Wages and the distortion of the pyramid
Posted by John Beech on October 30, 2011
The data just published by Sporting Intelligence (sourced from internal PFA files) adds more fuel to my argument that the football pyramid is becoming utterly distorted in the sense that the scale of finance in the different tiers is being ludicrously stretched. In a recent public lecture as part of the Coventry Sporting Conversation series (a podcast is available here beginning at 02:05 mins.), I put the case that the lifting of the maximum wage started to stretch the level of financial activity across the tiers, and that when the Premier League broke away and negotiated its own broadcasting rights this process accelerated dramatically.
While the Sporting Intelligence data in its tabular form excited me, it was when I put into Excel and produced some graphs that I got really excited. The full set of data on average players’ basic wages , together with UK average wages as a benchmark is shown here:
(All graphs can be enlarged by double-clicking on them)
At first glance it is obvious that things started to change with the appearance of the Premier League, but if we plot pre-Premier League and post-Premier League separately, the change can be seen as an acceleration of the existing trend:
The most striking features of the data emerge when you compare the average basic wages over time in each tier with the average UK wages. The Premier League data confirms the stereotype of the ability to live the Ferrari-driving playboy lifestyle:
In 1984/85 the average Premier League player was earning two-and-a-half times the average UK wage, but by 2009/10 this had grown to 34 times the average OK wage, with no sign of slowing down.
On the other hand, life for a player in today’s League 2 is rather different from this stereotype:
Starting from a position in 1984/85 of below the average UK wage, things did slowly get better until the dawn of the Premier League. Apart from a strange positive blip in 2003/04 (and no, I can’t explain it either), his lot has been scarcely different from the average UK worker’s wage. Given that a footballer has a limited career, I wonder how a League 2 player ever manages to get a mortgage and buy a house, especially if he’s a goalkeeper – other data I have shows that goalkeepers are the worst-paid players.
This distortion in wages up and down the pyramid is simply a reflection of the disparity in revenues. Of course higher levels deserve higher broadcasting rights and should be able to pay higher wages to attract the best talent, but when the size of the difference between tiers has become so vast, the traditional view of a club having some ambition and a local businessman to back them has long gone. The only way upwards to the top is with an Arab prince or a Russian oligarch. This is of course hardly news, but the data above makes abundantly clear that unless 92 Arab princes or Russian oligarchs come along, performance on the pitch will continue to be grossly distorted by the richness or otherwise of a club’s benefactor. That is, unless change in governance takes place, and Financial Fair Play is imposed rigorously up and down the pyramid, financial doping is stopped, and a measure of sporting competitive balance returns to the game.
Football Management 
steve_mcfc said
It’s interesting that you’re blaming wage inflation on benefactors, because the facts contradict your argument. Using figures from here for PL wages:
From 1991/2, the season before the PL began, to 2002/3, the season before Abramovich bought Chelsea in June 2003, the compound annual growth rate (CAGR) in PL wages was 23.5%. From pre-Abramovich to 2009/10 the CAGR is only 9.6%.
Figures for average transfer fees follow a remarkably similar pattern:
http://twitter.com/#!/steve_mcfc/media/slideshow?url=pic.twitter.com%2FYeUptbB
There is no figure for 1991/2, so using the figure for 1992/3 instead, the CAGR in transfer fees up to 2002/3 was 15.2%, whereas the CAGR from 2003/4 to 2009/10 is only 4.4%.
Therefore your claim that wages and transfer fees have inflated due to benefactors is clearly false. The real reasons why they’ve inflated so much is due to the rise in TV revenue, and also due to the rise of players using greedy agents, and the sensationalist media’s obsession with wages and transfer fees.
Don’t let facts get in the way of your argument, will you?
John Beech said
Those are precisely the figures I have used Steve, as I acknowledged, but don’t let that get in the way of your argument!
My argument is not, as you falsely claim, that benefactors have directly caused inflation. I fully agree that the root cause of the disparity between the four tiers is the astronomical rise in broadcasting rights, which have been redistributed very unevenly across the pyramid since the appearance of the Premier League. This stretching of the pyramid in terms of financial scale has forced lower level clubs to turn to the benefactor model if they want to be ‘ambitious’. Benefactors have facilitated rather than caused the spiraling.
Agents fees have certainly had an impact too, but on a much smaller scale.
steve_mcfc said
I should have made it clear that I was referring to your claim that benefactors are basically the root of all football evil – I’ve seen you make the same argument on a number of occasions.
As I say though, the facts disprove your argument that benefactors are to blame, because it is actually the TV money that has caused wage and transfer fee inflation.
