The Beautiful Game and the Dismal Science
Part 1: The Labour Market for Footballers
“There’s too much money in the game…” said many a keyboard warrior on various social media platforms, peppered with several expletives, venting their frustrations, wonder or bemusement (or a bit of all three) at the amount of money that certain professional footballers earn. One player has been reported to have had an £80,000-a-week salary almost three times what the average UK working professional earns in a year, at the tender age of 16. The average salary for a Premier League footballer is around £1.7 million a year (around £33000 per week), whilst the world’s highest earning player, Cristiano Ronaldo, earned a total of £70 million last year, £45 million being his salary and £25 million in lucrative sponsorship deals.
Is this too much? Many would say it is, based on the common argument that football players seemingly do not contribute to society in the way that the likes of doctors and soldiers do, and that their job seems to be relatively easy and stress-free. However, before we come to such a hasty judgement based solely on media headlines, we are here to dig deeper and analyse exactly why they earn this amount, where this money is coming from and whether this is economically justified.
Like all forms of paid employment, football players carry out a service to bring in income for their employers. This is done typically by entertaining paying customers on the pitch, winning matches and competitions, which results in prize money and increased exposure by broadcasters, which attracts sponsors and earns the club more income. To perform well, players need compensation and incentives. Professional football players earn a basic weekly wage which is supplemented by various bonuses, which can sometimes double their wages. For example, they could earn performance-related bonuses, based on how many goals they score, the number of assists or clean sheets. They can earn a bonus for winning a major trophy and, if they are particularly valued by their club, they can have loyalty-related bonuses as well. On the other end of the spectrum, many clubs have a system of fines for misdemeanours like arriving late for training, or major breaches of discipline, the kind which results in them being reported on the front page of tabloid newspapers.
To see whether in fact they do get paid too much, we need to figure out just where the wages comes from. Let us focus on the demand side for now, which consists of a combination of the fans, the owners, sponsors and broadcasters, and compare that to, say, a doctor. Manchester United, the richest club in Britain, has a value of $3.3 billion (£2.7 billion) according to Forbes, with turnover for the 2014-15 season at £395 million, a combination of a match day income, broadcasting, sponsorship and merchandise. Ownership by the Glazer Family, with a £2.86 billion net worth, and being listed on the New York Stock Exchange means that it’s safe to say they can afford the £200 million wage bill for the players and staff, so £300,000 a week for a single player is somewhat of a drop in the ocean. This is commonplace because, although some clubs run losses, they have the backing of billionaire owners who earn their income elsewhere.
Compare that with public sector jobs such that of a doctor or soldier. There are around 280,000 practising doctors in the UK working with a healthcare budget of around £130 billion. Although that may seem a lot, in reality that is only about £2000 per person. Only a small percentage of that goes to doctors, meaning they “only” earn between £55,000 and £80,000 for GPs and up to around £100,000 for consultants. The fact of the matter is that they do not have financial backing that football clubs have and they are paid by the taxpayer, not multimillionaires or large corporate sponsors, who are for-profit businesses as opposed to the state.
Let us look at this from the supply side. There are around 4,000 registered professionals in the UK out of approximately 8 million who play football regularly. In order to become a professional, many will have had to make football their life from a very young age. A lucky few of them will have the opportunity to be part of the academies of professional clubs. According to Oshor Williams of the PFA (Professional Footballers Association), there is a high “attrition rate” among young players: 50% find themselves out of the game by age 16, and 75% at 21. The average career length, taking into account all levels of the professional game in the UK, is eight years, which can rise up to 20 for top-tier players. Many don’t have any university degrees or A-Levels, or even many GCSEs, and thus will find it difficult to change careers if the footballing dream fails to materialise.
This is why Premier League players are compensated so well: they are talented, marketable and in very short supply. If we consider the demand for and supply of labour for footballers, then the demand would be high and supply would be low and very inelastic. If the demand for footballers were to increase, the labour supply would hardly increase at all, as it is very difficult and risky to become one full-time, and they have short careers and few prospects after retirement, hence the high wages. Compare that with a prospective doctor, and he or she should have, after a rigorous training process, a better chance at attaining employment, where long-term prospects and job security are generally much better, and a pension.
Paul Pogba, Manchester United’s world record summer signing, valued at around £89 million, generated so much excitement from fans that the entire fee could be recouped just through shirt sales, around 1.75 million (although not all the revenue goes directly to United).
It therefore makes some sense that top footballers earn so much money: because they are in short supply, earn high levels of revenue for their clubs, the demand for the sport is high through fans, sponsors and broadcasters, and clubs can afford to pay that amount for their services. Of course this is very controversial, as many feel they are not providing enough welfare to society in the same way as doctors, nurses and soldiers, who earn less in a year what some players earn in a week.
In that case, what can be done about it? And, more importantly, should anything be done?
We can look to market solutions to make the top footballers’ wages seem more equitable, if they can really be called “solutions”. Consumer incomes could fall, the quality of players could dramatically decrease or other sports could experience a surge in popularity at the expense of football, all of which would result in a fall in demand to watch matches, broadcast them and sponsor them. As labour is a derived demand, the demand for footballers should fall, meaning lower wages. This seems somewhat unrealistic: the sport is becoming more popular than ever, thanks in part to clubs’ social media presence and a more globalised marketing strategy.
Perhaps a more realistic way of controlling footballers’ wages is through regulation. One of the simplest methods is having a salary cap, with the aim of controlling costs and promoting parity between teams. This takes place mainly in the American sports, and to an extent in some football leagues. In Germany, their clubs almost always run profits due to effective cost controls, partly through shrewd wage expenditure. This is not the case for Premier League clubs, whose spending on wages were up to 85% of turnover, as UK regulations tend to be weak and a lot of clubs are owned by multibillionaires who make their fortune elsewhere. Then there is Financial Fair Play (FFP), a UEFA initiative where clubs are not allowed to spend more than what they earn in revenue. This mainly relates to transfers but can be extended to wages. This has been more effective, as some clubs who breach FFP can be subject to heavy fines and restrictions on transfers.
It is true that many people are vocal about their distaste of footballers’ pay: it’s only natural for people to envy those who earn more than them. The same can be said about singers and actors; curiously though, the issue there is more about gender pay gaps than whether they earn too much collectively. With footballers’ pay, it seems that, although their lifestyle may not seem all too strenuous, if people felt that this issue were a grievous injustice upon society, major action would have already been taken, i.e. people would have stop watching football. The fact of the matter is that, with the top five European Leagues earning £23 billion in revenue last year, demand is as high as ever. There is more commercialism than ever before, like the Premier League’s recent £8.3 billion TV deal. Inevitably there will be more money in the game, with higher wages for its main employees.
This article does not by any stretch of the imagination think that the salaries of top-tier professionals should be cause for celebration. But, it just makes sense that the top players, who are really in the minority, earn six figures every week. If we think about fairness, it is ludicrous. In economic terms, this is purely an example of supply and demand.