “When adjusted for inflation, the average wage has remained stagnant for 50 years,” it found. Given this growing gap between the rich and poor in the U.S. the almost impossible odds of winning, Bernal describes $10, $30 and $50 scratch cards and lottery tickets a “Hail Mary investment strategy for the poor.”