Can A Salary Cap Save The Premier League From Itself?

I was posed a question last night about the Premier League by a casual American observer. “Why don’t they have a salary cap?” While on the face of it I know that in some ways the comparisons aren’t entirely fair, it certainly is a fair question. My knowledge of the economics of the Premier League isn’t as intricate as that of the NFL; however, I have a reasonable grasp. Being a lifelong devoted fanatic of American football, and a recently converted, but obsessed follower of English football, I now find the fans who annoy me most are those on either side who have no regard for the other one. If only the governing bodies of each major professional league were keen to take notes off each other.

Here’s part one of my series:

I) Parity

Since 2000, fifteen different NFL teams have represented their respective conference in the Super Bowl, and eight teams have won the championship. By contrast, only three teams have topped the Premier League in that span, and only members of the “Big Four” have finished in the top two. I will certainly entertain an argument for the value of sustained excellence; however, I think a neutral observer would prefer to see more teams, cities and fans participate in the thrill of a championship run.

There are many factors that created the financial success and stability of the NFL, and the cap-imposed competitive equality is a major factor. The maximum amount of money each of the NFL’s 32 teams could spend on player’s salaries last season was $128 million. The NFL’s deliciously lucrative TV contracts contributed $116 million to each team’s bank account, before a ball has been kicked, or thrown as the case may be. The labor dispute on the horizon between the team owners and the player’s union will be mostly about how to distribute an obscene amount of money amongst hundreds of millionaires.

If only the Premier League had such worries. There is no possibility of a Leeds United situation in the NFL. Sure, it’s possible that teams may relocate cities, or certain teams may fold, leading to the creation of a new franchise. But these unlucky teams and cities end up being replaced by markets that are even more lucrative (cough, Los Angeles, cough), and the overall financial health of the league is unlikely to be in question in the next decade.

Of course, the Premier League’s promotion/relegation system, a fixture in the worldwide game of football, is an entirely foreign concept in American sport. The totem pole/pyramid of the Football League down to Conference and non-league sides is a terrific, living, breathing, sporting meritocracy, where a new or old club is afforded success on its ability, acumen and luck. The NFL has its fair share of almost purely mediocre franchises, such as the Detroit Lions, where the ludicrous management decisions have been sustained by the rest of the league’s success, in what could conceivably be a misguided study in psychological torture of a mass population.

23 thoughts on “Can A Salary Cap Save The Premier League From Itself?”

  1. The only way a salary cap would work is if it’s mandated by UEFA for all major European leagues. If not you will have the other major European powers outspending the English teams by an even greater margin.

    1. exactly. And I would go even further and say FIFA.

      the structure of world soccer is such that this isn’t feasable. Now if FIFA was like FIBA with one dominant league (like say the European SuperLeague Ltd.) then maybe things would be different.

  2. Stephen,

    Very happy to have this discussion, and I appreciate that your plan is to divide it into parts. My suspicion, though, is that you will now get many comments that are not restricted to parity discussions but are aimed generally at the relative merits of a salary cap at large.

    There are at two issues that immediately come to my mind that make a salary cap difficult, which cannot analogize one-to-one with the American system and may be insurmountable barriers to such a suggestion.

    First: youth academies. The U.S. system has no such thing. Players are developed for the NFL by the American collegiate system. Those players are the property of no franchise, and in fact cannot be approached by a pro franchise in any form without NCAA sanctions. That means that any team has an equal shot at any player, and all that rides on it is the quality of its scouting team and its draft position. By the time the players are available to franchises, there is a pretty good idea of the quality of the player, particularly in the early rounds of the draft. I give you there will be bad busts (Ryan Leaf, I am looking at you), but there will also be a good proportion of obvious stars to be: Peyton Manning, etc. With very rare exceptions (Eli Manning, now I am looking at you) the player cannot decide where he plays – he goes where he is drafted.

