Athletes: Over or Underpaid?
Chandler Bentley
Mrs. Straub
AP Economics
September 25, 2014
Athletes: Over or Underpaid?
Professional athletes are some of the most physically gifted people we have in this world. Whether it’s scoring a basket, kicking a goal, or catching a touchdown, professional athletes are few and far between. Which raises the question, what type of salary should they be receiving? The impression for years has been that athletes are ridiculously overpaid. Many would say to earn millions of dollars a year to play sports is simply ludicrous. But nobody had truly studied the economic perspective of this question. We have simply analyzed the perception that athletes work less than the everyday worker, yet get paid exponential amounts of money and have failed to delve into the logical aspects of it. To answer this question, we must look at the economic value athletes have to truly answer the question, over or underpaid?
First, let’s take simply the statistical side of this argument. One of the highest paid athletes in the NBA and arguably the best player in the world, Lebron James, is making approximately $20 million a year strictly from his contract with the Cleveland Cavaliers. Although this may seem at eyesight an extraordinary amount of money for a man who puts a ball in a ring, but look closer. Lebron James is scheduled to bring in up to $600 million to the city of Cleveland simply from his move from the Heat to the Cavaliers. As if this wasn’t enough money, while James was in Miami, the Heat’s net worth skyrocketed from $364 million to $625 million within just four years. Couple that with the millions of dollars of revenue each and every NBA team brings in per year and Lebron James contributes upwards of a billion dollar a year of revenue. Now compare this with Walmart. CEO and President C. Douglas McMillon earns just over $25 million per year in salary and incentives for Walmart, a business whose net income per year is approximately $16 billion a year. Once again, this seems like an enormous amount of money, but compared to the amount of money he makes the for the company each year, he is essentially only being paid a minute amount of the company’s net income per year. Compared to Lebron James, McMillon makes less percent of the net income of Walmart from his salary than James. Comparing general salaries, we can even see from the chart below that the average wage per year of professional athletes is much greater than that of almost every other profession in the world. Chalk up one tally for overpaid.
Switching perspectives, let’s now look at a different aspect of salaries, scarcity. We all know that professional athletes are some of the rarest talents in the world and very few people actually become professional athletes, and not from lack of effort. Athletes are global, from young kids all the way to professionals, but only a minute selection of those young kids ever become the superstars we come to know and love.[i] Although the availability for CEOs is also extremely scarce, the plethora of people that are both equipped and willing to carry out the everyday operations of a CEO are much greater. Although the demand for the number of professional athletes and the number of CEOs seem to be approximately equal, the supply for athletes is much greater for that of CEOs than those of athletes. Now some may say, “doesn’t the supply for athletes outweigh the supply for CEOs considering there are so many kids who want to and are willing to become professional athletes?” Now that may be true, but the same ability is not sustained. If you were to replace the CEO of a company with another CFO, COO, President, or another occupation that is “inferior” to that of a CEO, many of those people could carry out that same CEO position with just as much ability as the one before it. Now take a professional athlete. You simply cannot replace a Lebron James or an Aaron Rodgers and expect the same level of output from that replacement. The marginal benefit of obtaining those extraordinary athletes far outweighs the marginal cost of a couple million extra dollars. It is because of this that we even up the score at one to one.
Lastly, we’ll look at the output of work that professional athletes go through on a day to day basis. Many people would simply revert to the fact that athletes have only half the hours of work per day that an average worker will complete. Although this may sway the majority towards the everyday worker, we haven’t accounted for the everyday physical demands that the athlete must go through. The physical toll an athlete takes on his body is much greater than that of a normal worker. The work rate of an athlete in the moment are much greater than that of any other profession and although it may not seem as mentally dependent as other occupations, the amount of mental concentration and training that an athlete must take is just as great as the next man. The question is, what is more harsh on the body, harder work for less time, or easier work for more time?
In total, athletes are some of the highest paid people on the planet. Whether it’s Lebron James, Aaron Rodgers, or any professional athlete between, the debate will continue upon the salary of athletes. Each side has its merits with either the profit they produce, the scarcity of their skill, or the efforts they put forth. So the answer is up to you. Under, over, or just right?
Bibliography
"NBA Team Valuations." Forbes. Forbes Magazine, n.d. Web. 26 Sept. 2014. <http://www.forbes.com/lists/2010/32/basketball-valuations-11_Cleveland-Cavaliers_324902.html>.
"Millionaire athletes who lost their millions – How to spend like a professional athlete.." Finance my Money RSS. N.p., n.d. Web. 25 Sept. 2014. <http://financemymoney.com/millionaire-athletes-lost-millions-of-dollars-professional-sport-salary/>.
Manfred, Tony. "Here Are The Odds That Your Kid Becomes A Professional Athlete (Hint: They're Small)." Business Insider. Business Insider, Inc, 10 Feb. 2012. Web. 23 Sept. 2014. <http://www.businessinsider.com/odds-college-athletes-become-professionals-2012-2?op=1>.
[i] For more information and statistics on the odds of becoming a professional athlete, visit Here Are The Odds That Your Kid Becomes A Professional Athlete by Tony Manfred.
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