Introduction
Excessive pay to some athletes has long been a hot issue among people from all walks of life. Many people question reasons behind excessive pay to some athletes while the majority only receive a relatively low wage, and whether athletes deserve excessive payments. Generally, in the labor market, people are supposed to pay according to their economic contributions. For instance, people would find it is reasonable to have software developer earns more than factory worker, and doctor earns more than cashier. Therefore, it seems unreasonable that some professional athletes are paid with sometimes hundreds of times that of software developer and doctor.
The purpose of this paper is to figure out reasons behind the excessive pay to some athletes. Microeconomic frameworks of labor market would be introduced to critically analyze the situation. After this introduction, the paper examines detriments of professional athletes’ excessive salary based on theoretic framework of microeconomics. Furthermore, it discusses reasons behind the excessive payment of top athletes. Finally, a conclusion part is given to summarize the key points of this paper.
Detriments of excessive payments to some athletes
The demand and supply of professional athletes
According to the theory of equilibrium price-wage, the average salary level is decided by the equilibrium price formed by the demand and supply of professional athletes (labor force) in the market. From the perspective of demand for professional athlete’s labor force, driven by the profits come with excellent athletes, clubs and sports organizations have large demand for excellent athletes. Given that there are few substitutes for high-level athletes or superstars. To large extent, a high-level athlete is a relatively irreplaceable labor force and playa decisive role in many competitions. From the perspective of supply, as the major benefits-producer, professional athletes are required to master a series of specialized skills.
Usually, the high-level professional athletes experienced longer training period, masters higher levels of professional skills and are more likely to win sports competition for their clubs. Generally, it is a principle for professional athletes in the market that the more excellent the more irreplaceable. Given that both the supply and demand of excellent professional athletes are inelastic, the equilibrium wage detriment by the supply and demand of the professional athlete market.
In addition to the feature of the demand and supply curve of first-tier professional athletes, the changes in supply and demand also contribute to the high salary for some top athletes. On the one hand, from the supply side, as Zhang and Xu (2001) suggested, the number of top athletes is almost constant, and the supply usually falls short of demand. However, on the demand side, the improving global economic performance has been contributing to the rapid development of sports and other entertainment industries. The rapid expansion and development of professional clubs or leagues has resulted in more demand for professional athletes, enlarging the gap between professional athletes’ demand and supply. Clubs and leagues have to provide higher salaries to attract excellent athletes. Despite that they can offer lower wages to recruit less excellent athletes, considering that their future profits based on the comparative professional between their athletes and other clubs’ athletes, the dominate strategy for each club is to ensure that they could recruit the best athletes that they can afford. Meanwhile, the positive labor market for athletes also enables athletes to ask for higher salaries. To recruit and keep top athletes, clubs and leagues cannot but pay them higher salaries.
The marginal products of professional athlete’s work
In order to maximize profits, according to the basic microeconomic theory of marginal costs and profits, clubs and leagues are supposed to follow the principle that the benefit of hiring the last athlete, must exactly equal to the cost of increasing the last athletes. Namely, the marginal cost of recruiting a professional athlete should equal to the value of the marginal products of professional athlete’s work. However, due to the incomplete competitiveness of the professional sports market, labor market structure, the high opportunity cost of cultivating an excellent athlete, and relevant regulations, the wages of professional athletes might not equal to the exact marginal products of professional athlete’s work (Leeds & Allmen, 2007).
For instance, the Bosman Ruling of 1995 called a free contract for European football players, granting players to decide whether to transfer to another league at the end of the contract freely (LawTeacher, 2018). The Ruling resulted in the soaring salary of British football players. Due to the Bosch Bill, clubs and players no longer need to pay compensation fees for the transfer of athletes over 24 to their original clubs. This enables players in a better position when conducting wage negotiation with their employers.
Since the Bill granted no liquidate damage for original clubs when players transfer to other clubs, there are more likely to have higher labor mobility among the athlete labor markets. Therefore, in order to protect themselves from losing their best players, many clubs had to provide higher salaries for their athletes. Scully (1974) also suggested that regulations benefit for clubs might lower athletes’ salary less than the value of their marginal product, while free contract that gifted athletes free transfer among different clubs tend to bring athletes higher bargaining power when negotiating salary with their employers.
Furthermore, the existence of athletes (labor) union also contributes to the high pays to athletes. The athletes labor union negotiate with clubs and leagues on behalf of all athlete involved in the union through meetings and talks, to bargain for higher wages, benefits and working conditions (Parlow, 2010). Since athletes form into a union and not negotiate with clubs individually, they tend to have higher bargaining power against clubs, which means they could ask for higher salaries.
The ineffectiveness of a wage ceiling for athletes
Many nations attempted to issue regulations on maximum wage for athletes to restrain excessive pay to athletes. However, these regulations were always appealed due to enormous pressures. Since the development of sports relies heavily on competition, the wage ceiling on the one hand restricts the free competition of the athlete labor market; while, on the other hand, might hurt athletes’ enthusiasm to pur