Sports and Economics

The first topic area that we covered in second semester of class was Sports and Economics. We discussed this topic area in class on March 11th and 13th. Some of the information that we covered included:

• Who benefits economically from sports?
• Free Agency
• Average salaries of athletes in different leagues
• League minimums 

The individuals that benefit the most economically form sports are of course the athletes. They benefit form salaries, endorsement deals, appearance fees, etc. Restrictive labor practices kept athlete salaries down for the most part until the last twenty years of the 20th century.

Free agency began in 1975 for baseball, 1976 for basketball, and 1993 for football. Free agency is what has allowed athletes to sign the extremely expensive contracts that we see today.

Average Salaries In Sports

• National Football League  - $1.9 million
• Major League Baseball - $3.31 million
• National Hockey League - $2.4 million
• National Basketball League - $5.15 million

League Minimums

• MLB - $480,000
• NFL -$405,000
• NBA - $475,000
• NHL - $525,000

It now seems like every year we see an athlete sign a record breaking contract in on of the major sport leagues. The latest in this list is 30 year old Detroit Tigers 3rd baseman Miguel Cabrera. On March 27th, 2014, SB Nation writer Patrick Kennedy wrote an article titled Cabrera's new contract is the biggest in baseball history. In the article, Kennedy breaks down the contract for the average reader to understand. Cabrera received an 8 year, $248 million extension to his current contract that still has 2 years remaining that pay him $22 a season. All together, Cabrera's contract adds up to be 10 years, $292 million. This contract is more money than any one player has received under one contract in the history of baseball. Cabrera will make $31 million a season for the first 8 seasons and $29 million each of the last 2 seasons. Kennedy explained the impact that the contract will have financially on the Tigers. The Tigers now have one of the top 5 highest payrolls in baseball, and it is going to be tough for them to find the money to re-sign their other "star" players when that time comes.

Detroit Tigers 3rd baseman Miguel Cabrera
Image courtesy of CBS sports

Connecting to the text, Jay Coakley discusses the concept of free agency and the average salaries in major U.S. professional leagues, compared to the median family income on pages 381-382 of his book, Sports in Society:  Issues and Controversies. He writes that professional athletes obtained the right to become free agents under certain conditions in 1976. He defines free agency as "allows some players whose contracts expired to seek contracts with other teams that bid for their services." He also writes of how free agency has had a huge effect on salaries from the 1970's to today, something we are all seeing in the sports world currently. In 1970, the average MLB salary was $13,300 and the median family income was $4,000. This was about a $9,000 dollar difference. In 2008, the average MLB salary increased to $3,142,000 and the median family income was $58,480. That difference of only $9,000 has increased to a difference of about $3 million dollars, and contracts like the on Miguel Cabrera just signed are the reason for statistics like this.