Friday, April 25, 2014

College Athletes Should Be Paid $92,000/Year

By my calculations, the average college college should be making $92,000/year. How did I come to that number? I compared the average salaries of other professional athletes to the amount of revenue their leagues brought in to get a ratio of how much an average salary for an athlete should be.

In the table below I have the estimated revenue, average salary, and my estimate of the total league players salary and ratio of salary/revenue for each of the four major North American Leagues

League Revenue Average Player Salary/Year Estimated Number of Players Estimated Revenue Per Player Ratio of Salary to Revenue
NFL $11,000 mil $1.9 mil 1696 $6.48 mil 29%
MLB $7,000 mil $3.3 mil 750 $9.3 mil 35%
NBA $5,000 mil $5.2 mil 450 $11.1 mil 45%
NHL $3,300 mil $2.5 mil 810 $4.07 mil 58%

The revenue and salaries were from the Major Professional Sports Leagues in the United States and Canada Wikipedia page and the number of players in the league was calculated as the roster size of teams (53 NFL, 25 MLB, 15 NBA, and 27 NHL) multiplied by the number of teams per league (32 NFL, 30 MLB, NBA, and NHL). The range of league ratios ranges from 29% to 58%.

As a note, the NFL collective bargaining agreement is 47%, so either the numbers are off, or the NFL has revenue that is not part of the collective bargaining, and it looks like the NHL union has done a great job with negotiating with the league.

Using this knowledge I calculated what the salary NCAA athletes should be making by estimating the revenue of a NCAA D-1 athletics departments at about $4,800 mil. I got his number from the ESPN college sports revenue and expenses from 2008. The median revenue was $40 mil for 2008 and I multiplied that by the number teams at 120. Then I estimated the number scholarship athletes at a school to 150. This number is rough since schools have varying sports per school, but I figured 68 football, 30 both basketball teams, 20 baseball and softball, 10 swimming, 10 tennis, and 12 as fudge factor. I decided a fair wage would be about 30% of the athletics department revenue based on the fact that college athletics is not the cash cow professional sports are and there is more overhead in the athletics departments. For the year 2008, that would put a fair salary at $80,000/year for 2008. With an growth estimate at 2% for 6 years that would put athletes at about $92,000/year for 2014.

Also, median revenue/athlete in NCAA D-1 is about $300,000, I feel paying athletes is just plain fair. Undergrad research assistants help professors generate income through research and they get money, graduate teaching assistants generally get a scholarship plus a stipend for their teaching and research efforts, why are college athletes getting their only getting their tuition and room and board paid for? At my alma mater, New Mexico State Universtiy, the athletic department brought in $25 mil for 2008, and I estimate the average football player with tuition, books, room and board cost the university about $20,000, based on 150 athletes thats about $ 3 mil in expenses, or salary athlete expense to revenue ratio of 12%. NMSU's athletics program is dwarfed by programs like Alabama or Texas where the ratios will be even lower at about 5% athlete expense to revenue ratio.

I propose the NCAA schools pay their students a flat salary across the board on top of their scholarships, say $45,000/year (which is more than I made as a grad student) plus the scholarship students would be earning at the school. This will be the salary per scholarship player across all sports to keep in the spirit of Title 9. This flat salary would prevent rich schools like Notre Dame or Alabama from buying players off. Also, the money would encourage students from dropping out due to the higher opportunity costs. I know in sports that are not football or basketball, coaches can split scholarships across multiple players, the coaches can still do that for those sports.

This is America, when people participate in the capitalist system they should be compensated for their hard work, and I think college athletes are not getting their fair shake.

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