User:JonathanStone/Football Economics: A comparative analysis of player wages and salaries between the elite football leagues
Football (soccer) around the world has endured a rapid expansion of wealth, player salaries, club valuations, debt and an increased involvement of political societies and governments over the years. Football is an exceptionally large market and achieves a large portion of live and worldwide audiences. Such is the phenomenon of Football around the world, the 2010 FIFA World Cup Final listed an enormous 700 million views (FIFA World Cup Views in 2010).
This paper will seek to provide an in-depth evaluation and comparative analysis into player wages and salaries between elite football leagues. As illustrated in this paper, player salaries reach well into the millions throughout the period of a year and can be subjectively different within the varied Elite Football Competitions. However, we want to know how a player’s salaries are determined and by what means are clubs able to continuously pay such large wages to players. An insight will be given to the dimension of player salaries between elite football clubs and leagues over the world. Such is the substantial spending of football clubs, it seems imperative to review the flow on effects of their activities and the current financial situation of large European Clubs.
The ability of clubs to spend blank cheques will draw on issues such as financial sustainability of player salaries and elite competitions. Club spending and attractive player salaries have shown to have a direct affect on fair play and equal competitiveness in large European Leagues. For these reasons, potential alternatives provided by Football Governing bodies such as FIFA and UEFA aimed at financial sustainability in club spending and player salaries. Particular attention will be paid to the impact and effects of salary cap arrangements within the A-League and community similarities (Australian Football League).
Player Wages & Salaries
Player salaries and elite club's ability to splash exorbitant levels of money through clubs is continually becoming the focal point of the general public and economists. Player wages and salaries are constantly coming under review and criticism from the public of the global football player’s labour market (Frick, 2011). Player salaries and the ability of elite clubs to inject exceptional levels of money through clubs is continually becoming the focal point of the general public and economists (Barajas, 2010) . Below is a list of elite footballer's yearly salaries from around the world as of the season ending mid 2011.
1. Cristiano Ronaldo - 16 million AU
2. Lionel Messi – 14 million AU
3. Fernando Torres – 13.5 million AU
4. Yaya Toure – 13.5 million AU
5. Wayne Rooney - 13 million AU
This is but a snapshot of footballer’s salaries around the world with tenth place still earning 10 million AU a year. In the latest of player salaries, Samuel Eto’o was recently purchased by Russian club Anzhi Makhachkala for 28 million Euros (37million AU). Coincidently, this player’s yearly salary of 26 million AU will make him the highest earner in world football (Goal.com).
When these figures are compared to Australian Football (A-League) it almost seems that A-League players are but a minority earner of world football. The average salary within the A-League as of 2007 was recorded as $135,000 AU a year (The Offside A-League). However, it should be noted that player wages and salaries should not be compared between Australian Football and elite football league such as the English Premier League and Spanish League. The A-league is still in the early stages of establishment and is fast growing to compete as an elite and world renowned football league.
One might wonder how player wages are determined. It was found that players will be remunerated according the innate talent and their performance on the football field (Frick, 2011). Performance measures at the local, national and international level will also have an impact on a player’s valuation and yearly salary. Player salaries at the elite level seem to have an impact on the grassroots of football including academies, local/state clubs and national leagues. Given that the size of player salaries within top leagues are increasing rapidly, the financial stability of clubs must be given insight. Financial crises are prevalent within the English Premier League and the Spanish La Liga. Such crises suggests that clubs cannot sustain payments to players and an alternative method of payment needs to be considered.
Financial Stability of Elite Football Clubs
Viewing the above figures of player salaries is somewhat concerning to economists. It raises the concern of football clubs' ability to continually pay their players and regularly increase these figures. Financial stability of clubs has shown to be very tentative within the English, Italian and Spanish Football Leagues (Bosca, 2008). This paper shows that clubs within these leagues all have a common problem in accruing debt, resulting in the inability to break even between revenue generated and expenditure. A question that must be placed forward is, how can clubs sustain to pay and continually increase the size of player salaries within respective elite football leagues?
