The use of salary caps in sporting competitions and whether they are actually useful is something academics have been debating recently.
There are some studies which suggest that salary caps have very little or no effect at all on the competitive balance of some leagues. Yet a strong understanding of statistical analysis is required to understand fully why, while what the term ‘competitive balance’ refers to is another point of conjecture.
Is it about every team in a respective league having a realistic chance of winning the championship, eventually?
If this is the case, then the most popular domestic sporting competition in the world is evidence that it doesn’t really matter.
Few would argue that every team in the English Premier League has a realistic chance of winning the title or ever has since its inception in 1992. So why is it that so many of us are captivated by this competition?
Part of it is the quality of talent in the EPL, which could be strongly argued, would be impossible under a salary cap.
Another aspect is that, despite the disparity in wages between the top and the bottom, there is a popular belief that the promoted Bournemouth does have a genuine chance of defeating champion Chelsea.
The belief that the result of any league fixture is uncertain, appears to be the defining feature of competitive balance, at least in attracting the interest of fans.
That’s the conclusion that law expert Stephen Ross and sports economist academic Stefan Szymanski come to in their book Fans Of The World Unite!
Under this definition is where evidence that salary caps have no great effect on competitive balance is most visible.
Take the AFL for example. There have been some blow out results so far this season, which begs the question do the strugglers have a genuine chance of defeating the leaders?
Even with the AFL’s cap, the bottom sides in that league seem to have the same chance that Bournemouth does of defeating Chelsea.
That’s not to suggest that every football league without a salary cap has the same competitive balance as the EPL.
Many may point to the Spanish Primera Liga as being a prime example of a competition where the smaller teams have a greatly diminished chance of defeating the bigger ones.
I tend to agree, which is why I think a fair distribution of revenue is probably more important than a salary cap in achieving competitive balance. That is the major problem in Spain, where it’s every team for itself when negotiating lucrative broadcast deals.
With no great evidence that salary caps lead to competitive balance, the other reason for them is providing cost certainty for owners.
But with a cap on how much an owner can spend on players, is the league’s growth also constrained?
For competitions like the AFL or the National Football League in the United States, it’s not important because they have very little competition for their talent.
In football that is not the case. A club in France’s Ligue 1 is competing with a side in the EPL while also having to deal with the riches of a country like Qatar for the world’s best players.
The EPL and recent International Champions Cup are evidence that fans around the world want to see the best talent on display.
If a football club is limited in attracting top talent, the result is that it may be greatly limited in attracting fans.