    That is just not true with the football system. Teams develop their own players inside academies with the hopes that if they spot and nuture talent they can produce good quality players for reasonable wages at the exclusion of all competitors. What would the salary cap do to this system, keeping in mind there is no alternative like the NCAA in place to develop players. Do the caps count against youth spending? Youth salaries? Money spent on youth facililties? Because if not, there will not be great enhancements made in parity. Some teams don’t even have youth facilities, while others have multi-billion dollar systems in place. It might change who the Top 4 are, but it won’t change that there *is* a top four.

    Second: the free movement of labour and Europe. The NFL is in a unique position. It is the only professional league of American football. There are no other leagues where players can go play American football if they don’t like the NFL (the CFL has both different rules, and let’s be fair, shite for salaries). If the players don’t like the wages in the NFL, they can not play. But they cannot leave and play elsewhere. Not so in the EPL. Football is the most popular game in the world. There are professional leagues all over the place, and at least two other leagues that are on par financially and in terms of quality to the EPL.

    If a player in the EPL does not like the wages he earns by a salary cap, he can go ply his trade in a non-capped country like Italy or Spain or Germany. So unless you can convince ALL the big leagues in Europe to adopt a salary cap, and by the way, the SAME or roughly the same cap, then that will fail.

    Which raises a further related legal issue. In the United States, the U.S. Supreme Court has held that a salary cap is not uncompetitive behaviour that violates the constitution, but it is not clear at all that the same would apply to Europe. England is in the EU, and there is a law permitting the generally unrestricted movement of labour. A salary cap in England that affected the ability to ply a trade in a free market might very well be legally impermissible, whether you ultimately conclude that it is a good idea or not. It is the same principle that created Bosman transfers, I would expect it to rule out a cap as well.

    Looking forward to the rest of your series.



    1. Jon,

      I’d like to speak to a couple of your points.

      First, almost all major sports in the USA have some sort of salary capping structure whether it is a soft cap/luxury tax system or a hard cap like the NFL has. For your point about youth academies, you can look and see how baseball deals with developing players in the minor leagues, which is similar to a football youth academy. I’m pretty sure minor leaguers’ salaries don’t count against the salary cap, but it becomes an advantage to some teams to develop good, cheap talent—it keeps the payroll of their major league club low.

      Second, a salary cap would never restrict player movement. NFL players can move freely from team to team. So, I doubt it would violate an EU statues or British laws.

      Finally, I agree with you that it would have to be a FIFA-mandated salary cap because it would skew the competitive balance. If Barcelona could spend as much as they wanted, how could Man U, Liverpool, or Arsenal keep up?

      I also think that a missing point here is that the NFL’s salary cap also comes with a salary floor, meaning that each NFL team has to spend a certain amount of money each season—they can’t just spend as little as possible and pocket the rest of the TV money. This, in effect, helps the players make more money because the teams are forced to spend it.


      1. Hi Matt,

        Appreciate your comments. With respect to baseball: a luxury tax system is not at all like a salary cap from a parity point of view. It has done next to nothing to reduce the dominance of the big spending teams like the Sox and Yankees. If a team makes proportionately enough more to make the tax meaningless, then it’s effectively meaningless from a parity point of view (even if the added luxury tax money helps keep the Royals afloat, it won’t make them more competitive). One of the big complaints in the media I read in the United States is that the luxury tax simply does not work as far as parity is concerned. Furthermore, baseball minor leagues are not like youth academies because there are rules that limit the age that a player can be recruited and signed. The minor leagues are closer to an academy system than the NFL-NCAA, but you do not go scouting in Africa for the next big pitcher at age 8 or 12 or even 16. It is closer but not equivalent to the system in world football. If you do not apply your salary cap to youth systems then nothing will change from a parity perspective, because the big clubs will just divert their much higher revenues into massive youth systems and get to the talent earlier than the poorer clubs who cannot afford large international scouting networks and private training grounds.

