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Thursday, January 15, 2009
The Salary Cap, a Rookie Pay Scale and the NFLPA

The week leading up to the Conference Championships, with all of its corresponding movement of coaches and executives, is a good time to take stock of two important bargaining points for the new NFL Collective Bargaining Agreement (CBA): 1) a rookie salary cap and 2) the traditional salary cap. Both of these issues relate to a more fundamental question—who are the union’s constituents when negotiating the CBA? Does the NFLPA represent each individual member, or “the players” as a group, and how does the group it represents affect the NFLPA’s negotiating strategy?

First, the current CBA provides a limited amount of cap space with which to sign first-year players (the “Entering Player Pool”). The Entering Player Pool is allocated to each team based on the number and position of their draft picks. The size of the pool varies yearly, increasing in proportion with the salary cap, but it will never be greater than 5% of the salary cap. Therefore, on average, a team will spend no more than 5% of player costs on rookies. In fact, Andrew Brandt of the National Football Post reported that the average team spends less than 4% of its cap space on rookies. Therefore, rookie contracts, on average, do not pose a large burden on team cap spaces, except for a few picks at the top of the first round; however, those few picks are driving the current debate over rookie salary reform.

Second, the traditional salary cap performs two main functions, the first well known and the second a bit surprising. It creates a maximum amount of money a team can spend on its roster in a given year. It also guarantees players a large percentage of all revenue earned by the teams for their football operations. The salary cap has long been touted in the public as a way for owners to control costs and prevent “excess” spending by wealthy teams like the New York Yankees in baseball, while having the pleasant effect of increasing parity in the league. The other, often unnoticed, effect is guaranteeing players least 50% and up to 58% of all NFL revenue. The players have received an enormous piece of the proverbial pie. It is thus unsurprising to find out that the players were the group to demand the salary cap in the 1993 negotiations. One reason the public often overlooks this purpose of the cap leads to the final, and I believe unanswered issue—who does the NFLPA represent in CBA negotiations?

We tend to view professional sports unions as representing the individual athlete (the individual model) and not the group of members as a whole (the group model), and in a way this is true. For instance, the NFLPA represents individual athletes in grievances against teams or the league. However, the NFLPA’s constituent group becomes less clear when one looks at CBA negotiations. What is viewed as a “win” by one group of players is a “loss” for another; higher minimum salaries for veterans increases certain players’ wages while simultaneously putting others out of work (if teams do not value them at the minimum salary) and decreases the wages of certain other players (since more cap space is eaten up by older players). I contend that the public misses the idea of the salary cap increasing the pay for players precisely because we only see the NFLPA’s relationship to the players in the individual model, and not the group model. This is why people often cynically viewed Gene Upshaw as an agent for the league and not the players—the players do not individually have guaranteed contracts, so Upshaw must have failed. However, he did obtain a large amount of guaranteed money for the players as a group—up to 60% of all money earned by teams must be paid to players in the form of salary, benefits, and bonuses each year. Similarly, we view rookie contracts as too rich because of the prominence of contracts such as Jake Long’s and Matt Ryan’s deals, yet we do not view the entirety of rookie contracts taken together as a very small percentage of total player wages.

As the NFLPA searches for a new director to lead it through the next round of CBA negotiations, a rookie pay scale or salary cap and revisions to the traditional salary cap will be two of the most hotly debated issues. Whether the union subscribes to the individual or group model will greatly affect its positions. The salary cap currently guarantees a large amount of revenue to the players, but prevents certain superstars from earning A-Rod type contracts—an individually focused union may try to lift the cap and get huge paydays for the top earners. A group-centered union, on the other hand, will continue to demand high revenue guarantees, regardless of the form they take. Similarly, any changes to the rookie pay system will depend on whether the union looks out for each individual rookie (and its right to as high a salary as possible) or the rookies as a group (and its right to higher guaranteed revenue percentages).


At the same time that, as you suggest, an individually focused union may fight for the right for top tier players to earn A-Rod type money by eliminating the cap, the union must remain aware of the fact that an elimination of the salary cap will also eliminate the salary floor. Third-string type players, and late round draft picks, may not retain the right to earn hundreds of thousands of dollars per season without a cap.

Anonymous Anonymous -- 1/16/2009 9:45 AM  

What the salary cap does is ensures that football remains a profitable enterprise for all owners. It puts an external control on your largest variable cost. (Remember all the articles about how Southwest was thriving when fuel prices went up because it had bought its fuel in the futures market?)

Add in revenue sharing, which ensures that teams cannot become the KC Royals or Florida Marlins unless management is incompetent (e.g., the Lions, Rams, Bengals), and you have an ongoing revenue-generating machine with financial controls.

Gettting subsidized by public tax dollars is just lagniappe.

The alternative would be that some teams, even with revenue sharing, would underpay for players, and the product on the field would suffer. (Overpaying is self-correcting, especially given the length of a football career, even with all the steroid usage.)

So it was a player proposal that benefitted the bulk of both constituencies. (I would be inclined to argue that increasing the base salary for veterans is good for the players including those who are not tendered a contract offer, since that's the market's way of saying that they need to take more care of their body than to have it abused violently for half of the year, but I doubt anyone has done the empirical work that demonstrates that.)

Blogger Ken Houghton -- 1/16/2009 2:39 PM  

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