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Tuesday, October 04, 2011
Among the best players of their sport, are NBA players the most underpaid?
Any time you set up some artificial ceiling, you end up with someone being underpaid. In the NHL, they set the top-end player at 20% of the payroll limit. And, that 20% seems fine, considering that’s around how much the top-end players were getting to begin with before the lockout.
You can also think about it in a WAR sense. I’ve never done WAR for hockey, but I suspect the top-end guys would have a WAR of around 6. The average team WAR is probably around 25. So, the top end should get 24%. (I’m sure my fellow hockey analysts can speak with more authority on this illustration.)
Anyway, what about NBA? Just doing some back-of-the-envelope calculations, and I figure a top end player is worth about 15 WAR. The average team is probably 30 WAR. So, the top end should get 50% of the average team payroll. Last year, I think the teams brought in 4 billion$, of which 57% went to players, and we divide by 30 teams to get a fair top-end salary of 38MM$. Max deal in NBA is 20MM$ (I think). So, the top-end NBA players are taking a huge cut, relative to what they actually generate. (I’m sure my fellow basketball analysts can speak with more authority on this illustration.)
For MLB, it’s pretty straightforward. The best players have a true talent WAR of 5-6. The average team has a WAR of 32. So, the top-end players should get 15 to 20% of the average team payroll. With 90MM$ (actually 80MM$ of marginal dollars above the minimum), that means they should get around 15MM$. In MLB however, players are hugely underpaid prior to free agency (30 cents on the dollar!), so (some) teams are overpaying free agents to compensate for that huge savings. Some teams however don’t bother going to free agency, taking the money they saved, and just putting it back in the team. (This system seems to work by the way. A’s, Twins, Rays, Royals, Pirates, etc all benefit from the slave-wages paid, and the Yanks, Redsox, Mets, etc seem all too-eager to overpay on the free agents. It’s a weird kind of balance. Not totally balanced of course, but for a system that has that many moving parts, to cancel out to a high degree does have some balance.)
Anyway, it’s fairly shocking that the top-end NBA player makes less than the top-end MLB player, even though the NBA player has far more win impact on his team than the MLB player. MLB generating extra revenue in no way cancels that out.
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