by William Haskins

Created on: September 21, 2009   Last Updated: September 25, 2009

I frequently hear complaints about the "stratospheric" salaries of athletes, especially when people are buying tickets to the game, or looking at their cable bill. They compare athlete's salaries to that of school teachers, police or firefighters, and mutter that it's just not fair. I do agree that teachers, police and firefighters are underpaid, but does that mean that others are overpaid? I maintain they are not.

Salaries of anyone, including corporate executives, entertainers (which includes professional athletes) are set by the marketplace. The pay is set by supply and demand. If a business needs more staff to accomplish more work, they hire at the rate which the marketplace pays for that grade of labor. If they offer too little, they won't keep enough workers and may not be able to stay in business. If they pay too much, their labor costs are too big, and they will lose money.

Now let's take a look at the compensation of athletes. Most businesses that want more production can hire more people. A sports team, however, can't do that. A football team can't put 13 guys on the field, they are limited to only 11. So, unlike most businesses, they can only increase production by hiring more talented and skilled workers (the athletes). This significantly drives up the cost of labor.

It is important to understand that the owner of sports teams are not 16-year-old kids playing on some internet site. The sports team owners have successfully run multi-million and billion dollar businesses for decades. They obviously wouldn't have been able to do that if they overpaid for labor. Team owners pay the salaries based on the expected worth the player will contribute to the team.

While some players will obviously flop, others pay out huge dividends. It's a highly speculative business, but the owners do make money. Let me provide an example. In 1986, Jim Kelly was offered a large (at the time) contract of $1.5 million per year as a quarterback of the Buffalo Bills. The Bills sold 5,000 season tickets right after his singing was reported.

Season tickets had cost an average of $300 each in 1986 ($30 per game for 10 games, 2 of those are preseason). Those ticket sales tallied $1.5 million. Jim Kelly earned his year's pay, and he hadn't even shown up for the first day of work. How many people can make that claim?

Let's face it, there is a lot of money in professional sports. The television contracts for the 2009 NFL season is $20.4 billion for three major TV networks and ESPN (source: wikipedia.com). Is it unreasonable for the players, those whose services make it all happen, to want their fair share of it? I don't think so. As much as athletes' salaries are large, they are paid what they are worth, just as any other worker.

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