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SPORTS SALARIES.
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Discusses dramatic increase in salaries.... More...
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Paper Abstract:
Discusses dramatic increase in salaries. Focus on team sports. Issues of owner exploitation of players, whether or not athletes deserve their high salaries. Superstar strategies. How team owners deal with higher costs. Impact on consumers. Behavior of leagues and teams. How player unions and free agents have contributed to problems caused by higher salaries.
Paper Introduction:
Introduction
Sports salaries increased dramatically during the last 25 years of the twentieth century, with athletes in the major American sports making considerably more than those who came before. Team sports have received the most attention with regard to salary, since there is much attention paid to the negotiations between owners and players, and team sports garner significant audiences both in arenas or stadiums as well as on television. But other sports, including golf, tennis and auto racing, have also seen dramatic increases in their prize money, as well. This research focuses on team sports, however, as there have been more studies about salaries in this segment of the athletic industry.
Traditionally, salaries in team sports have been portrayed as a contest between the l
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Each of these sources recognizes that sports salaries in the nation'smajor sports grew at a rate which greatly outpaced the nation's wage growthas a whole, and which was unprecedented in the preceding years. Individual star performers can negotiate highsalaries by offering their services to the highest bidder through the freeagent process, while those who are not eligible for free agency participatein labor actions (including strikes) that affect the league as a whole.The results in either case are higher salaries for the players. As salaries have increased exponentially, there is also the issue(pointed out by Kindred) of unrealistic expectations. Then again, these minor sports also lack the mediacoverage and exposure that characterize the major sports, and this alsomakes it more difficult to consider them simply entertainment rather thansports. As salaries continued to climb, however, increased attention wasfocused on whether or not athletes deserved the high salaries theyreceived. Traditionally, salaries in team sports have been portrayed as acontest between the little guy (the player) and the industrialists (theteam owners and the league as a whole). Monopolists position themselves as the singleseller of services in the market, and certainly for exceptional performerssuch as Michael Jordan, this is an appropriate approach, with his servicesbeing unique and valuable to the many buyers (teams) in the league. In onecase, a player who refused a $2 million, four-year contract sat out aseason and was able to command a $47.5 million, four-year contract the nextyear (Kindred, 1998). SportsIllustrated (78), p. Football sawsimilar meteoric increases in salaries, with Joe Namath earning the most ofany NFL player in 1972 at $25 , while Dan Marino made $25 , per gamein 1993 ("A Year's," 1993, p. Review of Economics and Statistics (82), pp.422-43 . 17. This figure pales in comparison to Cal Ripken, Jr. While leagues may behave as cartels, players who are free agentsbehave as monopolists, while those who are subject to the reserve clausebehave as monopsonists. In this way, professional sports may be in danger ofbecoming games played by the wealthy for the enjoyment by the wealthy (atleast in person). Over the last 25 years, professional sports have moved away from being"just" a game to being entertainment on a grand scale, and in this light,perhaps it is not unreasonable for sports figures to command salariessimilar to movie stars. The salaries that teams pay to their players are determined throughcomplicated negotiating processes that vary from sport to sport, but whichare characterized by some similarities across all professional sports. The leaguesets salary caps, when they apply, and provides the overall frameworkagainst which individual player salaries are negotiated. 87-96. Introduction Sports salaries increased dramatically during the last 25 years of thetwentieth century, with athletes in the major American sports makingconsiderably more than those who came before. The SportingNews (222), p. The high salaries received by athletes at the end of the twentiethcentury caused concern among some analysts as they began to wonder howowners could afford to pay these wages. During the 197 s and 198 s, whensalaries increased at ever-increasing rates, part of the argument thatappeared in the press was that the owners were exploiting the workers bypaying them unfair wages and pocketing the proceeds for themselves. Miller, P. In other situations, teamsnegotiate new stadium deals with communities by arranging for tax subsidiesfrom those communities using the questionable argument that the merepresence of a team in a community will produce economic benefit. 63. C. Because of this,researchers have determined that leagues (as represented by the baseballleague) behave as cartels, and individual teams are essentially price-takers because of the rules imposed by the league. (2 2, January 28). Fisher, E. When a rookie sportsfigure can earn millions of dollars per year for playing a game, and earnmore in a single year than many other Americans will earn in a lifetime,the importance of sports becomes skewed in the scheme of American life.Salary levels become news items, scrutinized with the enthusiasm oncereserved for performance statistics, and young people entering otherbusinesses may have a similar sense of entitlement regarding their wages. The spectacular increases in salaries from 1972 to 1993 alsoillustrates a common complaint among sports figures from earlier years, andthat is the difference not only in the salaries between then and now, butin the pensions received by former athletes. Professional sportsfigures, including those who are not star athletes, make considerably morein the playing career than many other Americans make in a lifetime, and yetmany Americans can no longer afford the ticket prices required to supportthe high salaries. Literature Review Kindred suggests that the salary levels for professional athletes inmajor sports (football, basketball, baseball and hockey) are too high, thatplayers are in a favorable negotiating position, and that the cost of thesalaries is ultimately borne by the fans. 32). Certainly sports figures in minor sports(including women's sports) do not make the same salaries as those in majorsports, and such sports retain more of the "game" image than do majorsporting events. The teamowners control entry and exit to and from the league, and even moving ateam from one location to another requires league approval. In an earlier (1993) article, Sports Illustrated compares the salariesof 1972 professional athletes with salaries of 1993 professional athletes.In 1993, Shaquille O'Neal (then in his rookie year and playing with theOrlando Magic) made $3 million per year. Nonetheless, team owners tend to behave in the way that economistsexpect from a cartel, and players also behave in a way that is predictablefrom an economic standpoint. who, inaddition to making a sizable salary, will receive a pension of $16 , once