Tuesday, October 20, 2009

Increasing Income Inequality: Lessons from the NFL

Click to enlarge.
An analysis of the USA Today Salaries Database for the National Football League (NFL) reveals that the share of total team payrolls in 2008 going to the highest-paid 20% of players ranged from a high of 69.8% for the Indianapolis Colts to a low of 49.2% for the Tampa Bay Buccaneers, and averaged 59.5% for all NFL teams (see chart above). That compares to an NFL average of 56.3% in 2000 for the share of team payrolls going to the highest-paid 20% of players.

For the entire U.S. population, the top 20 percent of American households earned a 50% share of total income in 2008
according to the Census Bureau, slightly higher than the 49.8% share of income for the top fifth of households in 2000.

In other words, there is significantly greater income inequality in the NFL than in the general U.S. population, both in terms of the share of income going to the top 20% in 2000 (56.3% for the NFL vs. 49.8% for the entire U.S.) and 2008 (59.5% vs. 50%), and also in terms of the increase over time for the top quintile’s share of total income (56.3% to 59.5% for the NFL between 2000 and 2008 vs. 49.8% to 50% for the general population).

What can we learn from the significant income inequality in the NFL? Find out here at
The Enterprise Blog.

10 Comments:

At 10/20/2009 4:32 PM, Anonymous Anonymous said...

As you point out, even the lowest paid NFL player has experienced a real increase in their compensation.

But in sharp contrast, even after the sharp increase of the last three years the real minimum wage is at the same level is was in 1956.

The NFL players are members of a union that negotiates real increases for all of its players.

Libertarians keep asking for an example of a heavily unionized industry that has thrived. Professional football certainly fits that bill.

Spencer

 
At 10/20/2009 5:12 PM, Anonymous Anonymous said...

Spencer,

Libertarians are not anti-union. We are against when unions get unlimited perks and advantages through their influence in government. Same goes for businesses and any other agent in the market.

But yes--let's raise the minimum wage to $20 dollars an hour and we'll see how many unskilled workers get (un)employed.

 
At 10/20/2009 5:35 PM, Anonymous Anonymous said...

Libertarians keep asking for an example of a heavily unionized industry that has thrived. Professional football certainly fits that bill.

The NFL is a heavily subsidized legal monopoly. The same logic that Obama uses to justify the level of compensation at banks and car companies - they've taken government money - should be applied to the NFL. It's not like they're brain surgeons. Let them start at minimum wage and work their way up from there.

 
At 10/20/2009 5:37 PM, Anonymous Anonymous said...

What concerns me most is that the NFL is obviously racist. Where are the Asian players? Why so few Latinos? If these guys can't get their diversity on, we're goig to have to appoint admission boards, just like UM.

Where's the "Handicapper General" when you need her?

 
At 10/20/2009 7:37 PM, Blogger PeakTrader said...

Spencer, when union power reached its peak in the 1960s, union workers were grossly overpaid, while non-union workers were grossly underpaid. That disparity, or inequality, has narrowed substantially with the decline in unions.

Also, real wages have been flat for 40 years. Yet, both real compensation and buying power have increased substantially. So, living standards of even minimum wage workers are much higher today.

 
At 10/21/2009 8:14 AM, Blogger Steve said...

MP states in the link that "even poor and middle-class Americans are better off today than ever before, despite the fact that income has become more concentrated"

Could you please show where that comes from, and over what time period? I recall reading that real wages have been stagnant for a decade.

 
At 10/21/2009 10:14 AM, Anonymous spencer said...

Average hourly earnings data only goes back to the early 1960s.

But since the early 1960s the minimum wage has fallen from over 50% of average hourly earnings to 29% just before the last round of minimum wage increases.

Do you have any data to support your claims?

 
At 10/21/2009 7:03 PM, Blogger PeakTrader said...

This comment has been removed by the author.

 
At 10/21/2009 7:06 PM, Blogger PeakTrader said...

A report by the BLS that reflects the sharp rise in U.S. living standards is "100 Years of Consumer Spending: Data for the Nation."

An article: "The Disappearing Minimum Wage Worker" based on BLS data states:

"Overall, we find that the number of individuals earning the federal minimum hourly wage or less has decreased from 7.8 million people in 1980, representing 8.9% of the total U.S. workforce in that year, to just 1.9 million people in 2005, or 1.5% of the total U.S. workforce last year."

A study: "Real compensation, 1979 to 2003: analysis from several data sources" used data from the National Compensation Survey, the Current Employment Statistics survey, the Quarterly Census of Employment and Wages, the Current Population Survey, and the real hourly compensation series from the BLS productivity statistics program.

It revealed "real hourly compensation in the nonfarm business sector increased 32.2 percent from the fourth quarter of 1979 to the fourth quarter of
2003. That increase is similar to the 26.8 percent increase in the ECI for total compensation."

 
At 10/22/2009 3:35 PM, Anonymous GregL said...

Mark said: "even poor and middle-class Americans are better off today than ever before, despite the fact that income has become more concentrated, and the share of income going to the highest-paid 20 percent of American households has increased from 43.6 percent in 1967 to 50 percent in 2008."

How does that work with a falling median household income nation wide?

 

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