Blogs | December 1, 2011

Why are football players paid more?

Dimitry asks: Why are football players paid so much more than volleyball players?


Ian answers: Dimitry, it amuses me that people can get paid at all for playing games, let alone be paid the huge salaries some of these sportspeople negotiate. From where I am, sitting in an office each day, I reckon both the footballers and the volleyball players are on a good wicket. But your question does raise some interesting issues around career choice and it brings up some of the thinking traps that can end up costing us dearly.
The way I look at it, what you are describing can be explained by a combination – in technical terms – of tournament theory and salience bias.

In a league of their own
It is probably fair to say “footballers” are generally paid more than volleyball players, no matter what code of football is considered. Part of the answer must be that football – from soccer to gridiron to rugby (league and union) to Aussie rules – typically has more spectators, perhaps more sponsorship opportunities and higher revenues than volleyball, meaning there are resources to pay footballers more. But among professional footballers and volleyball players, there will be big differences in the amounts they get paid. The very, very best in both sports (think the top 0.1% of players) are likely to be paid very much more than others – even those considered to be very good (say, the top 1% of players). A small increase in an individual’s skill relative to others may make the difference between winning and losing – not only for the individual but also for their team.
Tournament theory explains how the price clubs are willing to pay can be very high for a small increment in skill that can have large effects.

Tournaments on (and off) the field
For example, male soccer stars such as Lionel Messi and Cristiano Ronaldo are paid much more than their already well-paid team mates. It is not that their team mates are not skilled but the Forbes magazine analysis of the world’s highest paid soccer players suggest the skills of Messi and Ronaldo are rated higher than the others (although off-the-pitch endorsements and sponsorships will have boosted their totals).
When it comes to men’s volleyball, high pay differences for extra skill also may occur. Ivan Miljkovic, considered one of the best male players in the world, is reputed to be paid $1 million, however it is difficult to verify as volleyballers’ pay doesn’t seem to be as openly discussed as footballers’. In any case, I doubt Miljkovic’s team mates are paid as much as he is.
When the amount paid to a worker depends greatly on the rank order of the skill (the best is paid more than the next best) rather than the marginal difference in their skill, economists say that wages are being set by a tournament – hence the name tournament theory. The idea is that a tournament provides an objective rank in skill levels and even a small difference in skill (perhaps coupled with a sprinkling of luck) determines winners and losers. The winner receives a much greater prize than the runner up.
Tournaments occur not only in sport but in a traditional office as well, where there can be multiple tournaments. Directors and managers are paid more than regular staff and presidents more than vice-presidents. Economist and author Tim Harford argues that this is part of a process that encourages people to work harder in the hope of gaining promotion.

Fame, fortune – and the truth
Stars shine brightly and attract attention. We might dream of living in their shoes. And when someone mentions footballers, fame, large pay packets and glamour spring to mind. People tend to identify footballers in general as being very well paid despite the fact that this is not necessarily the case. Our views are swayed by the information that is eye catching or salient – hence the term salience bias.
This is a problem not only in deciding whether to try out for the local football team or to spend the extra hours on the golf course in the hope of breaking into the big time. It can also affect the decisions we make in deciding which career to follow.
Salience bias can contribute to poor career choices if we, for example, decide to pursue a particular job because it appears well paid only to find that, once the full story is revealed, we signed up to a path that requires many years of training to get to the top. And, by definition, not everybody can get to the top.
A frequently cited study by US-based academic Herwig Schlunk asked in 2009 whether the costs of gaining a law degree outweighed by the benefits. The title of his paper Mamas don’t let your babies grow up to be … lawyers hints at Schlunk’s conclusions. Similarly, academic Laurence Kotlikoff put forward a strong case for pursuing a lower profile career when he compared the lifetime earnings of doctors and plumbers in the US. He wrote for Bloomberg that, after taking into account tuition fees and lost earnings while at university, the sustainable spending over a lifetime for a plumber is almost as high as for a doctor.
As Kotlikoff notes, big decisions on education and careers should not be based on money alone. Nevertheless, salience bias tells us it is also is important to make decisions based on complete information rather than what appears attractive from first impressions.

Where in the world?
Which brings us back to the footballer and the volleyball player. Throughout this answer I have assumed the players were male. I wonder if there are significant differences between the pay of professional football and volleyball players who are female. It may be tempting for a male who is highly skilled at both football and volleyball to choose football. Meanwhile, a female who is highly skilled at both sports may make the opposite choice. For women, their stars, choices and tournaments may be different to men’s.
And while we are thinking about alternate stars, choices and tournaments, think about cultural differences too. In some places football players are regularly out earned by other sportsmen. Think cricket in India or rugby in New Zealand.

EconomicsJobsSport

Ian Bright
Ian Bright

Senior economist at ING
.(JavaScript must be enabled to view this email address)

42 blogs

If you have a question for Ian, ask him here.

Have your say

Should banks incentivise you more to boost your savings?