David R. Henderson  

College Athletes: Go on Strike!

Me on Economists' Ideological ... Big Break Theory...

The latest John Stossel show on Fox Business Network is another home run. In it, he deals with the economics of sports: ticket "scalping," the NCAA's enforcing a monopsony on the labor of student athletes, laws against gambling on sports, and much more.

One item I particularly liked: his interview of Boyce Watkins, a finance professor at Syracuse University, who laid out how unfair it is for colleges to bring in millions of profits and to pay their coaches sometimes millions of dollars each, while at the same time refusing to pay even their best athletes anything above tuition and room and board. Watkins tells of Chris Webber, a basketball star at the University of Michigan, complaining that he walked by a store that had T-shirts with his picture on it and yet he was not allowed to share in any of the royalties and his mother could not afford to attend one of his games.

I've written earlier about how the NCAA enforces this monopsony.

I got a kick out of Watkins's proposal: That in the final four basketball tournament in late March or early April, the 40 or so players get together and say they're going on strike unless their colleges pay them. I'm not sure how plausible this is. Each player would be risking not being in the limelight. For those who think there's a high probability that they'll make it to the NBA or one of the European teams, why make a big fuss? They're close to the big payday. For those who think the probability is close to zero, all their time playing is now a sunk cost. Why give up their one chance to be in the limelight?

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CATEGORIES: Labor Market

COMMENTS (23 to date)
Steve Cronk writes:

They won't do this because the non-monetary rewards are sufficient to make the exchange mutually beneficial. Playing in the Final Four is a dream come true. Most people wouldn't trade away a lifelong dream for a chance to make some money.

The dynamic is similar to the minimum wage. Sure, the workers' earning are less than they would if they had more negotiating power, but they still come out of the deal better than they would by abstaining from the transaction altogether.

MingoV writes:

The problem would be solved by eliminating TV coverage of college sports: no big money, no athletes demanding pay, no million dollar salaries to coaches, and no alumni donations targeted to new sports complexes (oops!).

Ted Levy writes:

For all the reasons you mention, David H., I think you well explain why the college players don't strike before the big game.

But what might be almost as effective...if most members of both teams put out a joint press release explaining how unfair it is to most college players--players who never make it to the big leagues--that their coach's and schools make millions but they get only a scholarship (and often not the education that should go with it), that they're going to play this game because they don't want to disappoint their fans, but that their fans should know they, the student players, are being exploited and should demand something be done.

Then, at least, there'd be some discussion...

David R. Henderson writes:

The problem would be solved by eliminating TV coverage of college sports: no big money, no athletes demanding pay, no million dollar salaries to coaches, and no alumni donations targeted to new sports complexes (oops!).
What problem are you solving? You're just making everyone worse off.
@Ted Levy,
Good idea!

David R. Henderson writes:

@Steve Cronk,
The dynamic is similar to the minimum wage.
There's a huge difference: employers of low-wage workers are not typically monopsonists and no one is imposing sanctions on employers who pay them.

Kendall Ponder writes:

If players are so underpaid why don't all of us pool our money and start a new league and pay the players what they are worth and make lots of money? Probably because no one would come watch us. The level of play in March madness is much lower now than in the 1980's because players leave early for the NBA but it is much more popular now. The money is there primarily because of the connection fans feel to the school, not the talent level of the players. Not to mention getting $20,000 to $50,000 worth of tax free benefits (depending on if it is a private school) for part time work is a great deal for most (80 to 90%?) of the players.

John Jenkins writes:

If you think major college sports is a part-time job, you're delusional. Schools don't respect the ostensible time limits placed on programs, and there are lots of off-the-books expectations of players even beyond that. Do not forget the one-sided nature of the scholarship "contracts" either. Lots of schools abuse that feature and leave ostensible student-athletes unable to complete their degrees.

s writes:

How are the non-student athletes any different than the non-athlete students? Both make the university money. Neither gets paid.

Kendall Ponder writes:

As a former D1 football player at a BCS school which went to four bowl games I don't think I'm delusional but I may be wrong. One of our starting defensive ends carried 17 hours in Engineering one semester and earned a 3.75 and he still had time to go out on weekends. My experience was any player who wished to get a degree was given every opportunity to do so. Those who didn't did not for the same reason most non-athletes who start college don't get a degree. They aren't willing to put in the time. I'm sure there are schools where they don't care about players graduating but top-notch players (which would be the only ones who would make money in a play for pay system) have plenty of schools to choose from which do care. I'm not sure what you are referring to about the one sided nature of the scholarships. Lots of players finish their degree on scholarship after their elgibility is up as grad assistants.

Jim Rose writes:

A 1000 strong cartel is a contradiction in terms. real cartels are unstable.

McKenzie and Sullivan (1987) argue that with so many members, the NCAA cannot stop a competitive market in players from emerging.

In addition to scholarships, athletes receive very important training, on-the-job experience and national media exposure. The value of this total package equals the players’ marginal revenue products.

Athletes can and do turn professional before college.

When to turn professional is an occupational choice many would be athletes in all sports must make.

this choice is made at a younger age in tennis and golf but at an older age in team sports. team sports require a longer grooming period before raw talent fits into a team.