You say that “Benefactors have facilitated rather than caused the spiraling.” I disagree. The data shows that TV money has led to wage and transfer fee inflation.
steve_mcfc said
BTW, the following quote is from the end of your blog above, and it looks very much to me as though you’re blaming the disparity between rich and poor on benefactors too, when in reality you should be blaming it on the size of TV deals:
“The only way upwards to the top is with an Arab prince or a Russian oligarch. This is of course hardly news, but the data above makes abundantly clear that unless 92 Arab princes or Russian oligarchs come along, performance on the pitch will continue to be grossly distorted by the richness or otherwise of a club’s benefactor. That is, unless change in governance takes place, and Financial Fair Play is imposed rigorously up and down the pyramid, financial doping is stopped, and a measure of sporting competitive balance returns to the game.”
Don’t let facts get in the way of your argument, will you?
John Beech said
I suggest you reread my reply to your first comment.
steve_mcfc said
I had read your first comment. But you claimed that “benefactors have [not] directly caused inflation”, whereas you essentially said the exact opposite of that in your blog, so I was querying which of these mutually exclusive views you actually held.
Changing the subject slightly. You’re obviously a big fan of Financial Fair Play. Firstly, are you aware that FFP breaks EU laws on competition? And secondly, what are your views on the obvious consequences of FFP being that the biggest clubs will get bigger, and therefore the gap between rich and poor clubs will widen further – especially considering the subject of your blog above? Once again, you appear to be espousing two diametrically opposed views simultaneously.
John Beech said
I am indeed a fan of the principles of Financial Fair Play, which aim to stop financial doping, but there are certainly problems which arise.
With respect to EU Competition Law, there certainly is an argument that FFP is in breach. Whether this is resolved by the EU putting some flesh on its ‘specificity of sport’ concept remains to be seen. I would guess that it will take a long time to resolve how exactly sport is ‘specific’, and I’m not holding my breath.
I’m not convinced by your ‘obvious’ argument that it will result in the bigger clubs getting bigger. There is certainly the problem that it will lock the big clubs in as ‘big’, but, without a blank sheet of paper, we are stuck with the status quo to move forward from.
To me FFP is a step in the right direction of pushing clubs into operating on earned income rather than on cash injections from benefactors – that’s surely what the ‘fair play’ part is all about.
An obvious and serious problem is its application – it will apply to any club that wants to play in Europe. i.e. the majority of Premier League clubs, but then there’s the ‘Championship gap’ before we get to the Football League’s voluntary code in League 1 and the mandatory code in League 2.
Do I thinks it’s a magic wand? No I definitely don’t. Until there is a fairer distribution of broadcasting rights, which are earned income and thus perfectly reasonably allowed as ‘fair’, FFP will not be that effective in improving sporting competitive balance, but definitely it’s a step in the right direction.
steve_mcfc said
You say that Financial “Fair” Play aims to “stop financial doping”. It won’t do anything of the sort. “Doping” in sport refers to using banned substances to enhance performance. Financial doping must therefore refer to using money to enhance team performance – in the case of football that means spending money on players’ wages and on transfer fees. The clubs with large revenues will continue spending big money on wages and transfer fees once FFP has come into effect, so financial doping will continue.
I think what you really meant is that FFP aims to stop benefactors injecting money into clubs. But please don’t try to suggest that big clubs such as Manchester United or Arsenal spending money on wages doesn’t consist of financial doping whereas it would be considered as financial doping if a benefactor spends money on the same thing.
Re my claim that it is obvious that bigger clubs will get bigger, so the gap between rich and poor will widen. It’s been established that there’s a high correlation between the total amount that a club spends on wages and success on the pitch. FFP seeks to ban clubs from European competitions if they spend more than the money they make in football-related revenues. So clubs that already have the highest revenues will obviously be able to spend more than those with lower revenues, so the clubs with the highest revenues are very likely to be the most successful in future too. Clubs that get into the CL receive £30m+ in TV money, they receive global exposure on TV, which leads to them having growing domestic and global fanbases, which in turn allows them to charge more for sponsorship deals and to charge more for ticket prices etc. As I said in the first place: FFP WILL undoubtedly lead to the big clubs getting bigger, and the gap between rich and poor will widen – something you claim to be opposed to, yet you actually implicitly support that if you support FFP.
You know, there’s a reason why FFP falls foul of EU competition laws: it happens to be extremely anti-competitive!
Did you seriously never question why FFP started life being about reducing clubs’ debts, but it ended up being about banning clubs from entering European competitions unless they break even, and debt isn’t even mentioned in the FFPR document?
