Jul 272011
 

Because my Mom is such a good cook, I can often be found eating supper at my parents’ house. On the menu last night was just homemade pizza, with a flat bread crust and ample amounts of pepperoni, peppers and other vegetables. It’s no wonder I’m a recovering fat guy.

So I’m watching the Blue Jays’ game with my Dad as we eat, and Travis Snider hits a routine ground out back to the mound. Snider puts his head down and hustles to first, but was still thrown out with plenty of time to spare. I was impressed with Snider’s hustle, so I went ahead and voiced my admiration with his hustle. My Dad was not impressed. A quote:

Well, I’d sure hope he’d hustle! Look how much he’s getting paid! In fact, every time a guy doesn’t run hard they should deduct 10% of his salary!

Oh Dad. Never change.

So what does that say about my Dad, besides a poor understanding of contract law? He’s squarely in the camp that thinks professional athletes are overpaid. In the past he’s told me that salaries for professional athletes should be capped at $100k, mostly because he came up with this number. I’m not sure why the number should be capped at $100k. I think he likes the roundness of it.

This post isn’t to bash my Dad. Many people share his opinion on athlete compensation. Some of them might even be reading this blog. Unfortunately, they’re all wrong. Athletes should get paid as much as the market will demand. Here’s why.

As someone who’s endlessly interested in economics, professional sports is a great proxy for capitalism as a whole. Thanks to free agency, professional athletes sell themselves to the highest bidder. From the athlete’s perspective, free agency is designed to extract money from the highest bidder. The team, meanwhile, has the exact opposite intentions, trying to acquire the best talent at the lowest price.

Most of the time, though, it’s fairly easy to value the services of a professional athlete, thanks to statistics. Sometimes statistics are inflated- maybe due to great teammates or because of one fluke year- but usually serve as a decent predictor of future results. If a baseball player has averaged a .300 batting average and 25 home runs over the past 5 years, chances are they’ll get close to those results.

What was the point of all that? Athlete salaries are one of the closest things I can think of to pure capitalism, especially in sports that don’t have a salary cap. (which is really only baseball I guess) There’s no government regulations. All that remains is pure supply and demand, the two forces that drive prices in a free market.

Let’s look at supply first. Being good enough at your sport to play professionally is really, really hard to do. Let’s take a look at hockey, Canada’s game. According to Hockey Canada, there are approximately 500,000 kids who play organized hockey in Canada. A quick search over at Hockey DB says that about 3000 players spent some time in the NHL since 2000. Approximately half of current NHLers are from Canada, meaning 1500 of those players are Canadian.

To summarize, 1500 Canadian kids end up spending time in the NHL. 500,000 play organized hockey. That means that any given kid has a 0.3% chance of making the bigs, even for just a cup of coffee. That’s 3 out of every 1,000 that ever make it. Out of those 1500 that do make it, maybe only half of those will end up being impact players. So in reality, only 1.5 out of 1,000 who ever play organized hockey will end up being contributors in the NHL. Those are pretty steep odds to overcome.

Meanwhile, we have normal jobs. I’m willing to bet that at least 25% of the population has the intelligence and work ethic to become a doctor or lawyer. Most professions can really be done by anybody. Obviously, there are limitations here. To be an engineer, you have to be good at math, and not everybody is. But a large chunk of the population has the multiplying skills to become an engineer. And frankly, any moron can get their major in communications.

Just kidding communications majors! Don’t kill me!

The point is, having the skills to become a professional athlete, even a poor one, is something that’s incredibly unlikely. You have to be outstandingly good at your sport to do it professionally. To be able to become a teacher, or engineer, or doctor, or whatever, you just have to be pretty good at the skills needed to do the job. Not everybody can do those jobs listed, but a lot more than .15% of the people who try end up succeeding.

Let’s face it, sports owners are usually pretty astute business people. Most are billionaires, and I can guarantee you they didn’t become stinkin’ rich by making foolish money choices. They know exactly what they’re getting into when they pay their athletes these millions. If they can get the right combination of athletes together, the team will be successful. If the team is really successful, they’ll go deep into the playoffs, maybe even winning a championship. The team wins, the owner makes lots of money and the players are paid what the market will bear. Is that why they’re overpaid?

I think that ultimately, the issue of player salaries comes down to your view of professional sports. If you view it as legitimate business that provides a valued product, then you’ll probably tolerate whatever salaries become. You’ll probably even shell out the cash for a ticket every now and again. If you’re the type of person who doesn’t care for watching sports and see no value in the medium, then you probably think salaries are too much. After all, why should someone get paid so much for playing a pointless game?

Like any job, professional athletes are paid what the market will bear. Complaining about it just makes someone look stupid. So just sit  back and accept those outrageous salaries. Except if they play in the CFL. No wonder everyone laughs at the CFL.

 

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  26 Responses to “Athletes Are Not Overpaid. Stop Whining About It.”