        Whether or not a salary cap is a violation of European law depends entirely on how is structured. For example, the NHL limit which places a maximum amount that can be spent on any one player certainly violates the EU rules on an open market. You cannot put a price control on a good or service – which this would be, even if it is unsalutary to think of a person as a “good”. It means that you say to a player “you cannot move if you will not accept wages at “X” amount” which is a restriction on movement if that same player could get X+1 somewhere else in Europe. It also is a restriction on the European free market, because a salary cap effectively tells a player that an arbitrary figure, rather than the free market, determines his value. So I’m fairly certain it would violate the EU treaty, though I freely admit my legal expertise is not in this area of law.



        1. Major league baseball has near the parity of the NFL. There have been 13 different teams in the world series since 2000, and 8 different champions – yes, the Yanks and Red Sox are the two multi-championship teams – equalling the NFL.

          You can scout in the Caribbean in the early teens and teams have academies there. Players can be signed at 16.

          MLB restricts the buying & selling of players on a pure monetary basis. The Oakland A’s did this in the 70’s and they put rules in to prevent it from happening again. Now teams need to get comparable players in return, even if they tend to be very young and cheap. You can take the Marlins in 1997 winning the world series, dismantling, but trading full grown plants for lots of seeds that would be reaped again in 2004 when they won again.

          The threat of relegation eliminates the rebuliding years that teams can use to try out and groom younger players.

          MLB and NFL also limit the size of their rosters. I think the bigger clubs carry a lot more first team players…at least that’s what it seems. Limiting roster size takes away one way the biggest clubs can hoard talent.

  3. I think the only thing that would work is a tax. What you could implement worldwide is that at the 80th percentile of club salaries for a league would be a moving line, set at the summer transfer window. Clubs above that percentile would be required to pay a 50% tax to be evenly distributed to all other clubs in that league. Imagine a 5 team league paying 2, 4, 6, 8, and 10m for salaries. In this case, the 8m team is the “line”, and the 10m team owes the remaining teams a split of 1m. This effectively makes their payroll 11m, and lowers op costs to the rest.

    Of course, there needs to be a 23/23 rule, too. 23 players max that are 23 or older.

  4. And I agree; this must be a FIFA worldwide deal. They can choose to impose this rule on all leagues where that line would be equal to £20,000,000.

  5. There is a rule that has been talked about. It is not a salary cap nor does it create equality. It is basically a rule that clubs can only spend a certain percentage of their income on players wages and transfers.
    It still means that the big four will stay the same as they have the biggest crowds and are popular on a world stage, but atleast it will stop clubs going bust.
    Nothing is certain yet but FIFA are suppose to be consideing bringing something like this in.

    It is there just to make sure clubs don’t go bust.
    The rule I’m talking about is based on what the club earns (this does not include billionaires throwing there money around either) There rule is based upon gate receipts and clothing profits.

  6. i have no problem how the EPL is setup. I don’t like communism in professional sports. it weeds out the weak markets and market allocation is decided by the highest bid. The reason why the NFL is doing so well because they have no outside competition and do not have to compete on the global stage. Look at MLS and its dire situation by trying to mimic the NFL on its salary cap. why is it so important to have a different champion ever year? Should a corporation have to have negative earnings every other quarter just to have parity within the market?

  7. A world- or Europe-wide salary cap would be fantastic for the sport. Youth academies are a good point, and some clubs would still be better than others, but the fact is that parity would be improved… just not to the degree of the NFL. This would certainly make the game more entertaining for everyone.

    Unfortunately this seems to me hopelessly unrealistic. First you have to get UEFA, and mainly the Spanish and Italians, to approve. This means getting all the biggest clubs which pull in the most money for their leagues to voluntarily give up some of their privileged status. The only big club that I think would be on board is Arsenal, as Gazidis has talked about salary caps positively in the past. Gotta love that American influence! Seriously.

    Anyway this would be great but I can’t see it happening under the dinosaurs Platini and Blatter.

