The Free Market Case AGAINST Paying Student Athletes

Every year, it seems like some big college gets busted finding backdoor ways to pay their student athletes. Whether it’s turning a blind eye to selling a few autographs and directing students to some favorable car loans, or having boosters treat star players to strip joints and fancy dinners.

This is, of course, strictly against the doctrine of the NCAA. They’re in the business of amateur athletes, as oxymoronic as that sounds. Whether they classify as a business or not is debatable (they do receive tax-excempt status as a “nonprofit, higher education association“). But for the purposes of this argument, I’m going to accept that the NCAA is in it for the money, which is key if you want to debate this in terms of free-market capitalism.

This will largely focus on college football. With NBA locked players able to leave college after only a year, the issue of their payment isn’t as big an issue. Football players, on the other hand, have an age limit to enter the NFL, so they’re kinda stuck. Also, the basketball market has largely reached its cap in terms of profitability. Football, with larger stadiums and popularity on the rise, is the focus of the NCAA efforts to expand. Here’s a summary of where the money comes from, and where it goes.

First, the common argument for paying athletes: these kids make big bucks for their schools. And it’s true. Big starts bring in big ticket sales for universities. They have their likenesses and talents painstakingly recreated in video games  (though names are omitted) which make tons of money and are getting more and more popular. And not only do these athletes get paid by their schools, they aren’t allowed to make a profit on the side from their talents.

Now the first argument against is also the most common refrain; these athletes do get paid. Most (the ones bringing in the money) receive full-ride scholarships for their time on the field, plus some money to cover expenses. And that’s not chump change. The average cost of attendance, per year, of a state university is $18,452 per year. If an athlete in college football only attends for 3 years, and leaves for the NFL a year before graduation, they will have made an average of $55,356. For four years, it’s $73,808. Players also have the option of “redshirting,” which means they don’t play for a year, don’t use up a year of their eligibility, but still can receive a scholarship. These athletes, in five years of college, will have been paid $92,260.

I know having an education funded isn’t the same as cash on hand. And in fairness, the amount of money athletes are given to cover costs of living hasn’t been increased fast enough to cover the realities of how much living costs. There is a startling gap emerging between how much athletes are given, and how much they really need.

Bmake no mistake, these are athletes being paid for their services. Still, if the average shortfall is applied to average cost of attendance, in means in four years players still make, around $62,000 for the time they put in on the field.

Lets compare that to, well, me. I attended college full-time for four years. I worked for pay of as low as $7 and as high as $10 for four years, working around 15 hours a week, year round, with a 2-3 month period working full time. Football athletes are allowed to practice, at most 20 hours per week, and they only do so for around half a year, meaning they put in far fewer hours than I did (around half).  The average student athletes is paid around double what I was in the same time. And paid at almost quadruple my hourly rate.  And I believe (though I have no statistics) that I beat the average income for my area.

At worst, college athletes do as well as students with steady, part time jobs in skilled fields.

But, and this is the next big free-market argument, a student athlete is worth far more to their university than you, and more to the market in general than you. And that might be true. According to a recent study, the average FBS level football player is worth $121,000 per year to their school. That’s an over $100,000 gap per year!

And that is a large gap, if the study is dependable. I’m not sure how you go about calculating such things, and I struggle to accept it at face value. Most individual athletes don’t contribute that much to the overall value of a school’s team. A HUGE factor is branding and marketing, and I’m not sure if this study takes that into account. Even so, I’ll go with it.

Businesses don’t calculate the costs of their employees by looking at just their salaries. If they did, they’d go bankrupt every time. There’s money spent training the employee, and equipping them with the tools do to their jobs. If there’s a benefits package, the cost of those benefits all get bundled into the bottom line dollar figure that employee is worth costing the company. Providing a free, and costly, education is payment. Free market enterprises figure these kinds of costs when calculating payroll.

The cost of coaching, equipment and catering all gets added to the benefits package of a the average student athlete. But even then, there’s no way that all adds up to $121,000 per year.

And here’s where we get into the fun part of economics. To do so, we do have to step away from pure numbers, and into more nebulous concepts of value.

