Correcting the Obnoxious Myth That Professional Athletes Are Overpaid
The salaries commanded by professional athletes make an inviting target. But their compensation is based on the same criteria as everyone else – the economic value they generate. The salary scale in professional sports actually demonstrates that the marketplace works: What players are paid reflects their comparative skill and market power.
Professional athletes command a lot of money because a lot of people want to see them perform their job. Unlike most of us, they do not just make a product. They are the product. Their skill and drawing power determines how many fans pay to see their team. Many blame high ticket prices on fat player paychecks. But lower player salaries wouldn’t translate to lower ticket prices. Franchises don’t base box-office price on payroll costs. Like every other business, they base prices on how much the market will bear. Reducing salaries wouldn’t make prices cheaper, it would just make owners richer. And no one has ever bought a ticket to see an owner.
Player contracts are far more lucrative than they were decades ago because players were underpaid decades ago. The reserve clause yoked players to the franchise they started with. In 1952, Ralph Kiner led the National League in home runs for the sixth straight season. Not surprisingly, he expected a big salary hike the next year. Instead Pittsburgh Pirates General Manager Branch Rickey offered a sizable pay cut. Astonished, Kiner pointed out: “But I led the league in home runs.” Rickey’s sanguine response: “I think we could have finished last without you.”
Kiner had no choice but to accept the Hobson’s Choice because he was not free to go to another team. Most of us are free to look for another job. Under the reserve clause, players were also free – to go into another line of work. The end of the reserve clause, in baseball and other sports, simply gave players the same leverage we all have – the right to take our skills to a higher bidder.
It is easy to look at the salaries players command, compare it to another vocation – like teaching – and shout “unfair.” But one law you can’t repeal is the law of supply and demand. There are far more teachers, so their compensation pie is divided into smaller pieces. They provide a service to tens of people at a time. Professional athletes enjoy greater scalability, providing their services to millions at a time. And fewer people can do the same thing they do at the same level of talent.
People compare athletes’ salaries to the number of games they play, and let out a long whistle. An NFLer plays 16 league games, four exhibition games and at most four post-season games. For that they command an average annual average salary of over $2 million – about $100K per game. Nice work if you can get it – but you can get it only if you have extraordinary skill.
The average salary in major-league baseball is about $4.5 million. But there are only 750 players in the majors at a time, so each big-league player is one of the 750 highest-paid people in their line of work – compared to the thousands in the minors getting by on $18,000 per year or less. Does that mean athletes are highly paid – or does that mean exceptionally talented individuals are exceptionally well paid? The 750 highest paid lawyers no doubt command $4.5 million in financial compensation or more, yet the public rarely complains.
Professional athletes aren’t just being paid for the 16 or so games they play in the NFL, or the 162 league games they play in baseball. They are also being compensated for the net result of all of the years they spent perfecting their skill in college, minor leagues and even little league, before they got to “the show.” How many people start learning their craft at six years old? Mickey Mantle’s father taught him to switch-hit when he was four. Young Mick may have loved what he was doing, but that didn’t make him any different from a kid who loved science and grew up to become a doctor. They were both entitled to every nickel they could command.
Want to earn as much money as LeBron James? No problem. Just sink a basket as well as he can.
