Premier League Should Emulate Major League Baseball’s Wage Structure

Premier League chief executive Richard Scudamore rejected the notion of a salary cap, suggested by UEFA.

“If you say 60% or 50% can be capped on wages, what it really does is absolutely lock in the natural order,” he told BBC Radio Five’s Sportsweek programme yesterday. “It would help the big clubs far more than the small clubs. If you have a small club who have got a benefactor, or who have got other ways of raising money or ways of funding, at least it gives them a chance to compete.”

Incredibly, the Premier League has a valid criticism.  Such a cap, tied to club revenue, would keep clubs within their means, rather than deficit spending themselves into massive debt.  But, it’s also implicitly unfair, as 60 percent of Man United’s turnover is far greater than 60 percent of Hull City.  It would calcify the existing order.

One alternative is a firm, legitimate salary cap for all clubs.  It would create parity, as it did in the NFL.  But, for such a system to be implemented, it would have to come at the expense of relegation.  Man United is not going to agree to a system that would see them at risk of relegation and financial ruin.

The NFL regulation may be too radical, but the Premier League should consider tow facets of the current system in place in Major League Baseball.

The first is the luxury tax.  There is no salary cap in American baseball, but there is a luxury tax – a set amount for payroll.  If a team spends above the luxury tax amount, they pay into a common fund, distributed to less fortunate clubs.

So, for instance, the Premier League could set the luxury tax threshold for payroll at £100m per year.  Chelsea’s payroll is £148.5m.  The difference is £48.5m.  Chelsea could pay a tax on the difference of 50 percent, so £24.25m.  That money would then be redistributed to the bottom clubs.  The tax could also increase for repeat offenders who repeatedly overspend.

The luxury tax would curb spending, but in a way palatable for clubs.  It would not stunt a big club’s ambition or enforce socialistic parity.  It would merely increase the cost of anticompetitive extravagance, to the benefit of other clubs.  Manchester United can still flex its financial muscle, but other clubs have a better chance to compete.

Another baseball innovation that the Premier League should consider is the apprenticeship period.

Baseball players are not natural free agents at the beginning of their careers.  Major League clubs hold their restricted rights for their first six seasons of Major League service.  The club dictates the player’s salary within league standards, for the first three years of the contract.

During the second three years, the player and club go to an arbitrator to agree on a salary.  A player may also sign an extended contract, often at below market value, forgoing another year of free agency in exchange for more money.

This could be key to breaking the Premier League oligarchy.

With young talent so cheap, teams would feel less pressure to sell young players.  Everton could keep Wayne Rooney for a few years, rather than selling him to Manchester United.

A low budget club with a smartly developed brood of youngsters and well-bought veterans could compete for the Premier League title.

It’s not a radical adjustment of power.  Generally, teams that spend well will still do well.  The Boston Red Sox and New York Yankees are still favorites to win the American League every season.

However, occasionally, there is a season such as 2008.  The Tampa Bay Rays went to the World Series with the second lowest payroll in MLB.  The three highest paying teams – the New York Yankees, the New York Mets and the Detroit Tigers – all missed the playoffs.

Similarly, Manchester United and Liverpool would challenge for the title every year.  But, every so often, a club such as Middlesbrough would rise to knock them from the pedestal.

The Premier League doesn’t need a massive NFL-style overhaul.  A softer touch in the manner of MLB may be just right.

11 thoughts on “Premier League Should Emulate Major League Baseball’s Wage Structure”

  1. the luxury tax is a good idea along with a transfer cap.50 mil per team per transfer window or even lower….i know its more complicated than all that,but something along those lines.

  2. The Phillies won the World Series last season, Tampa Bay won the AL Pennant, but lost the World Series.

    Another note, in regards to MLB salary structure, is that players’ service clocks don’t begin until they reach the Major League level. Teams own the rights to players from 3-5 years in the minor league before they’re exposed to the Rule V draft, and then get two-to-three years at league minimum (depending on Super-Two eligibility) in the Majors before three years of arbitration.

