Sport salaries get out of control

With the U.S. economy on the verge of a recession, salaries for professional athletes seemed not to have faltered. Today many contracts in sports are among the most recognizable and illustrious because of their dollar amount. In 2001, superstar major leaguer Alex Rodriguez signed the biggest contract in sports history when he netted a 10 year, $252 million dollar deal with the Texas Rangers. After being dealt to the Yankees in 2004, Rodriguez resigned with New York for an unprecedented 10 years, $274 million dollars. Single handily, Rodriguez is making more money than some countries make in a year. The ironic thing is that currently the second highest salary belongs to Rodriguez’s teammate, Derek Jeter, who makes nearly $19 million playing for the pinstripes in the Bronx. Despite these large sums of money, spectator sports make very little compared to the rest of the economic market and salaries of illustrious sports figures do not make much of a difference either.

“Spectator sports contributed less than $40 billion to the gross domestic product last year, or less than 0.3 percent. If you look at the sports salaries only, their share of GDP will be even less, basically of no statistical significance,” said Julius Walecki, professor of economics at the University of La Verne in a e-mailed interview. “In other words, you could either double or totally eliminate those salaries and the national economy would almost feel no difference.”

Still, inflated paychecks for athletes will be a continuing trend in the future. It is simply the way many organizations in their respective leagues do business. They thrive on profiting for their players, athletes or teams by marketing them with television, endorsement, marketing deals in addition to the revenue they make from ticket sales, apparel and other memorabilia.

“It's probably not a good trend at all, and we may not like that for different reasons, but at the same time the laws of supply and demand work rather well here,” Walecki said. “There's simply not enough supply of talented players and quite a bit of demand, so the prices of salaries will continue to go up.”

Yet, with so many athletes being paid so much these days, there must be some discontent with how salaries are being paid to these high priced athletes. Part of the reason may be the agent or representation for these athletes who continue to pitch and sell their clients. Another reason is that there are stronger and more gifted athletes than there was 50 years ago. The biggest reason though is that the sports industry is a multi-billion dollar business. It generates millions for teams and athletes but even more companies, sponsors and other with significant investments to sporting events. Still, mostly the superstar athletes are the ones that setting the standard for the best paid athletes as opposed to those learning less.

The average salaries for athletes in the various sports differ but in most, there are minimum salary guarantees that vary by sport when contracts are signed. In 2006, salaries in Major League Baseball rose nine percent from a year before, to a little over $2.6 million according to an Associated Press report. In other sports, particularly the main four (MLB, NBA, NHL and NFL) there are similar minimum contract deals, which are usually $1 million or more. However, all of these leagues have salary caps in place, which basically limit how much a team can spend on players. The point of the cap is to keep overall costs down in the league and to not allow one team with more money to dominate the sport. If owners do overpay, they often will have to pay the league back with their own funds.

Still teams like the New York Yankees and the Boston Red Sox have no trouble paying their players and are always in competition to outbid the other for the services of the best player available. In the case of Rodriguez, both teams pursued a trade for him while on the Rangers in which both teams would have been able to extend his contract once it was over. Financial security is one of the biggest things pro athletes strive for when they first enter their respective leagues. Whether they are drafted, signed as a free agent or traded, they are always seeking for that sense of stability with their contracts. GOOD!

Yet it seems that many of these athletes are grossly overpaid and even undeserving at times of what they receive. Several players after they are signed are never the same or fail to maintain their play or improve because they settle down and stop trying. Others seem to just be bad investments when teams throw them huge amounts of money. For example, San Francisco Giants pitcher Barry Zito is set to make $18 million this season as part of his seven year, $126 milllion dollar deal signed in 2007. After an underachieving season last year, Zito currently has an ERA over six and has lost both of his starts in this early season. In contrast, Rodriguez has been a perennial AL MVP award winner and Triple Crown threat ever since he put on a Yankees uniform.

Obviously, there are some athletes that fit the billing of their salaries and many others that fall short. But, the question of whether athletes are overpaid for what they do compared to many others in society that risk their lives including firefighters, police officers and emergency workers as well as doctors, lawyers and scientists.

Some close to the sports industry still maintain that there is some reason to pay players like A-Rod huge amounts of money and others reasons to not. Kevin Kaduk, who writes for the Big League Stew blog on Yahoo! Sports, recently compared how much Rodriguez makes in one season to the payroll of the 2008 Florida Marlins. However, Kaduk believes that high priced athletes are just part of the economic side of sports and capitalism.

“On one hand, the players are getting paid an awful lot of money just to play a game. On the other, they're also bringing in millions and millions of dollars for the men who own the team,” Kaduk said in an e-mailed interview. “The owners wouldn't be paying it if they couldn't afford it.

Brad Rock, a writer for Deseret Morning News, in Salt Lake City, Utah, shared similar sentiments in his article, “Athletes are not worth their wages,” on May 31, 2006. Rock turns to the fact that athletes are being paid because of their image and ability.

“Athletes are overpaid because it's a matter of supply and demand. The demand for great athletes is great, their potential to generate revenue is high, so they are a valuable commodity,” Rock said in an e-mailed interview. “Most skills can be learned. But at the pro level in sports, some of it is simply genetics. You can't "learn" how to play in the NBA, just because you want to be there. You either have the talent/size or you don't.”

And with sports salaries beginning to reach astronomical numbers, both Kaduk and Rock predict they will increase in the future.

“I don't see any reason why it would slow down,” Kaduk said. “While our country is facing a downturn in the economy, we haven't seen that trickle down to professional sports yet. I think people almost really see this as a life staple and not a luxury, anymore.”

“I think salaries will continue to rise,” Rock said. “Although most team owners say there is a breaking point, I think there would simply be fewer teams if salaries got too high for some owners.”

Overall, sports salaries are something to watch. It indicates how much attention and money these corporations, business sponsors and other entities are putting in the professional ranks. It is also an indication of our culture and how much we want to pay to see the best athletes in action. If owners know they can get fans to come watch the best athletes play, they will pay top dollar for them and hope to make millions more in profit from fans, companies and other financial investments made. The fact of the matter is that the industry is making tons more money than what athletes are making. But if the meter keeps going up, it is almost certain that sports salaries could get out of control eventually.