Salary Caps in Professional Sports

http://financialedge.investopedia.com/financial-edge/0910/How-Salary-Caps-Changed-Sports.aspx



In the four major professional sports leagues, NFL, NBA, MLB, and NHL, three of them historically always have a salary cap. The 2010-2011 season in the NFL is uncapped and this may be due to the talks of the upcoming strike. The NFL opted out of their collective bargaining agreement with the players union to create this uncapped season. The MLB is the only professional sport that does not traditionally have a salary cap. This gives an advantage to the big market organizations such as the Yankees, Red Sox, and Phillies. These teams are able to put together rosters of many all-star players with enormous contracts. The goal of a salary cap is to limit the amount a team can spend on players' salaries and to keep a balance in the league.


Salary caps directly affect how a player is paid and the division of contracts between the athletes. Salary caps do not influence merchandise and ticket sales as these are determined by profit. Their are different caps such as the hard and soft caps as well as the luxury tax. A hard cap means that the organization must stay under the designated amount to avoid fines, loss of draft picks, and cancellation of contracts(Neiger, 2010). A soft cap means that teams are able to exceed the cap in order to protect the rights of a player who already plays for the team. This has been named the "Larry Bird exemption'' after former Boston Celtic, Larry Bird, was kept with the team until his retirement. The luxury tax is where a team that goes over the determined total payroll pays a tax on the excess amount which is placed into the industry-growth fund. Also, there is a hard floor which means organizations must pay at least the minimum payroll to its players.


Owners must be careful and tedious in their spending of their payrolls. These owners are usually white men. Owners have the final say in contract negotiations and the signing, drafting, and cutting of players(Neiger, 2010). In the NBA, their are eight owners worth over a billion dollars.


The New York Yankees have used their high market to sign players to astronomical contracts such as Alex Rodriguez, CC Sabathia, and Derek Jeter. They have ten players with contracts over 10million dollars and Alex Rodriguez makes a little under 2million dollars less than the entire Pittsburgh Pirates team salary(ESPN, 2010) . Baseball should implement a hard cap to spread team and player equality. This more than likely will not happen because players will not vote on this and they have already suffered a lockout in 1994.


Hopefully, the NBA and NHL continue to use a salary cap and the NFL can come up with some sort of agreement to keep a salary cap keeping players, coaches, owners, commissioner, and fans happy as well as competition fair.








Neiger, C. (2010). How salary caps changed sports. Financial Edge, Retrieved from http://financialedge.investopedia.com/financial-edge/0910/How-Salary-Caps-Changed-Sports.aspx


ESPN, Initials. (2010). New york yankees salary/payroll information-2010. Retrieved from http://espn.go.com/mlb/team/salaries/_/name/nyy/new-york-yankees