Economics Vs. Sociology

There is a hue and cry about in the land.  It seems as if some folks have just discovered that London is the capital of England, and they are appalled that such a thing might be allowed to continue to be the case.  Cries of righteous indignation are everywhere.  What has caused this mass case of agita, you ask?

• The contract that Caitlin Clark will get l;in year one from the Indiana Fever of the WNBA is less than 10% of what the lowest paid player in the NBA will get.
• That revelation has alerted sensitive folks across the land to the issue of pay inequities in professional sports.
• And … those sensitive folks do not like this at all!

</Sarcasm> I am not here to champion unequal pay for male athletes because they are males; that makes no sense and is indeed offensive.  I am here to explain why this situation exists and why protesting is not going to change it.

Using professional basketball as the test case – – since it is the Caitlin Clark contract that has generated all this stomach acid – – the fundamental basis for the different salary levels between the NBA and the WNBA can be summarized in a single word:

• REVENUE.

The current CBA for the WNBA can be viewed here.  The part of the CBA dealing with team salary caps begins on page 70 if you are interested in reading it; the cap for a year depends on the value of the contracts from previous years; it is complicated but the previously existing small contracts factor into the team salary cap.  This is the CBA negotiated in 2020 which is supposed to extend to 2027; it is not a remnant of times when women were denied voting rights.

The current CBA for the NBA attaches salary cap numbers to annual revenues for the league; you need not be a math genius to see how the NBA numbers can explode when revenues go up significantly – – and indeed that is just what the cap numbers have done.  The NBA TV deal is worth more than $50B over the lifetime of the deal.  The WNBA TV deal brought in about $200M last year.

Teams in both leagues operate with the hope that they can turn a profit.  Players’ salaries are a major cost factor for teams in both leagues and the fact of the matter is that more revenue available to the owners/teams/league means more can be spent on players’ salaries.  These teams are not like the US Government that can spend money it does not have for extended periods of time with little to no consequences; do not merely compare player’s salaries between the two leagues; compare the revenues as well.

Here is the question I would love to have verified:

• How many of the purveyors of righteous indignation about salary inequities have paid $34.99 (that’s the total cost) to buy the WNBA League Pass giving the holder access to about 150 WNBA games nationally?  Selling League Passes increases revenue…
• Then, in addition, how many of those same observers of pay inequity are going to watch all those games in order to drive audience numbers through the roof to the point that advertisers will pay top-shelf money to networks that air WNBA games?  That is where the big money is; the WNBA – – in economic terms – – is a television series and the value of that series is directly proportional to the number of eyeballs that watch the series episodes.

The reason I would want to know about how many activists and commentators are doing these things is that these are constructive ways to increase the salary levels for WNBA players.  These actions – to include buying a few tickets and seeing a few games in person – will improve the status quo.  However, they will not bring any real notoriety to the folks who undertake the constructive approach…

Let me be clear.  From a sociological standpoint the idea of equal pay for equal work is a proper one.  If Joe Flabeetz retires as the CEO of National Veeblefetzer and is replaced by Suzie Glotz, then Suzie Glotz should be paid what Joe Flabeetz was paid for doing the same job.  But the WNBA pay situation is not a sociological situation; it is an economic situation.  Let me compare Joe Flabeetz and Suzie Glotz in a different light:

• Joe Flabeetz is the CEO of a manufacturing corporation that has gross revenue of $10B annually and has a profit margin of 10% after paying all other costs and salaries.  Joe makes $50M a year for his efforts.
• Suzie Glotz is the CEO of a manufacturing corporation that has gross revenue of $100M and has a profit margin of 10% too.  But Suzie’s corporation cannot pay her $50M because that would be half of the corporation’s gross revenue for the year.  They are doing the “same job” but the revenues of the two entities are significantly different.

Yes, I have concocted the two examples but there is an important lesson to be gleaned from them.  If Suzie Glotz ran the big corporation and Joe Flabeetz ran the smaller corporation, then it would be Suzie who should get the bigger payday.  There is the sociological aspect of the equal pay concept at work; the economic aspect is the reality that the smaller corporation simply cannot spend that kind of money on a CEO and hope to stay in business very long.

Caitlin Clark’s minuscule rookie salary in the WNBA as compared to whomever is drafted #1 in the next NBA Draft is not the result of misogyny nor is it yet another example of the exploitation of women in our society.  The smaller salary reflects the very real – – and verifiable – – difference in the revenues generated by the WNBA as compared to the NBA.  And here is just one data point to show that this ought not be a “gender issue”:

• Caitlin Clark will make $76K as a WNBA rookie next year; the National lacrosse League is a male-dominated entity, and players there make between $10K and $35K per year.
• It is not about gender; it’s about Revenue.

Finally, I said above that the “TV rights” for the WNBA was an important element for the economic success of the league; so, let me close with this view of television by comedian Fred Allen:

“Television is a device that permits people who haven’t anything to do to watch people who can’t do anything.”

But don’t get me wrong, I love sports………