Salary Caps Don’t Increase Parity in Professional Sports.

As a fan of a small market team I can say that in conversations with other fans one of the things that almost always pops up as a primary preoccupation is the resignation that in the off-season your team will lose out in the free agent lottery. If a team can’t afford to sign good players they can’t improve, if they can’t improve a bad team will languish in suckitude for years the logic says. Leaving aside for a moment that there are of course other ways for rotten teams to get better I did want to look at the question of supposedly egalitarian salary caps and whether or not they actually increase parity to any significant degree.

First of all, what is a salary cap?

Simply put a salary cap is a cap, or a limit, on how much a team can spend on player salaries. By limiting what teams can pay for players it is hoped that parity can be increased by spreading the highest salaried players around the league rather than them all accumulating in one or two very lucrative spots. If only a select group of wealthy teams are able to buy up all the talent they will win more games than their competition which in turn makes them even more rewarding destinations for free agent players. This cycle is thought to be a detriment to parity and the spirit of fair competition.

How do they work?

There are various kinds of salary caps in sports ranging from hard to soft, and of course there is the option of having none at all. Hard salary caps such as the one currently used in the NFL place a salary number that teams can’t go over for any reason. Soft caps are ones where there isn’t top number over which you can’t spend, rather there exists a number over which you can go but only in a limited way and/or with a financial penalty. The NBA has has soft cap which allows teams to go over only in signing their own currently under contract players, certain veterans, players being paid the league minimum and a one time a year mid level exception. In both leagues crossing the cap illegally is a serious matter that merits varied punishment that may include fines, suspensions and the rescinding of draft picks.

Do they improve parity?

This graph shows the number of different teams that have won the championship in the last 30 years, focusing on the big three American sport leagues; the MLB, NBA and NFL. Looking at it you can see that Major League Baseball has had the most wins by different teams even though it is the only one of the three with no salary cap. It should be noted that championships are not the only way to measure parity, you could also look at total wins or playoff berths, but since it is the best possible outcome to a teams season I feel that it is valid and does go to demonstrating the amount of parity in a sport.

So Why Do Salary Caps Really Exist?

This graph shows that for most of its recent history Major League Baseball owners have had to pay an exorbitant amount of money on their players, many years paying more than what they make in revenue. Salary caps usually help keep the price of players down and thereby are a benefit to owners who may not want to spend more than they make. Salary caps are frequently a point of contention for CBA’s between owners and players unions.

Each side knows that where the salary cap lands is going to be a prime determiner of how much money they make in the coming years. Salary caps are not a strike for parity but rather an attempt by owners to try and keep player’s salaries down. In the end other factors having to do with the quality of the front office running the team have more an effect on whether or not a team is successful on the playing field, money can help the front office accomplish its goals but it can’t be seen as a means to end in itself.

Citations and Links.