The Last Frontier in Worker Exploitation

Name a multi-billion dollar industry where all the competitors in the industry have formed a single cartel.  This cartel performs many functions, but one of its highest profile functions is to aggressively punish any member who pays its employees more than a cartel-enforced maximum.

Believe it or not, there is such an industry in the US... college sports.  The cartel is the NCAA, and whenever the NCAA makes the news, it usually is with an enforcement action punishing a school for allowing any of its athletes to make more than the agreed maximum salary, which is generally defined as free tuition.  As folks are learning at Ohio State, even trading your autograph for a free tattoo is not too small a transaction to attract ruthless NCAA retaliation.

This ESPN page (via Phil Miller) shows 2010 athletic revenue by school.  Take the top school on the list, the University of Texas.  In 2010 its athletic program brought in over $143 million in revenues.  It paid its workers (athletes) who helped generate this revenue $8.4 million (in the form of tuition), or 5.9% of revenues.  Its hard to decide whether this is high or low, though this percentage of labor for a service business seems low.  Looking for an analog, we can turn to the NFL, which is currently negotiating a revenue split with players.  The issue is still under negotiation, but for years players have been guaranteed over 50% of total revenues.

Even the Olympics finally gave up its stupid distinction of amateur status, allowing the best athletes to compete whether or not someone has ever paid them for anything.  This only makes sense - we don't have amateur engineers who work for free before they give up their amateur status for the professional ranks.  I can still continue to earn my degree at college in programming while being paid by outside companies to do programming.   I can still participate in the school glee club if I make money in a bar singing at nights.  I can still be student council president if I make money in the summers at a policy think tank.  Of all the activities on campus, the only one I cannot pursue if someone is willing to pay me for the same skill is athletics.

Only the NCAA holds out with this dumb amateur distinction, and the purpose is obvious -- it provides cover for what otherwise would be rightly treated as worker exploitation.  And they get away with it because most of the members of this cartel are actually state governments, who are really good at exempting themselves from the same standards the rest of us have to follow.

  • Don

    Warren,

    At the Highschool level, in Texas, UIL requires all participants in UIL sanctioned activities to be "amateurs". When I was in HS, I knew folks in other school bands that were kicked out for playing with Mariachi bands. I can recall bands being stripped of awards because one player was a "professional".

    The problem is so pervasive that in some schools in San Antonio (and I assume elsewhere), they went to having Mariachi band classes as a vocational ed elective, which has an implicit requirement that you NOT participate in the marching or stage band classes.

    Stupid.

  • http://www.whiterockkitchens.com Mike

    It is surprising to me how many media members express outrage at "cheating" in terms of these kids talking to agents or actually pocketing some cash. Listening to "The Ticket" on the drive home the other day as they talked about the Michigan Fab Five documentary, I was taken aback at how they wanted these kids to play for free and to have anybody that paid them money sent to jail.

    They don't see any conflict or irony in the fact that they get paid to talk about sports, yet they don't want the actual athletes to make money. Crazy.

  • Tom Nally

    A College athlete needs to think about a scholarship as a proposal (an "offer") for an exchange. The college athlete in receipt of the proposal only needs to accept it if he believes this exchange will advance his position.

    If the athlete judges that the exchange will not advance his position, then he is free to manage his affairs the same way he would have managed them had the offer never been made.

    As far as universities go, why should they offer a prospective athlete an education and a pile of cash for his servies when the athlete is willing to trade his services for an education only?

    Let's imagine this scenario...

    Say that the 300 best high school athletes in the country said, "No, an education alone is not an equitable exchange for the athletic services that I provide." In other words, they refused the offer. If that happened, then the NCAA and the universities would offer athletes a lot more in exchange for their services.

    But athletes never refuse the offer! Given that, isn't it obvious what the athletes are saying? They are saying that the current offer of exchange advances their position much better than anything else available!

    Frankly, I don't see a problem.

    ---Tom Nally, New Orleans

  • me

    I think Lebron James was stupid for skipping college. How is he going to support himself when he can't play ball any more? Guess he should have taken that free education.

  • Carl S

    Except that the NFL and NBA are part of the conspiracy. The NFL prohibits an athlete from joining the pro ranks until 3 years after highschool. The NBA has a 1 year rule.

    Thus your point is silly Tom, since their options are college or nothing.

  • Tom Nally

    Carl S., you are incorrect.

    Their options are college, or the career paths of those who are not athletically gifted, and the latter population vastly outnumbers those who are athletically gifted.

    As an outlier on this issue, I've already annoyed readers, so I might as well repeat myself: what does the recipient of an offer do if the offer doesn't provide an avenue that advances his position? He manages his affairs same way he would have had the offering party never knocked on his door.

