Gaming the Poor

Barbara Dafoe Whitehead, New York Times, 6/21/2014

In a referendum in November, voters approved as many as seven new casinos to join New York State's existing nine gambling facilities. And New York is hardly alone. In recent years, 23 other states have legalized and licensed commercial (as opposed to Native American) gambling facilities. In the casino-dense Northeast and mid-Atlantic regions, where 26 casinos have opened since 2004 and at least a dozen more are under development, most adults now live within a short drive of one.

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Subjects: Casinos, Gambling, New York

More by: Barbara Dafoe Whitehead

In a referendum in November, voters approved as many as seven new casinos to join New York State's existing nine gambling facilities. And New York is hardly alone. In recent years, 23 other states have legalized and licensed commercial (as opposed to Native American) gambling facilities. In the casino-dense Northeast and mid-Atlantic regions, where 26 casinos have opened since 2004 and at least a dozen more are under development, most adults now live within a short drive of one.

Not surprisingly, the closer casinos come to where people live, the more likely people are to gamble at one. As casinos have spread into de-industrialized cities, dying resorts and gritty urban areas, the rate of gambling participation has grown among lower-income groups.

In America's increasingly two-tier economy, casino industry leaders realized that they didn't have to cater exclusively to well-heeled consumers in order to rake in profits. Payday lending, rent-to-own stores, subprime credit cards, auto title loans and tax refund anticipation loans all evolved to extract high profits from low-income groups. And the newly established state-licensed casinos have their methods, too.

A research team from the University at Buffalo and SUNY Buffalo State has conducted studies that offer new evidence of the exploitative effects of casino gambling on lower-income Americans. For example, the researchers found that the rates of casino gambling participation and frequency of visits have increased among lower-income groups. Easy access to casinos is a key factor. Living within 10 miles of one or more casinos more than doubles the rate of problems from excessive gambling. Another factor is easy access to slot-machine gambling. Women and the elderly have become more likely to gamble in recent years, partly because of a preference for nonskill slot-machine gambling.

The casinos' method is to induce low-income gamblers to make a huge number of small bets per visit, to visit the casino several times per month, or even per week, and to sustain this pattern over a period of years. The key to executing this method is the slot machine.

Most regional casinos are essentially slot parlors. Slot machines are nowadays sophisticated computerized devices engineered to produce continuous and repeat betting, and programmed by high-tech experts to encourage gamblers to make multiple bets simultaneously by tapping buttons on the console as fast as their fingers can fly. Natasha Dow Schüll, an anthropologist at the Massachusetts Institute of Technology who has written the definitive work on gambling-machine design, notes that as gamblers deepen their immersion, they become less interested in winning itself than in simply continuing to play.

Slots will accept bets in denominations as small as a penny – one reason they are attractive to small bettors. But even penny bets placed on each of multiple lines for each spin, after hundreds of spins, can result in large losses.

The goal, though, is not to clean out the gambler in a single visit; it's to provide an experience that will induce the gambler to prolong the time spent on the device. The slots achieve this by carefully regulating the rhythm, tempo and sound ambience of the play, while doling out occasional small wins even as the players' losses slowly increase.

One way these computerized pickpockets milk their customers is by generating "near misses," whereby the spinning symbols on the machine stop just above or below the winning payline. The feeling of having come oh so close to a win prompts further play.

A second goal is to ensure that gamblers visit more often and continue to do so over time. Through player loyalty cards and other marketing programs, casinos collect a vast amount of information on their customers. This enables them to devise customized strategies to get gamblers to adhere to this pattern of frequent play over long duration.

Casinos also gather information on their customers' worth, as well as their "predicted lifetime value." From this information, we might be able to calculate what percentage of customers come from the bottom half of median income distribution, as well as how much these low-income gamblers lose as a percentage of their income. We might also be able to tell how the regional casinos catering to lower-income gamblers are affecting income inequality in their localities.

The casinos do not, of course, disclose this information, and the states that share in the revenues generated through gambling losses do not press their commercial partners to do so. As a result, the limited data available to the public on the impact of casino gambling has been gathered by a few outside sources.

A large-scale survey of adults, conducted by the Buffalo group in 2000, found that lower socioeconomic and minority groups who visited casinos had more gambling-related problems, including financial difficulties. This suggests that their losses, as a share of their income, were greater than those in the upper income distribution.

Examining 15 types of legal gambling, the researchers came to a striking conclusion: Casino gambling had by far the most harmful effects on people at the lower end of the income ladder.

This article originally appeared here.

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