First, athletes are paid in more than just the pure dollars of an education. Many are given opportunities that they simply couldn’t obtain any other way. I hear a lot that most athletes don’t care about the education, they want to pursue a career in sports. But the cold reality is, only an extremely small minority of student athletes will become professional athletes.

And look at the value of an education overall. Economically speaking, people wouldn’t go to college if, on average, we didn’t make up for the costs in the long haul. And given the socio-economic status of many scholarship athletes, that gap between have and have-not is even greater, thus increasing their long-term economic gains on top of what their not paying to receive those opportunities. If this weren’t true, college wouldn’t be economically viable.

You have to look at lifetime earnings increases, not just the cost of a scholarship.

But lets examine the minority of athletes who truly and obviously contribute economically to a schools revenue stream. The Tim Tebows and Terrell Pryors of the world. A lot of that revenue is generated via merchandising, like jerseys. In this, I fully concede that it is fair for a student athlete to be allowed to receive some sort of revenue sharing with the University for the use of selling his name and image.

Most of the athletes of this caliber are headed for the NFL. That’s the goal. These athletes, more than any, lose all right to complain about their forced amateur status.

These athletes didn’t graduate from high school capable of surviving in the NFL. Unlike basketball, there is a large skill and strength gap between even the top-tier high school athletes and professional football players. They require training from professionals to obtain their career goals. Given the high salaries in the NFL, that training is extremely lucrative.

And there’s one place they can get it: college athletics.

There’s no NFL rule saying athletes have to have attended college. They merely need to have been out of high school for at least three years. Any student athlete with aspirations for the NFL can have that time to train and market themselves as they see fit.

Student athletes have a need: advanced training in their chosen field and a place to demonstrate their expertise in their occupation.

Universities have a need: revenue to support other athletics and ways to strengthen overall branding.

Student athletes have a resource: the physical and mental ability to perform in a sport that the general public will pay to see.

Universities have a resource: a natural environment to allow athletes to showcase themselves in competitions in front of large audiences.

So, in pure free-market fashion, the NCAA offers these elite athletes training and heavy marketing in exchange for their talents. Yes, NFL-bound players are worth more to their schools. The value of the opportunities they are given are worth a whole lot more as well.

Do NFL bound players have alternatives? Yes. Any good ones? Not really, other than that they can try to get into to any of the 120 FBS level universities across the country. And players at that level can usually have their pick, which opens up a whole new can of fringe benefits and value that the athlete places on the colleges competing for his services.

But that’s the market for you. Monopolies are part of it. But with competition between universities, NCAA regulations on treatment of student athletes, the excellent benefits package student athletes receive, and the value of the opportunities provided to both NFL and non-NFL bound players alike, student athletes are compensated.

It’s not exploitation. It’s just supply and demand. Sometimes the two can seem stunning similar. Just not here.

And in the end, even if schools are making a profit off their players (which most schools don’t)…isn’t that how businesses operate? If we’re talking free market, name me a company that doesn’t strive to turn a profit. And not just make a profit, but grow it. If an employee’s value to a company is how much money he brings in, then the company MUST pay that employee less than his worth in order to profit. And if you want to argue this in economic terms, it’s a fact you must accept.

What’s that protest on the tip of your tongue? But the NCAA is a nonprofit organization? And these universities are too? Well then…free market arguements don’t really apply do they? To either side.

So stop using them.


One Response to “The Free Market Case AGAINST Paying Student Athletes”

  • Nick Says:

    To add a little nugget, one I know we got hounded in several classes (especially 411/450). Universities generally have clauses that they they have the first rights or even ownership any product or idea you create while attending said University using University equipment and/or personnel. A student agrees to that clause when you attend the University.

    If this rule is unilaterally in place, I don’t see how an exception of student athletes can be made. Most often, if you have an idea or product that makes the university do a double-take and come calling for it, you are normally able to negotiate leadership of it or some monetary compensation. Because of this, I do agree with the notion that student athletes will be able to negotiate for portions of the merchandising.

    I think student athletes receiving a portion of merchandising can benefit both sides. The athlete now has a stake in performing and promoting their abilities on field, giving a higher reward for performing well. One of the key differences is that in college sports, you can’t be asked to leave the University for simply not playing the sport well consistently; in professionalism sports, if you don’t perform well, it can absolutely mean a pink slip.

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