he turns 62 years of age. G., Jones, J. At a time when union membership is declining in the United States, itis interesting to note that it is alive and well in professional sports,and the unions in professional sports have succeeded in gaining not onlyfavorable wages, but pensions and other benefits (such as medical insurancefor spouses and children) for their members. Baseball continues to offer the mostgenerous pension of any sport, while football and hockey offer lessgenerous pensions (although considerably more generous than many of thepensions available in other industries) (Fisher, 2 2, p. Ownersare willing to do this to the extent that they are confident they canrecoup the costs by passing them along to the public or to advertisers, orthrough tax concessions from the communities in which they participate. A Year's pay is now their daily bread. Forteam sports (including baseball, hockey, football and basketball), there isa league which controls which teams are based in which cities. This was at a time when the average NBA salary was $2.36million per year and the average baseball salary was $1.4 million per year(with more than 3 baseball players making more than $1 million per year)(Kindred, 1998, p. Still other owners have moved their teams tocommunities that offer favorable tax situations that divert money fromother social programs. Conclusions There can be little doubt that salaries for professional athletes havegrown far more rapidly than the cost of living over the past 25 years, andmore rapidly than salaries in other industries. A. It is this approach that leads to strikesand lock-outs as the league behaves as a single entity (Miller, 2 ). Whencities divert taxes to build a stadium or subsidize a team's activities,other programs in the community may suffer as a result, and thus the highsalaries can have a detrimental effect on the community as a whole. (2 , August).Competition within a cartel: League conduct and team conduct in the marketfor baseball player services. (2 , July). Superstars in sports began to make hundreds of thousands pergame; in some cases, athletes would sit out a season for more money thenext year rather than take what they considered an unfair salary. When Darrell Green becomeseligible for his pension at age 55 (he is currently 41 years old), he willreceive a monthly pension of $5,8 5, the largest ever paid to an NFLplayer. Southern Economic Journal (67), pp. (1998, April 2 ). A Theoretical and empirical comparisonof free agent and arbitration-eligible salaries negotiated in major leaguebaseball. 17). Team sports have receivedthe most attention with regard to salary, since there is much attentionpaid to the negotiations between owners and players, and team sports garnersignificant audiences both in arenas or stadiums as well as on television.But other sports, including golf, tennis and auto racing, have also seendramatic increases in their prize money, as well. The labor disputes that arisein professional sports affect Americans to the extent that seasons can bedelayed or subject to interruption, and there can be considerablemanipulation in the press in order to gain favor for either management(teams and leagues) or labor (the player). But owners also are willing to pay these higher salaries, even whenthey must also pay a penalty to remain within league guidelines. Insight on the News (18),p. In the name of sanity. (1993, April 12). Aspokesman for the National Basketball Association union stated that theowners' desired return of 1 percent is excessive, while Kindred finds sucha return "reasonable." Kindred also disagrees with the NBA players refusalto change the free agency system because the proposed changes would benefitthe owners. In other situations, theowners have negotiated higher television rights, requiring televisionstations to charge more for advertising and advertisers to pass those costsonto consumers, as well. Sincethe players were in the public eye and the owners were not, or owners whodid have public images tended to have poor public relations (such asSteinbrenner of the Yankees), this argument gained considerable supportamong the sports going public, who supported athletes in their bid to makemore money. Some teams will engagein team-building during certain seasons, and may be willing to pay highsalaries in order to attract high-quality players, even to the point ofhaving to pay penalties if salary caps are exceeded. This research focuses onteam sports, however, as there have been more studies about salaries inthis segment of the athletic industry. H., & Stewart, K. G. Fair pay? Owners have passed some of thecosts onto consumers, raising prices for tickets. This research considers the current situation regarding salaries inprofessional sports, its effect on consumers, the behavior of leagues andteams that have led to these high salaries, and how player unions and freeagents have contributed to the situation, as well. References Ferguson, D. As tickets become more expensive, fewer and fewerindividuals and families are able to enjoy professional sports in person,and thus are reduced to watching the sports on television. These costs are thenpassed onto customers in the form of higher prices, or television contractsmay be negotiated which help offset the team's personnel costs (Ferguson,Jones & Stewart, 2 ). 32. Since contracts are negotiated on aplayer-by-player basis, the pay and benefits that one player receives maybe significantly different from that of another player, depending on theagents involved, the strength of the team doing the negotiating, and--to alesser degree--the ability of the player. Themonopsonists, younger players who lack the experience or perhaps even thedifferentiation of a Michael Jordan, use their unions to bargain for higherwages, and consider the league a single buyer (building on the work of thepreviously discussed article). Eventually, it may be that only the very wealthy will beprivileged enough to see sports in person, while the rest of us will bereduced to watching them, as we would films or television shows, throughthe medium of television, removing the public at large from the once-personal relationship to sports and sports figures. Kindred takes particular issuewith the negotiating tactics used by players, who argue in the press thatthey want their share of what would otherwise be going to the owners. As salaries have increased,however, it has been difficult for players to find support among workingAmericans, many of whom cannot sympathize with an employee who wants tomake $47 million instead of $2 million for four years' work. Kindred, D. The authors also recognize that players' salaries must be funded fromsome source, and that the source most often is seen in higher ticket pricesthat render games unaffordable for many fans. That figure was nearly ten timesthe amount made by the top rookie in 1972, Bob McAdoo, who made $333, .In baseball, Hank Aaron made $2 , in 1972 while Barry Bonds, who madethe most of any player that year, earned $7.29 million. 63). In addition, sports figures are subject to injuries that cancut a career short or end it completely, and the career of a professionalsports figure is rarely as long as the career of non-sports individuals. However,the newfound wealth has been limited primarily to younger players, andalthough there are some generous pensions, there is little universalapplication of pension benefits.
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