  1. I love the argument “I’d do (elite athlete’s) job for nothing!”
    Yeah, no one’s offering you his job for nothing.

    Alex Rodriguez makes $25.2 million a year. Let’s say his salary was capped at $100,000, or .4% of its current value, which goes pretty far in New York.

    If Hank Steinbrenner is paying Rodriguez $25.2 million, it’s a safe bet that A-Rod’s presence is generating more than $25.2 million in revenue for the Yankees. (Otherwise, they’d unload him.) So the fair thing is presumably to take everything A-Rod generates (minus his new $100,000 salary), and stick it in the pocket of his billionaire owner. Yep, sounds reasonable to me.

    • I think the glitz and glamour of being a professional athlete would wear off in about a week. It would just piss me off.

      The media is constantly questioning you, reminding you of when you suck. Fans call you a bum all the time. You’re on a plane more often than you’re at home. You run the risk of getting traded to Cleveland. If you fail during an important moment, you will make children cry. And people would do that for free?

      No, people just want to get paid to play baseball with their buddles. No pressure, just having fun all the time. Because that’s totally realistic. People are morons.

  2. Usually those same ones whining the most are the same ones that provide a market of demand to enable those large salaries.  The everyday guy who spends $60 on a ticket and $30 on a few beers to go to a game or the guy who watches at home or spends to buy the season viewing package.  Interesting that your dad made the comment while watching the game.

    • In my Dad’s defense, I don’t think he particularly enjoys baseball. He just happened to be in the room as I was watching. He’s taken me to all sorts of games over the years though, so he’s definitely helped to support the whole establishment.

  3. No one is overpaid, no one is overpaid.  You’re paid the rate which you accept, and therefore you have decided, rationally, that this is an amount for which you’re willing to do X for $Y per hour/year/whatever.

    Some people are natural athletes.  Some people are naturally good looking people.  If they can turn those two things into serious money, then good for them.  If the rest of us can’t, well, we have to do something else.

    • I would love to be the starting center fielder for the Toronto Blue Jays. But I can’t, because I suck. I don’t suck at finance or at being a potato chip salesman, so that’s what I do. Everyone has strengths, unfortunately our strengths don’t pay as well as Kim Kardashian’s.

  4. Athletes are paid however much the franchise values their skills, and to a lesser extent however well they’re represented by their own personal Jerry McGuire.

    BUT…..

    Many athletes would be paid a great deal less if some franchise owners had to foot the entire bill for building the stadium or arena, instead of having it financed by the local taxpayers.
     

    • I agree that taxpayers shouldn’t be footing the bill for the stadiums. Building a stadium is generally a pretty crappy investment. Politicians continue to do it because they know helping out the local team is typically a popular move.

  5. I definitely think pro athletes are overpaid.  And the issue that didn’t get discussed in your post is who picks up the tab.  It’s the fans in the seats who pay, not the people watching for free on TV.  After 8 years of having season tickets for the Angels, I gave them up this year.  I got tired of paying thousands a year for tickets, parking, food and $9 light beers so players could get $100 Million contracts.  Fans are the other half of the economic equation in sports.  If enough fans vote with their feet, the salaries will come back down.  With all of the recent strikes and lockouts, it could happen.

    • My local hockey team is the Calgary Flames. I’ve stopped going to games because the cost is too much for the level of product, imo anyway. Even though I think it’s a rip-off, the stadium still sells out most every night. Most people will still gladly shell out to go to a game. Until this starts falling in a meaningful way, we’ll continue to see salaries rise.

      The point of the post is that athlete salaries are just an equation of supply and demand. Supply is very tight. Demand is very high. Therefore, even an average athlete gets paid very well. If you have a problem with that, you have a problem with capitalism.

      I pay extra for the sports package on TV, presumably because of content costs. I also own all sorts of jerseys and hats with teams’ logos on them. These are both significant revenue sources for the team as well. Your point is valid- fans do pay. But it’s not always the fans with their butts in the seats.

      I’m sure we can both agree on this: stadiums shouldn’t be funded by municipalities. That is, indirectly, one reason why athlete wages are so high and it shouldn’t be.

  6. [...] Uproar from Financial Uproar presents Athletes Are Not Overpaid. Stop Whining About It, and says, “How dare athletes get paid so much to play a game I’d play for free! I [...]

