Why football players’ salaries will keep rising

“We’re a great business,” mused the director of a big European football club some months ago, “except for our players’ wages.”

He spoke for the whole industry. It is players’ wages that have driven the total debt of European clubs above €6bn ($8.1bn, £5.3bn). Dozens of clubs pay more than 100 per cent of turnover to their players.

Many believe football’s current crisis will end all that: that footballers will cease being multimillionaires and again become the bloke next door. After all, even workers in industries that make profits have been accepting pay cuts lately. American CEOs now earn less than in 2007. Football, it is often said, cannot go on like this. Spain’s government has just averted a players’ strike over unpaid wages. In Russia, Vladimir Putin, the prime minister, has been saving improvident clubs. Portsmouth, whose multi-millionaire players have reached England’s FA Cup final, are in administration. There is a widespread belief – and a moral conviction – that footballers’ salaries must fall.

However, they probably will not – because of the logic of this industry. Firstly, in football, wages pretty much determine success. The more a club pays its players, the more matches it will win. Stefan Szymanski, sports economist at London’s Cass Business School, studied English clubs in the top two divisions from 1998 to 2007 and found that their wage spending accounted for 89 per cent of the variation in their league positions. The top of the English table currently reads: 1. Chelsea, 2. Manchester United, 3. Arsenal. That also happens to be the ranking order of their wage bills. In Italy, Mr Szymanski found an even stronger correlation between wages and league position.

In short, footballers get paid what they deserve, at least judged by their contribution to winning matches. A club that cut wages might increase profits, but almost all European clubs pursue victories not profits.

True, certain clubs in certain countries will reduce wages. The Spanish or Greek or Russian clubs that are not paying promised salaries have in effect already cut. Some Dutch clubs, notably Ajax and Feyenoord, are offering less generous contracts. There is a European-wide trend to cut wages for players aged over 30. Overall though, players’ salaries should keep rising. For the second point about football is that, contrary to popular belief, most clubs can afford millionaires’ wages.

The recession has barely hit consumption of football. Television contracts remain juicy. England’s Premier League expects to get about £1.4bn ($2.1bn, €1.6bn) for its overseas television rights for 2010-13, more than double current levels.

Moreover, the problem of football’s debt is overstated. Manchester United, Europe’s most indebted club, and Liverpool, which struggles with its debt, are being pursued by buyers. Other clubs have learnt over the decades that banks and local governments will never pull the plug. No bank manager dares terminate Valencia, Liverpool, or even Portsmouth. “Football clubs are ‘too important to fail’,” explains Mr Szymanski. So they might as well keep borrowing to pay players.

Clubs that do need to scrimp will cut all other spending before they touch their regulars’ salaries. The first item they have slashed is transfer fees. European clubs spent just £30m between them in the January “transfer window”, their lowest figure since 2003. Transfer fees do not win matches. In England from 1978 to 1997, clubs’ outlay on transfers explained just 16 per cent of their total variation in league position, says Mr Szymanski.

Second, clubs will cut fringe players. No longer will Liverpool, for example, employ the hilarious total of 56 footballers. Next season clubs in the Premier League can register squads of only 25. Similar limits exist in some continental countries. There will be many unemployed footballers going cheap this summer.

However, players who retain their jobs will keep earning well. There is a logic to footballers’ salaries. If only other industries were as fair.

simonkuper-ft@hotmail.com