Research found on the Belgian Jupiler League has shown that at least five clubs are falling into financial crises by spending too much money on transfer fees and salaries (Kesenne, 2010). Researchers commonly agree that the poor financial situation of elite football clubs around the world is a direct result of excessive spending on player transfer fees and salaries (Kesenne, 2010). Financial problems evident within elite footballing clubs is generating an influx of awareness in operational issues such as player wages that arise in elite sporting clubs. Although there is little to support this, national leagues and local leagues are seeing the affects of such restrictions and are taking measures to ensure leagues and clubs to do find themselves in financial strife.
Salary Caps and Regulation of Club Spending
Sourced from A-League CBA Minimum Salary by the Professional Footballers Australia.
Due to the increased awareness of club financial crises' around the world, football governing bodies are taking particular measures to ensure that clubs do not fall into excessive debt, in particularly the recently established (2005) A-League in Australia. In such strong markets such as football or sport, there is a strong belief that the game needs to be protected from itself (Sydney Morning Herald, 2007).
These measures come in the form of salary caps for clubs and is administered by football governing bodies such as the FFA (Football Federation of Australia). The regulation of spending and salary dispersion in football clubs is evident within Australia's National soccer League, commonly known as the A-League. In 2007 a collaborative movement between the FFA and the PFA (Professional Footballers Australia) completed a partnership agreement to ensure the following two objectives (Professional Footballers Australia - Collective Bargaining Agreement, 2007);
- Establishing a rewarding and attractive career path for players
- Building a viable future for Australian Football at all levels
This led to the establishment of A-League Collective Bargaining Agreement (2008-2013). Little can be found on the specifics of this agreement however it should be noted that the salary cap placed restrictions on A-League clubs to control their spending and financial outlay. Despite this, evidence has been found that the salary cap is becoming more beatable and is gradually being lifted by regulating bodies (A-League Salary Cap to be Lifted, 2008). This article illustrates that the salary cap is gradually being strung out and clubs are being given permission to finance larger sporting deals and player salaries. The above table indicates some interesting details with regards to player payments throughout the A-League (minimum salary) and also the Youth League (NYL).
Professionalism in sport is evident through this table in the form of financial compensation for player services both on and off the field. As we can see, players as young as 16 years old are now provided with a minimum base salary which they must be paid by a club. Admittedly this is targeted at clubs within the A-League and also the National Youth League (A-League feeder clubs). Professional Footballers Australia have shown in this table that youth players are now subject to exceptional payments for their level of professionalism within a football club. Although this does not outline the potential sponsorship, player bonuses and any such add on payments that the players may receive. Currently in the A-League, the salary cap is listed as $2,350,000 million, in addition to this sum each club can do the following (A-League & Major League Salary Caps: A True Comparison, 2010);
- Contract a maximum of 2 marquee players who are not included under the salary cap
- Collectively pay players up to $275,000 in 3rd party payments
- Collectively pay up to $150,000 to outstanding young players (U23)
- Contract up to 3 National Youth League players on the minimum wage
From these figures we can conclude that the A-League is not suffering in player payments and is gradually increasing as the league becomes more popular and financially capable of expansion. The rapid growth is regulated so as to ensure the League does not spiral out of control and ultimately landing clubs and the league in financial difficulties. As we look at the gradual increase of the salary cap within A-League clubs, what is to stop them from pursuing private ownership and accumulating larger sums of money and finding themselves in a similar financial crisis as elite footballing clubs around the world? Furthermore, what is to stop local and community clubs following suit in the way of player wages, financial instability and inequality throughout the leagues.
Community & Elite Sport: The Parallels
In modern society parallels can often be drawn between community and elite sporting success in the form of financial outlay and structure. It has been found that like elite clubs, community and local footballing clubs strive to attain two particular objectives. These objectives include success both on and off the field. To achieve such objectives clubs must carry the ability to purchase the best players, contract the best trainers and have access to advanced equipment (Guzman, 2006). This is exampled by such elite club spending in Europe (in particular England) (English Premier League Summer Spending)) and also more recently Australia with the signings of Harry Kewell and Brett Emerton to Melbourne Victory and Sydney FC respectively.