Just look at the European Club Association Exec board that negotiated FFP with UEFA:
http://www.ecaeurope.com/Default.aspx?id=1082766
Representatives from Bayern, AC Milan, Barcelona, Manchester United, Real Madrid, Inter etc. Do you think it’s just an amazing coincidence that all of those clubs apart from maybe Bayern are heavily in debt, and they’re the clubs that already have very high revenues, so FFP massively benefits those clubs, and it effectively eliminates the possibility of any club that isn’t already big from trying to compete with them. For example, how could a club with a revenue of, say, £80m ever hope to compete with Manchester United, which has a revenue of £300m?
The ECA exec board is a cartel. And why on earth an academic such as yourself supports a scheme such as FFP that is purely intended to eliminate competition for the big clubs, I’m not entirely sure? Unless you actually support one of the big clubs?
BTW, there are ways to cap spending while also being fair, such as having a cap on the total amount spent on transfer fees and/or wages – but, crucially, for that to be fair, the cap would have to be the same for all clubs. The big clubs cartel wouldn’t want that, though, because they’re only interested in stacking everything in their favour…..
theboyler said
I was thinking about the L2 blip in 2003, and the only thing I can think of is that in that season, you had several teams which were getting good crowds, bigger than average for that division (see here: http://www.emfootball.co.uk/attend2004.html) which meant they were paying more than usual for that league. It’s easy to see how the presence of a Hull City paying big money can quickly distort the market in a given year, as my impression is that contracts at that level are often short, so a certain percentage of the talent is hired in that year, so changes in the going rate on average can be quickly skewed by high-paying outliers.
Other thoughts:
– If one could augment this database with TV deal stats and attendance stats, you’re only missing reliable ticket price data to build a coherent model of how football operates, and analyse what actually seems to drive the various areas.
– Outside of the top two leagues, costs seem to have risen in line with average incomes, yet anecdotal evidence suggest ticket price rises have consistently outstripped inflation. If so, where’s the money gone?
– The inequality curve is very similar to charts we see much of in relation to the growth in the earnings and assets of the top 10%/1%/.1% in the last 30 years; football has become as comfortable with inequality as the rest of society.
– It’s been able to be comfortable because the gap has been filled by easy credit, just like wider society. In football, that’s mainly been benefactor loans with some form of repayment from future earnings, in wider society, credit borrowed rising asset prices.
– The number of insolvencies in the period under study is a function of the fact that whereas once there was generalised support via gate sharing (intra-league transfer payments) and more equitable broadcasting rights sharing (inter-league transfers), there’s now individual support – every man for himself as it were, and the consequences of that are that some of the men have sunk because the men they relied upon pulled the plug.
– There is gross mismanagement, wishful thinking in place of strategy and the rest, but that’s standard football fayre. The key change has been the growth in the gap which people are trying to bridge.
– Against that backdrop, the key issue is to deflate football -this is where FFP comes in as a necessary first step. It will be an insufficient step though if not linked to a new solidarity system which allows the gaps to close; to fail to do this will be to lock-in clubs of sufficient means as the pre-eminent and unchallengeable elite.
Matt said
“But please don’t try to suggest that big clubs such as Manchester United or Arsenal spending money on wages doesn’t consist of financial doping whereas it would be considered as financial doping if a benefactor spends money on the same thing. ”
This is exactly what financial doping is Steve, as well you know. If you earned the money you have every right to spend it, if you didn’t earn it but are gifted it from a benefactor that is the doping part. Where does the analogy come from?
If you trained harder than anyone else you can expect to be faster, if you are naturally stronger, faster etc then the same thing applies. If you used artificial aids to boost your natural attributes, or help you train harder, that is doping (and that is exactly why those substances are banned, because they artificially aid performance).
Of course the club in recent years this would apply to is MCFC, which rather explains your awkward position on the matter i suspect.
steve_mcfc said
“financial doping” = the use of money to boost on-field performance.
Your analogy implies that it’s okay for some teams to boost their performance by spending money, but it’s not okay for other teams to do the same. How on earth could you possibly consider that to be fair??
I would also be interested in your views on whether you consider Financial Fair Play to be “fair”? If you do think it’s fair, could you tell me how a club that has a revenue of, say, £100m could ever hope to compete with a club with a revenue of £250 – £300m?
Please don’t patronise me by telling me that the club with the lower revenue should invest in youth development, because there’s obviously nothing stopping the club with £300m revenue from spending just as much if not more on youth development, there’s no guarantee whatsoever that it would pay dividends at any point in the future, and even if it did pay dividends it could take a decade or more to see the fruits of any investment. Basically, if you want to compete with the big clubs, you HAVE TO spend money on players, but FFP seeks to ban clubs who try to do that!
