The Economics Department

The Price of Professional Football

Tue, March 1, 2005

"I would have said that on the day he was drafted that he'd be grossly underpaid because the Detroit Lions have to abide by the rules that they agreed to with the union," said Bronars. "He's going to be underpaid for his whole career—that's just the way it's going to be." These claims are based on a study Bronars recently conducted on the relative value of NFL draft picks to the teams that have them. What he found was that on average the marquee players in the league bring in significantly more revenue than they are paid in salary. According to Bronars, the players picked in the first two rounds of this year's draft will be underpaid by about $400 million over the course of their NFL careers.

Bronars arrived at his estimate of the relative value of draft picks by looking at what other teams were willing to trade to get those picks. For instance, he figures that the San Diego Chargers' right to pick Mississippi quarterback Eli Manning first in the draft was worth $70 million.

"That is what I expect the New York Giants to earn in profits from having Manning on their team if he is successful over his career, as the average No. 1 selection." Bronars said. "In football, if you get the first pick in the draft, it's worth a lot of money." Once Bronars analyzed the data and established that star players are being underpaid, he then asked himself why. The culprit? He blames the salary cap and minimum salary requirements set out by owners and the players union in the labor agreement they signed in 1993. Each team has a maximum amount that it can pay its players-currently around $80 million. In addition, players must be paid a minimum salary on a sliding scale based upon the number of years they've been in the league-currently $220,000 for a rookie. Combine these requirements with the fact that every team needs to carry around 50 men on its roster to field a full squad with backups, and the current salary structure effectively prevents teams from compensating stars for anywhere close to their actual value. "The current labor agreement really redistributes the resources from the very top players both to the lesser players in the league and lining the owners' pockets," said Bronars.

According to Bronars, who specializes in the study of labor unions, this outcome is not surprising: "Unions try to standardize pay. The general idea is if you're in a union, you're going to get taxed if you're a go-getter achiever, and you're going to be subsidized if you do worse than average."

Needless to say, Bronars figures the results of his study aren't going to be welcomed with open arms from officials at the NFL Players Association. On the other hand, he said, he's considering sending copies of his report to prominent sports agents, who might want to use his findings when negotiating future deals for their clients, or as evidence that changes are necessary when the current labor deal expires in 2007.

But Bronars said it's not just the best players who have been hurt by the labor deal—the league's lesser talents are suffering, as well. Because the minimum salary increases the longer a player stays in the league, it makes financial sense for teams to replace mediocre veteran players with rookies, leading to increased personnel turnover.

"You think of why your career is cut short in football and you think injuries, but it's also the union rules saying we're going to price you out of the league," Bronars said. "If you don't more than double your productivity as you go from a rookie to a fifth-year player, you're out."

So the real winners under the current labor agreement, according to Bronars, are the owners. They've seen their profits soar and the value of their franchises skyrocket, all in large part due to the fact that they can underpay players like Roy Williams.

"It's not that I want to screw things up and cause labor problems," Bronars said. "It's just I don't know if the star players realize the extent to which they are getting hurt."

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