  8. No possible way that a salary cap would work in English or any other football league. Revenue sharing is the only way that a salary cap could possibly work. Smaller clubs whose payrolls already dwarf what the salary cap might be would not automatically be able to make more money in order to pay for the bigger players. Therefore, the revenues from everyone in the league(s) would have to share money so that each had the opportunity to have a payroll close to the salary cap. Even if this was a solvable problem, the fact is that bigger players will almost always go to where they can get paid the most, so we would see many more big names spreading out into the rest of the leagues around the world. The consequence will inevitably be a dilution of talent in all leagues and therefore a lesser quality product.

    The bottom line is that there should be no built in protection from irresponsible managers or owners. If a club is irresponsible with money to the point that the club must fold or be relegated, the so be it. As unfortunate as it may be, no club has the right to exist at the top in perpetuity, or even to exist at all. Both are a privilege that must be looked after responsibly or lost. Salary caps and revenue sharing only serve to allow and even encourage long-lasting mediocrity.

  9. What an utterly ridiculous proposition. First of all most football players make nowhere near the absurd amounts American Football players can make. And worst of all salary caps would only help douchebags like the Glazers, Hicks, and others to pay less in wages so they can keep more for themselves. And to claim that salary caps help establish parity without delving into free agency or any other issues is downright ignorant.

  10. First of all – Football (Soccaar) teams are NOT franchises – they are CLUBS! Many clubs in Europe are not motivated by profit or the bottom line, and in fact owned by the fans or trusts (Green Bay is the only FRANCHISE I know of in the ‘big 4’ leagues that come close). Only recently with the advent of scumbags such as the Glazers, Hicks/Gillette, etc, has this changed. I’m interested to hear the rest of your views, but PLEASE do your homework. I have found most Americans who are recent converts to the beautiful game have no clue of the history and/or heritage of the sport at the professional club level, especially when it comes to such complex issues such as this.

    1. I am well aware of the limitations of comparing these apples and oranges. That said, there are obvious benefits and deficiencies in both economic systems which are open for exploration.

  11. Interesting idea but I just don’t believe it is something that would work with the EPL. Like Brad said in the first post, it would only be effective if all european clubs were capped.
    I, like you Mr. Gaffer am a big NFL guy as well as soccer. I like how american sports are setup in theory; However, there is one huge flaw. It dosn’t really give teams incentive to do well. If we use the NFL again look at how the Chargers and Cardinals were managed for years(not recently). Consistantly bottom of the league, jokes of the league, yet were still making money. Why is this? Most teams that follow this example have little motovation to do well if financially the franchise is still making money. In large markets like California and Arizona people will still go to the games and TV/revenu sharing fills their pockets just as much as the teams that make playoff pushes every year. American sports reward the worst teams with the best draft picks and easiest schedules. The NBA is the only one trying to fix this with a draft lottery. I know the teams that are like this are in a minority but it still puts a bad product out for fans of said teams. You will always have a couple of teams that will hover above the minimum salary cap numbers with no punishment other than fans of the sport laughing at them.
    You also have to look at the fact that the NFL has no competition from other leagues and really has a monopoly on football. CFL isn’t really viewed as competition and other leagues that have tried starting up have been absorbed by the NFL or been pushed out of existance. The EPL teams are not only competing from within its own league but with other european leagues.

    I really believe the current EPL system is fine, the problem moreso has to do with owners trying to spend more than they can afford. What is going on is similar to the “credit crunch” in America. To me the easiest solution in theory would be imposing financial rules like setting spending limits based on clubs annual incomes or allow teams to only spend a certain percentage over what they had spent in previous years. Not exactly a salary cap but this could be a barrier for teams getting too big for their shoes too fast or owners with tons of money coming in buying clubs and spending tons of money on transfers like Man City.

    Sorry for such a long post, keep up the work Gaffer

    1. Patrick, I didn’t write the article. Stephen Lucey did. Sorry, but I don’t watch NFL, but I appreciate you providing your opinion in the comments (seriously).

      The Gaffer

      1. Whoops, take out Gaffer in everything I said and insert Stephen Lucey instead haha.

        Sorry again for such a long ridiculas post

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