As I said in a previous comment, Financial Fair Play breaks EU competition laws for a very good reason: it’s anti-competitive, because it stops smaller clubs competing with bigger clubs. Do you support FFP breaking EU competition laws, Matt?
I’d guess that you’re a Manchester United, Arsenal or Liverpool fan, and the only reason you support FFP is because it stops City/Chelsea from competing with the team you support, and you’d far prefer to have the odds stacked firmly in your favour forever more via the demonstrably unfair FFP. Am I right, Matt?
John Beech said
As Matt hasn’t commented further, I’ll stick my five eighths in.
To me, financial doping is the use of unearned money to boost on-field performance (and its addictive nature; hence the use of the term ‘doping’), so I have no problem in principle with including sponsorship and broadcasting rights as earned income.
There are problems though, with respect to a general rather UEFA ‘financial fair play’ concept, with sponsorship (has the market price been paid?), and a bigger one with broadcasting rights (has their distribution been equitable?). The latter is a particular problem which UEFA needs to address because of the different ways that top tiers in different countries handle this.
Bazza24 said
Financial Fair play is a gross misnomer. Who decides what is “fair” – will Doncaster Rovers win the Champions League one day ?
Steve Mcfc talks more sense than the others on here, who seem to have been “educated” by the views of a certain M. Wenger, who had no views on “unfair” wealth when Arsenal were in a comparatively stronger position. Making up rules to protect your own interest is pretty well the opposite of any concept of “fairness”.
Is generating additional revenue from property speculation “fair”? What has it got to do with football ?
Brenton said
Hi John, I’ve very much enjoyed the blogs, I think the main reason for the spike in League 2 revenue was down to the promised funds of the ITV digital deal of around that time in which a load of lower league clubs pre-spent on monies promised to them.
On the financial doping, what City and Chelsea do is a blight on the game. To pay players a salary 3-5 times their actual market worth to ensure they come to your team creates an unevenness which is bad for the league and bad for European football as a whole.
The Germans have the fairest system which makes a much more interesting league, if only UEFA had the power to introduce a European salary cap (even if that allowed for the bigger clubs to pay a luxury tax if they went over the cap a la MLB in the States) as I find even the group stages of the Champions League game now become predictable and pretty uninteresting.
At the very least a league by league salary cap in relation to revenues generated by each league would be great to see. You want to be able to reward well run clubs like Arsenal and poorly run clubs still have the punishment of relegation. For the record I support Leeds
steve_mcfc said
Please name a single player at City who earns “3-5 times their actual market worth”. Take Samir Nasri as an example of someone who Arsenal fans consider to be “greedy”. The papers say he’s on £170k/week. £170k / 3 = £57k and £170k / 5 = £34k. Arsenal offered him a new contract for £110k/week, so City offered him 1.5 times what Arsenal offered him, which means your claim that City are paying 3-5 times their market worth is inaccurate by a factor of 2-3.
In order to build our team we did have to pay players a premium to come to the club: we couldn’t offer players Champions League football until this season, and we arguably still have to pay players more than the likes of United and Arsenal do if we want to sign them. You claim that City paying over the odds to attract players “creates an unevenness which is bad for the league and bad for European football as a whole.” How do you come to that conclusion? Surely Man Utd and Arsenal have an unfair advantage if they can pay players lower wages??
City have said that they’re intending to abide by Financial Fair Play, though, so the wage bill will have to come down if we’re going to meet that. But we’re a far more attractive proposition to players than we were. We’ve also got some excellent young players coming through, and we’re investing a lot in our youth academy. So the amount we offer new players would naturally have fallen over time anyway.
Just like John Beech, TheBoyler and Matt, you’re basically blaming wage and transfer fee inflation on benefactors-funded clubs such as City and Chelsea, yet every single one of you has totally ignored the data that I provided in my first post on here that completely disproves that wage and transfer fee inflation are due to benefactor funding. The inflation has been the result of rising TV revenues. Please don’t let facts get in the way of your argument too!
Re the lack of competition in the Chamions League group stages: that’s primarily due to the “seeding” by way of UEFA’s club coefficient, which gives the most successful clubs an easy route through the group stages – most people seem to agree that the most competitive group is the one City are in, but I doubt you’d agree.
BTW, as a Leeds fan, why are you arguing to stack everything in Man Utd’s favour???
Brenton said
You put fwd a decent enough argument mate, I guess I was referring to Nasri and Adeybayor who had their wages trippled ( I’ll concede that after pay increases it wouldn’t have been any more than that) and in relation to the majority of teams in the league it is at least 3-5 times than what they can afford. I actually enjoy City contending, I just wish there was some way of introducing a European or International salary cap so well run teams were rewarded rather than teams with billionaire owners etc..
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