Such spending, not only on player wages and salaries but also on club development and growth is prevalent within local or community soccer around Australia. In particularly the local Canberra club, Canberra F.C (Deakin Stadium 2008) have notably contributed a large sum of funds into the development and expansion of their club through the construction of a nationally recognised stadium. This examples that there is a great deal of support for local sporting clubs in the Canberra region. However, such activities will heavily depend upon the level of club membership, sponsorship and the level of community involvement to contribute funds of building facilities and player salaries. Similarities can be drawn to elite footballing clubs whereby only the wealthiest clubs can build state of the art complexes and attract some of the brightest talents.
As a member of a local football club in Canberra I am well aware of the potential payments and salaries that players will receive. It is directly proportional to the ability of clubs to make such payments, the inner talent of a player and level of professionalism they bring to a club and the success of that team or player within a league. As shown, such club structures can be related to those in elite footballing leagues around the world. There is little information to be disclosed about local club payments to players although it is evident that elite footballer's salaries are filtering through local clubs. Their now obligation to compensate athletes in the form of financial payments and bonuses is essential to retain their players. Club's inability to do so, could potentially lead to player transfers within the league and movement to a different club. The similarities between elite and local football shows to be more than just player wages but also the development and expansion of club facilities and player groups.
Suggestively, players at local or community level football within Australia and around the world would generally expect to be provided payments throughout a season for exceptional performances and for their services at that club. Although such payments would generally be expected by players when at a higher level of competitiveness. Clubs must compete for players' services at local leagues in relation to payments, sponsorship, facility development and equipment. Such similarities can be drawn to the operational structure of elite footballing clubs in terms of their financial output, general operations within competition and on and off the field success.
Financial stability is important to consider when delivering an effective business in elite, local or community footballing teams. The importance to maintain financial stability is essential within clubs and leagues, football economics is very much a business and operates for profit and success both on and off the field. Financial crises is evident within clubs around the world that have not found exceptional support in the way of financial backing and quite possibly the lack of success on the field. Clubs are showing a tendency to fail to meet or surpass their outlay of expenses including operational costs and player salaries (which account for the majority of expenses). Their inability to maintain a positive return on investment is the demise of their club and financial situations. As seen, player salaries are a large contributor to the expenses made by a football club but it seems that many clubs are spiraling out of control and no longer carry the ability to responsibly and effectively manage their funds. Regulatory bodies are successfully implementing restrictions and salary caps within leagues and is displayed through the A-League (Australia Soccer League). Salary caps seem a great tool to ensure clubs and leagues do not fall into financial strife. However, it also seems that salary caps could hinder the growth, development and attractiveness of leagues due to regulated salaries and financial input. It is interesting to see the parallels between elite and local footballing clubs. The operations and activities of elite clubs are seemingly evident in local football in terms of player salaries (or match payments), development of facilities and the attractiveness of successful clubs. Local clubs in modern society seem to carry a now obligation or expectation to provide financial compensation to players (at an exceptional level) in order to attract the best players and draw success on the field and as an operating business.
Barajas. A, (2010). . Spanish Football Club's Finances: Crisis & Player Salaries International Journal of Sport Finance, Vol.5 pp52-66
BBC News, (2011). . English Premier League Summer Spending Hits 485 mil pounds(online)
Bosca. J.E, Liern. V, (2008). . European Sport Management Quarterly, Vol.8 No.2, pp165-177
Canberra FC, (2010). . Deakin Stadium (online)
Cockerill. M, (2007). . Tight Salary Cap Threatens to deny the A-league a Place in the Sun, Sydney Morning Herald (online)
Cutler. M, (2010). . FIFA; Over 700 million viewers for World Cup Final, Sport Business (online)
FIFA, (2008). . A-League Salary Cap to be Lifted, World Football (online).
Frick. B, (2011). . Performance, Salaries, and Contract Length: Empirical Evidence from German Soccer, International Journal of Sport & Science, Vol.6 pp87-118
Guzman. I, (2006). . European Sports Management Quarterly, Vol.6 No.3 pp267-287
Kesenne. S, (2010). . International Journal of Sport Finance, Vol.5 pp67-71
Professional Footballers Australia, (2010). . Collective Bargaining, PFA (online)
Professional Footballers Australia, (2010). . A-league & Major League Salary Caps: a true comparison, PFA (online)