    If the exchange of athletic services for education isn't sufficient, then athletes need to say "no". If they said "no" in large numbers, then the environment would change.

    But among elite high school athletes, nobody says "no"! In effect, they are saying to athletic departments, "The offer you are putting in front of me advances my position better than anything else available."

    In light of that, there is no reason for the NCAA to do anything other than what it is already doing.

    When 100% of the potential parties to an agreement accept the agreement, where is the flaw? I think the flaw is in our imaginations only.

    ---Tom Nally, New Orleans

  • http://www.jameshowephotography.com James Howe

    Normally I agree completely with your posts, but I must disagree with this one, at least to some extent. When an athlete, particularly a high calibre one, is given a scholarship, they are getting payment in many forms. They obviously get access to a college education that others generally have to pay for. They have access to trainers and facilities to improve their skills. They get exposure to potential future employers. None of this comes cheap. Here's my proposal, if an athlete wants to get 'paid', they should then be required to pay for their room and board as well as paying appropriate fees to their coaches and trainers. They should pay a fee to use any of the athletic facilities, etc.

    If the athlete doesn't want to agree to these terms they are certainly free to go elsewhere. They could go pro in Europe or other places. They certainly aren't being 'exploited'. Successful athletes do quite well after leaving college. In some regards it's no different than being an unpaid intern. Are you against unpaid interns?

  • marco73

    The vast majority of collegiate athletes will never earn a nickel for their athletic endeavors. Its the elite, professional bound athletes who are being screwed.
    As a recent example, Tim Tebow at Florida probably earned that school millions through his image for every product under the sun, ignoring the money that rolled in from TV and bowl games. But heaven forbid if he were to sign an autograph for a free pizza; he'd have been hounded from collegiate athletics forever. He is only now getting some cash as a professional.
    Athletes don't even have to make money in their sport to be declared ineligible. Check out Jeremy Bloom, http://en.wikipedia.org/wiki/Jeremy_Bloom
    He lost his football eligibility because he was making money as a skier.

  • Tom Nally

    I have to admit that I'm very surprised at the lines of argument in these posts.

    Most of the time, libertarians argue that consenting adults should be able to exchange freely. The test of a good exchange is whether any parties to the exchange were subject to coercion.

    But on this topic, the notion of freedom is being displaced by the requirement that trades be "equitable". This is dangerous. Not only is the definition of equitability ever-changing, but it also invites participation by our betters in government, and disempowers the individual to map his own path forward using his best judgement.

    For some reason, the topic of college athletics causes libertarians to migrate toward the political Left, even if only slightly.

    ---Tom Nally, New Orleans

  • Carl S

    Tom,

    My main complaint is that the American pro leagues conspire with the colleges to prevent athletes from earning their market value by skipping college.

    Thus, players are indeed coerced into providing their services at a substantially reduced cost. That is, if they want a career in the industry. You are of course correct that they aren't literally coerced because they could go into another field outside of their area of excellence.

  • Tom Nally

    Carl S, I think I have at least partial agreement with your most recent point.

    Capable high school athletes should be able to earn a living in professional sports without having to go to college. In the same way, a capable programmer can be hired at a high salary right out of high school without having to enroll in college first. A capable teenage guitarist should be able to sign a record deal without having to enroll in the college of fine arts at his local university.

    The question has to do with the professional sports industry. They are a private sector entity and should have some latitude to act arbitrarily, even if it is not in their own interest. They are not a public sector entity.

    In my home (a private entity), I may arbitrarily exclude all redheads, or all Italians over 6'-4" if I so desire. But if the DMV (a public entity) refused drivers licenses to readheads or Italians over 6'-4", that would be wrong and we wouldn't countenance it.

    But there are some occasions when private sector entities are treated like public sector entities, and I'm OK with it. For example, a lunch counter (a private entity) cannot deny a seat to a patron because of the color of his skin. I support that (and that probably differentiates me from the pure libertarians).

    So, the question becomes this: to what extent should a professional sports team (a private entity) be allowed to act arbitrarily, like a man who operates his own home?

    Or, should a professional sports team be treated more like a lunch counter, and be required by law take all comers within reason?

    Personally, I think professional sports teams should allow tryouts to all capable athletes regardless of age, but I'm not ready to say that the force of law should be brought to bear to enforce it.

    ---Tom Nally, New Orleans

  • kevin

    in theory, could an elite athlete attend a university, decide to pay full tuition (i.e. walk-on), and then be free to pursue money-making endeavors such as re-selling jerseys? I don't know the rules, but if they are turning down the free tuition, couldn't that allow them to make money in other ways?

  • http://www.expensereporttemplate.org expense

    Amateur athletes are not rightfully compensated for their work when competing. They are most likely the ones being exploited as seen on the statistics of 2010 athletic revenue by school.