Salary differences under the salary cap in Major League Soccer

Abstract

Professional soccer is the world's most popular sport; a number of National Leagues are under the control of National Associations. The economic theory behind soccer is the continuing competition to earn much more than other sports do in the sports market. Since the supply of talent is limited, teams' demand for certain professionals is so strong that it leads to salary differences between players. Therefore, in this study, attention is given to the determinants of the differences in workers' salaries in the Major League Soccer labor market using Generalized Least Squares (GLS) estimation on panel data from 2007 to 2016. Birth place is the most influential determinant of a player's salary, along with a player's position, a player's age, whether the player has a national team duty, and the number of games in which the player started in the first eleven. Conversely, moving from one Major League Soccer team to another and the number of games played as a substitute have a negative effect on players' salaries.

Card collection: An examination of whether yellow and red cards affect base salary under Major League Soccer’s salary cap

“…Player position is another potentially important determinant of salary. 6 The goal-keeper position was eliminated from the data set because the position dummies in the model control for the goal-scoring and goal productivity of the player. Thus, a position dummy (whether a player is a forward or not) was included in the model.…”

“…This observation is supported by data from the MLS as well. After examining over 10 years of salary information, Celik and Ince-Yenilmez 6 reported that offensive players averaged a higher salary than defensive players. Accordingly, the following hypothesis is proposed: H 2 : A player rostered as a forward will have a higher base salary than non-forward field players.Along with position, player age may impact salary.…”

“…Accordingly, the following hypothesis is proposed: H 2 : A player rostered as a forward will have a higher base salary than non-forward field players.Along with position, player age may impact salary. In a study by Celik and Ince-Yenilmez, 6 for example, for every year older a MLS player is, he will experience a 5.7% increase in salary. Similar patterns have been found in the German Bundesliga.…”

“…17 Players from South America, Western Europe, Southern Europe, and Northern Europe have significantly higher salaries than domestic MLS players. 6 A possible contributing factor to the differences in salary are that most DPs are international soccer players and their salaries are not paid exclusively with a team’s salary cap allocation. Therefore, the following hypothesis is proposed: H 4 : Domestic players will have lower base salaries than international players.…”

“…Professional sports labor markets have their own unique ownership structures, forms of governance, strategic planning, and market demand. To better understand the professional soccer labor market, several studies 3,6,7 have examined the relationship between salary and performance. A consistent result from such studies is that a positive relationship exists between players’ performance and the salaries they earn.…”