There are many people who comment that football salaries are too high when compared to teachers and nurses who arguably provide more social benefit.
In this post, I will explore the reasons why some footballers receive high salaries, whether we can justify this, and if applying an additional theoretical tax could be advisable.
Why Do We Care about Footballer Salaries?
The salaries that some footballers receive is a widely discussed topic.
This is particularly poignant in a world where austerity measures have been imposed on multiple economies, unemployment rates have hit uncomfortable levels, and the majority of workers see their real wage decrease as inflation devalues their purchasing power without a pay rise to compensate for this.
The Telegraph reported that 26 million Britons admit that they are “struggling financially”, the thought that some players are being paid multiple times the national average yearly salary in just one week to “kick a ball about for 90 minutes” can be a difficult pill to swallow.
How Much do the Footballers get Paid?
The highest paid English football player is currently Harry Kane, who commands a wage of £200,000 a week (enough to pay the minimum weekly salary of £420 for just under 500 teachers) and has this wage confirmed until 2024 (potentially earning an obscene £62.4m in that time).
Harry Kane is not even the highest paid player in the Premier League.
Manchester United player Alexis Sanchez earns £315,000 a week, which when you consider that there are also many other players in the same team with similar salaries, the wage bill can easily smash through the millions per week per team.
Where Does the Money in Football Come From?
In the case of Alexis Sanchez, he plays for Manchester United which is one of the largest football teams in the world, and who reported an income for the 2018 at a record £590m.
This yearly revenue was received from sources including television broadcasting of matches, ticket sales and merchandising.
Extra profit can also be earned through better league positions, by reaching the latter stages in domestic and international competitions (gaining additional broadcast revenues and performance bonuses), and better performances mean better stadium attendance per game.
Each team therefore has an incentive to compete for the world’s best players in order to be better placed to challenge for these large revenue streams, and the laws of supply and demand have seen these wages inflate to these incredible levels.
Back when Real Madrid bought Cristiano Ronaldo for a record £80m in 2009, there were many people complaining that footballers’ wages have gone crazy, but this was a shrewd business move by the club who made £90m from shirt sales in the following year to cover the transfer fee plus more.
Given that revenue from television rights has rocketed, the more recent transfer of Neymar from Barcelona to Paris St. Germain for €222m makes the transfer of Ronaldo seem like a drop in the ocean.
Returning to the weekly wage of Alexis Sanchez (who earns £315,000 a week), his tax contribution at the higher tax rate of 45% is already over £7m a year (a very significant contribution for one individual).
While it might be easy to oppose the significant wage that he earns (none of which is paid for by the Government), the tax system already takes a very heavy chunk of his earnings a year and increases the amount that the Government can spend on public services and infrastructure (such as additional nurses, and funding for new hospitals or schools).
Should we be Implementing an Additional Tax on Footballer Wages?
As explained in my previous blog about the effectiveness of the top tax rate, the outcome of increasing the tax rate would be to create an incentive for the player to move abroad (as they aren’t geographically tied to any one place given their significant wealth).
We have seen situations before where even the slightest change in circumstance can make a player ask to move. Rafael van der Vaart (previously of the football club Tottenham Hotspur) asked to move to a German team before his contract had finished because his girlfriend had just been offered a job there, and his wish was fulfilled as he moved to Hamburg in the following year.
If a reason as simple as that is enough for a footballer to move, then you can be certain that implementing an additional tax would have a similar effect.
Can All Footballers Be Rich?
It is certainly possible, but the reality is that many aspiring players often find themselves in the situation where they don’t reach these heady heights of player wages, and end up attempting to find alternative careers with a second, and relatively underdeveloped skill-set as time was invested in playing sport rather than learning.
The average weekly pay in the bottom televised league in the United Kingdom (League Two) was just £750 which is about the average national wage. Another additional fact that we need to recognise is that the majority of footballers are considered “too old to play” when they are in their thirties, and so miss out on many decades before retirement age, which means that their wages are made to compensate for this.
The economic basics behind the levels of money in the football world of entertainment simply revolve around supply and demand in a private capitalist sector which earns its revenue as an entertainment source paid for by many people who grumble about the “crazy wages” paid to players.
When we consider that a match day team consists of eleven starting players, seven substitutes and a manager, and when the level of income earned per game for a team is so high, it is easy to see why wages for the very best players can reach levels in the multiple millions of pounds per year.
While I don’t entirely agree with the levels that footballers’ salaries have reached (given that many professionals who give much more benefit to society are not paid anywhere near these levels), and that I don’t have any influence in altering this situation; it is just amazing to witness how far a laissez-faire system has been allowed to go in its movement to ‘equilibrium’ (here as the point where aggregate players’ marginal costs (wages) equal the marginal revenue of the football club).