    I guess the football equivalent would be that players’ service clocks don’t start until they debut with the senior club (reserve team games wouldn’t start the clock).

  3. Another big thing that aids parity is the amateur draft. American citizens, and Puerto Ricans, entering (MLB affliliated) professional baseball as amateurs apply for the draft. They’re then drafted by teams picking in reverse order of the previous season’s standings and the team that drafts them owns the exclusive right to sign them for a calendar year. They can hold out and not sign for a year and enter the draft again the next season if they wish, in which case the team that took them gets a supplimental pick in the next years draft. How you’d square that with EU labor laws is beyond me.

  4. As noted, the Phillies, with one of the higher salaries, won the world series, not the Tampa bay rays. Also, as an aside, the rays did very well because they had a great manager and two rookies who had unbelieveable seasons.

    Also, since Aston Villa is doing so well with a smart manager and prudent spending, can’t we delay articles like this until next year, when the Big 4 is in the Top 4? I am just not a fan of radical changes to a very entertaining product.

  5. It cannot be done at all under any circumstances, due to key two reasons, 1. the UK being a member of the European Union and 2. The Bosman ruling. Both of those restrict the restrictions that you mention.
    Also, with football being a world wide game, It would take all the major leagues in Europe to agree to it, which simply wouldn’t happen, you’d just have all the best players skipping off to the leagues where salary caps didn’t apply.
    Middlesborough’s point is also an issue, lots of players don’t sign for certain clubs due to their location in the UK. A salary cap wouldn’t address that issue at all. You can’t make a player move somewhere he doesn’t want to just because he can earn the same. For some players, money isn’t everything.

  6. 1. I am a huge baseball fan. I’m aware that the Phillies won the World Series. I missed the typo. Mea Culpa.

    2. I understand the legal restrictions would make a lot of this impossible. What I was saying is that the Premier League should go for a luxury tax/youth development route if they reform, rather than a hard salary cap.

    3. I don’t know where I said or suggested players would get made to move somewhere.

  7. No offense but if football mimics Baseball alot of us will be finding another sport to watch. Nothing about the MLB is worth imitating. It’s a cartel that’s protected by legislation. Anyhow as Paul said the EU prevents this from happening anyhow.

  8. Legal issues aside and even I a Chicago based attorney has had EU rules effect business in the Windy City, has to conclude that the world economic crisis will lead to a change in football salaries. What form, when , how, limits, exceptions MLB, NBA, or NFL model who knows, but it will come.

  9. How would a luxury tax be illegal?? it’s a great idea, i personally would implement along with the spend within your means rule. Average all the teams maximum spend amount, and that would be the luxury tax threshold. And as we know with mean averages, one extreme figure can push the average well away from the middle.

    So for example if your turnover is 4 times bigger than the average, you wont be able to spend 4 times more on salaries . Because part of your spend would go on luxury tax, a percentage to be determined, and like you said it can increase for repeat offenders. ie teams that do it more than one season in a row.

    That will make sure all clubs are fiscal, but slightly take away the advantage of being bigger, but not humungously so.

    just thinking out loud

  10. Recently papers came out that showed the financiap statements of the so called bottom of MLB. The system of luxury tax in MLB does not create parity it enforces and rewards the status quo. It guarantees that the top markets will consistently win the penant race. In addition, attendance in the MLB is in decline throughout 50% of clubs (16/30) this year and league revenues are down. For fans of the sport in cities other than the “big 4” the consistent year after year of seeing the same teams compete in September and October creates apathy. Case in point, Toronto Blue Jays. The first club to reach, and then hold, the 4m in annual attendance, during the period where they were competive. Now they are under 2m a year and its possible that the team can lose more. Being owned by a group that cares more abput profit than competition, the MLB structure rewarsds lower spending by these clubs by increasing their profitability to remain losers. Dont let that happen to the EPL. There are better ways, such as the NFL system which allows all teams to be competitive and creates a much more dynamic product.

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