I had a free moment at work last night, so I wandered over to ESPN.com and came across their salary crunch machine, which compares your regular average-joe salary to that of famous athletes.
Bored and knowing I was about to be depressed, I went ahead and punched in my salary and pleasantly informed that I’d have to work several lifetimes to match the annual salary of the newest New York Knick, Amar’e Stoudemire.
After I choked down the bile that had risen to my throat, I began to look for the answer to the following question:
“Why do professional athletes earn so much money?”
The answer, as you’ll see, is simple economics. Now, the common explanation I’d heard growing up was that athletes careers were much shorter than that of the average person; you or I can work for 40-50 years, but Amar’e's basketball career will be over by the time he is around 37. Therefore, it should be thought of as a lifetime advance.
That, however, is bull, because as you can see above, I’d have to work several lifetimes to make what Amar’e makes in one year.
Ben Reece’s explanation over at Socyberty makes much more sense. Reece explains it by pointing out that unlike you or I, who by working at one job provide a service to one consumer (our company), athletes provide a service to thousands of people.
Basic economics states that people get paid in exchange for the services they provide their employers. Having said that, another fundamental concept is the idea of service consumption and how it relates to salaries. As an employee a company consumes your service. Typically, only one company can consume your service at a time; therefore, only one income stream can be applied to that service per unit time.
Athletes and entertainers are different. For them the service they provide is not consumed so much by their franchise or studio, but by sports fans and moviegoers. Athletes provide a service which fans consume, not the franchise itself. Movie stars provide a service that moviegoers consume, not so much the studio releasing the film.
Think of every fan as a company, and time a fan goes to a game, they are offering to pay the athletes. Now compare it to a thousand companies all willing to pay to watch you fill out spreadsheets all day. Your work load is the same, the only difference is that many more people are willing to pay you to do it. Reece argues that that’s the economic reason athletes are paid to handsomely. And while it may sting to see that I’ll have to clone myself several times over to pull even to Amar’e, at least now I know why. [Socyberty]