  7. Agree 100%, but let’s take it a step further:
    1) Are professional athletes *underpaid*?  Take the NFL, for example.  The 2011 CBA was just ratified, and the minimum rookie salary is $375,000 for 2011, I believe.  Although the average player who makes an opening day roster lasts 6 years (According to the commish, http://nflpublicrelations.com/2011/04/18/what-is-average-nfl-player%E2%80%99s-career-length-longer-than-you-might-think-commissioner-goodell-says/), the average player (in general) lasts only 3.5. Since the high salary is supposed to compensate athletes for a career which they can’t perform due to advancing age, some players have to start a second career once their football days are over.2) An even better argument for why professional athletes are underpaid: the NCAA forbids collegiate athletes from receiving any financial benefits.  Now, a free education is nice, especially if one does not plan on being drafted, but there are a fair number of players in college who are already a ‘sure thing’.  Taking football again as an example, the NCAA doesn’t let players declare for the draft until after their Junior year (see: Mike Williams, USC).  So it has, in effect, created a monopoly on young American talent and forced a three year unpaid internship in an incredibly hostile and injurious work environment.  And for every  Ricky Williams there is a more depressing story, like Jason White.

    Now, I’m not trying to take sides here (someone can come create a rival to the NCAA if they wish), but I am curious what other people think!  I know no one is going to shed a tear for Alex Rodriguez, but there are loads of journeymen athletes who draw league minimum salaries and don’t catch the majority of the press.

    Hmm, maybe I’ll write an article, haha.

    -Paul
    dqydj.net

    • I agree with absolutely everything in this comment. Well done Paul.

    • I completely agree with this as well. Professional athletes make millions/billions of dollars for their schools, cities, and organizations and do not receive compensation for that. The salaries are not enough.

  8. [...] Athletes Are Not Overpaid, Stop Whining About It I completely agree with this. Athletes are paid what the market will bear for them. Owners of professional sports teams choose to pay those huge salaries because they get a large net positive return out of those contracts. If someone were willing to pay you $10 million a year to play baseball, would you not sign? Also, if you could hire an agent for $1 million that could turn your contract into a $15 million a year contract, wouldn’t you hire that person? If you want to gripe about player salaries, don’t blame the players. Blame those who created the marketplace (the owners) and the people who support that marketplace with billions of dollars (the fans). (@ financial uproar) [...]

  9. [...] “Athletes are Not Overpaid.  Get Over It.” – We loved this article.  We might be biased.  Read it and find out. [...]

  10. [...] Athletes Are Not Overpaid, Stop Whining About It I completely agree with this. Athletes are paid what the market will bear for them. Owners of professional sports teams choose to pay those huge salaries because they get a large net positive return out of those contracts. If someone were willing to pay you $10 million a year to play baseball, would you not sign? Also, if you could hire an agent for $1 million that could turn your contract into a $15 million a year contract, wouldn’t you hire that person? If you want to gripe about player salaries, don’t blame the players. Blame those who created the marketplace (the owners) and the people who support that marketplace with billions of dollars (the fans). (@ financial uproar) [...]

  11. This is an elegant blog post I would state
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  12. This is an elegant blog post I would state
    that you possess lots of understanding on this subject and you wrote
    outstanding. Unlike other your piece of writing has a zeal that matters to your
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  13. [...] what is seen, but rather by what is not seen.”  This article requires a special shout-out to Nelson Smith at Financial Uproar who planted the seed – sorry I waited until the third week of NCAA football to write [...]

  14. Interesting! I know little about hockey and some about economics but this article seems convincing to me. I am not going to argue about whether ot not athletes are overpaid. I would like to take this a step further in a different direction.

    One morning, several years ago now, I was listening to a news item. It was about Martin Amis who at the time was employed by a university to teach a creative writing course (it so happens it was the university where I am). What was discussed was that his pay was high – or that he was overpaid. The way this was done is by moaning that Martin Amis earns at the rate of top professional football player.

    I stopped the radio and have not listen to this programme again. Athletes may not be overpaid – I have no issue with their pay. But I surely hope that top intellectuals earn at least as much as someone who kicks a ball – however well he/she may do it.

    Now, if you apply straight economics this is not likely to work out.

  15. [...] worry, it only has 19 spelling and grammar errors. Anyway, a while ago, I wrote about the reasons why professional athletes aren’t overpaid. It’s kind of topical, considering the NHL lockout. I’m convinced Len is behind this [...]

  16. [...] athletes are overpaid? (CFL excluded, obviously) Sorry to burst your bubble, but they’re paid quite fairly. Go read and find out [...]

  17. […] were underpaid) in an article in 2011, you still might think I’m hopping on the bandwagon.  (Read our friend Nelson at Financial Uproar take the topic on as […]

  18. Yes they are overpaid. Let me ask, is the top neurosurgeon in the world overpaid? Here’s a rough ratio of the highest paid athlete vs. the highest paid US neurosurgeons: 130:1. That’s not including endorsements.

    Keep this in mind:

    When an athlete screws up they may think to themselves “man, I really let me team and a whole lot of fans down.”

    Take that neurosurgeon and put them in a high stakes situation like a brain operation on the president. What happens when they screw up? And even though you obliviously believe 25% of the population could do what physician’s do, I’d put operating on the human brain, hmmm, maybe just a tinge above the ‘difficulty scale’ of hitting a 90 MPH fastball.

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