Tim writes:

"Athletes can and do turn professional before college."

This isn't exactly true anymore. The NCAA has managed to get the NFL and the NBA to agree to rules that require players to sit be out of a high school a certain number of years. In the NBA the requirement is one year, but since the NCAA hates the whole "one and done" thing this there is pressure to increase the requirement even more.

Hana writes:

The continuing lawsuit of Keller vs. Electronic Arts might be a breaking point for the NCAA regarding licensing. The billion dollar potential liability for EA is going to impact all licensing and by extension the relationship between athletes, universities and the NCAA.

Patrick S writes:

The value is added by the university's brand (the capital), not the labor. Compare the quality of product in the NCAA tourney vs. the NBA with AAA minor league baseball vs. MLB. The difference in quality is much smaller in baseball, yet no one cares about AAA playoffs. The value of college basketball lies in the March Madness brand and the individual school's ties with alumnae. On average, college basketball players are being compensated about as much as they would in a minor league system. Put another way, is it unjust that I get paid approximately the same rate for coaching basketball at a kid's summer camp as at Michael Jordan's fantasy camp for adults even though the adults pay 6x as much? No, it's MJ's brand that adds the value. My labor's value doesn't change much.

David R. Henderson writes:

@Patrick S,
If you were right, there would need to be no NCAA restrictions on paying athletes because the equilibrium wage would be zero.

Patrick S writes:

How are NCAA restrictions fundamentally different than the NBA salary cap with max and min salaries? In both cases, the system leads to a somewhat predictable return to capital and less compensation for the stars and more for the scrubs than one would expect in an unrestricted market. Include the transfers from revenue to non revenue producing college sports and it's even more like a salary cap with minimums and maximums- minimum being a scholarship, maximum being a scholarship + internship for high paying professional job + fame and prestige and all that comes with that. One difference is college alumni subsidize athletic departments while NBA fans only pay for services rendered. Paying players would jeopardize that subsidy and could lead to lower compensation for labor in the long run.

David R. Henderson writes:

@Patrick S,
How are NCAA restrictions fundamentally different than the NBA salary cap with max and min salaries?
The NCAA salary cap is zero. That's pretty different.

PKSully writes:

The value of the scholarships, equipment, medical care, athletic training and coaching is considerably more than zero. Writ large, NCAA athletic departments lose money, even with donations from alumni, so where are increased wages going to come from? The best American high school baseball players are faced with a decision: get paid to play minor league baseball and the quality of life that goes with it or take a scholarship to play college baseball. No one forces all those kids to go to college. They weigh everything and choose college baseball and, I would argue, the non-financial rewards of college basketball and football far outweigh college baseball. So why is it a given that they're being paid a below market wage, counting all compensation? Blow up the NCAA and 18-22 year old athletes as a whole will be compensated less for those skills. The university brand is what makes their skills valuable. BTW, thanks for the forum of discussion.

David R. Henderson writes:

First, re the forum for discussion, you're welcome.
Second, you make very good points,
Third, even though you're right that the university brand is important and gets a return, notice that the universities themselves want to pay and are disallowed. Check any of the pay "scandals" in the past and you'll see that the scandal is not the student "holding up" the university but, rather, the university paying the student and getting caught.

MingoV writes:
"@MingoV, The problem would be solved by eliminating TV coverage of college sports: no big money, no athletes demanding pay, no million dollar salaries to coaches, and no alumni donations targeted to new sports complexes (oops!)."
What problem are you solving? You're just making everyone worse off. -- David Henderson
My comment was satirical: a play off the silly adage that money is the root of all evil. Thus, get rid of the money and the problem disappears. (Very similar to "get rid of the guns, and gun crimes disappear."
David R. Henderson writes:

My comment was satirical: a play off the silly adage that money is the root of all evil.
Oops. I totally missed that. Thanks for clarifying.

Kendall Ponder writes:

@David Henderson

If universities wish to pay players they are free to change the NCAA rules and do so. They NCAA has no power outside what its members give it. If a small number of football powers wish to pay their players they are free to leave the NCAA and form their own league. I'm not sure most pay scandals involved University money. I suspect the money often came from boosters. Wanting someone else to pay your players and give you a competitive advantage doesn't mean you want everyone to be able to pay their players.

Rick Z writes:

College athletes get opportunity

  • financial opportunity to GO to college
    • opportunity to LEARN what rookie pros need to do
      • opportunity to AUDITION for scouts of the majors

Colleges make huge amounts of money from the popular sports -- that's why the COACH is often the highest paid employee of the school.

One possible solution:
Remove all academic requirements, and pay the athletes.

  • The school provides the "brand" and gets the TV, endorsements, ticket sales, etc.
    • The athletes get coaching, a salary and a shot at the majors.
      • No need to maintain the fiction that the athletes are students, when they are just there to play.

Kendall Ponder writes:

@Rick Z
I don't think the school can provide the "brand" if it just hires the players. I think they would lose a lot of the emotional connection. It would just be minor league sports which does not have a big following. Also, it is not a fiction that athletes are students. When I went to school the graduation rate of football players was slightly higher than for non-athletes. Given the push for better graduation rates I'm sure it is higher now. There are a few players who are only there to play, but they are a minority.

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