Is a $1 Million Minimum Salary Sustainable in the NFL

I had a few emails asking me about a recent article at Pro Football Talk written by Mike Florio, who runs PFT, and Neil Schwartz, one of the more well known agents in the NFL, in which they state a case for raising the minimum salary for all players to an even $1 million across the board. They state a few reasons for the move, but the main theme is that the move helps veterans stay in the NFL and it gives players more financial reward for the risk they take. I’d recommend reading the full article before this piece, but I want to offer my opinion on if this is or is not really a feasible suggestion with a more in depth look at the numbers.

One of the things that is imperative with getting an idea like this one off the ground is the way you make your argument and I think it’s important to address that first.  Immediately upon reading the piece I felt the authors made a mistake by wrapping what is primarily an economic argument in the middle of the concussion saga that is currently plaguing the NFL. From reading the comments at PFT I was right in my assessment as many of the comments focused on that aspect rather than looking at the proposal itself.

Maybe the authors felt that it was an easy way out to wrap the argument up in the concussion saga. Everyone knows that toll it takes on a player is bad. Everyone knows the league should have done more and should do more to avoid these types of injuries from ruining a person’s life. But, the “athletes need to make more money because of…” argument is already a hard one to win with fans at large and there are too many people in the world who have careers that exceed the risk of a football player and work for a fraction of the money.  At its worst it came across like payoff money, saying that for a few hundred thousand more we all can turn a bit of a blind eye to the danger rather than investing in the safety of the game.

My guess is they got caught up in the concussion frenzy and thought that this was the best way to get eyes on an idea and get people discussing it. Sometimes when you write things you feel strongly about, especially when working with multiple authors, its easy to go left and right pretty easily (they clearly were going in different directions when talking who would pay for the raise) when bouncing ideas off each other and trying to fit it all in. You feel so strongly in what you wrote you are excited to get it out without trying to pull back and take an objective view. I do it all the time, but I also don’t want readers to get so caught up in that where we don’t address the real reasons that the $1 million thought raise really doesn’t work from an economic standpoint.

Surprisingly the article doesn’t propose increasing the piece of the pie for the players. The article is focused on a redistribution of wealth in the NFL with more money funneling from the top to the bottom of the NFL. I think at it’s core this is an important topic to discuss. I’ve spoken about it multiple times here. Ben Volin recently had an article at the Boston Globe talking about it. The NFL has become a league of have’s and have not’s when it comes to salary.

I’ve followed NFL contracts for some time and quite honestly never saw this level of disparity that exists.  Wages at the bottom and lower tiers have stayed relatively stagnant, or decreased, while money at the top has increased to just a few players. A big part of that is probably because of the shift in the CBA from salary cap spending minimums to team cash spending minimums.

In the old CBA owners could very well find ways to meet cap obligations while running a lower cost roster. One of the arguments in the PFT piece definitely held true then:

“at the team level, going young on the back half of the roster means saving money. Which gives the teams even more leverage when squeezing veteran players to take less.”

But now it’s not about saving money, it’s purely about decision making. Teams all have to spend a certain amount over a four year period in real dollars, regardless of it going to veterans or rookies. Overall the cash spending limit has benefitted the players. Over the last three seasons the player’s cash earnings are basically running 1:1 with the cap. While I don’t have the numbers right in front of me, I believe in the last three years of the prior CBA that number was closer to 90%. While there is still an argument over the rate of cap increases, it’s a solid justification for the NFLPA’s focus on cash spending in the last negotiation.

But the change has shifted the way most teams are fundamentally building their rosters. With the cap limits taken out of the equation and teams carrying over huge amounts of cap room it has changed the approach to contracts. Gone, for most, is the tightrope act with the salary cap where teams have to weigh the pros and cons of contract structures in free agency and long term damage that could be done with a “miss” coupled with a big signing bonus. Instead it is all about flexibility and meeting cash requirements.

To meet these cash minimums teams are simply handing money over to certain star players to fit the year by year spending needs. Because the cap is of far less concern teams have moved to all cash or hybrid cash/bonus models where players have large cap hits early in the contract but can be released by the third or fourth year with minimal impact on the cap.  The cycle allows teams to always have large amounts of cap space either yearly or every other year to go on a spending spree for top talent. There is no need to be budget conscious anymore.

That decision has really squeezed the lower and mid-tier veteran player. Those players filled the gaps in the old CBA. If you were a team that needed to meet cap limits you did so by signing players who would now be in the $2-$4M per year range to fill out the roster. Because you were concerned about the budget you were often better off signing that player to a two to three year contract rather than going year by year as so many do now with the “prove it” contract. You might pay a little extra in the form of a signing bonus but it gave some cap stability to the roster and you would find a way to use the player the next year.

When teams were tight on the cap and had older rosters with little leeway for cap relief it made more sense to overspend on a veteran rather than younger player because you felt your window of opportunity extended as long as those veteran contracts. We still see that today with teams like the Saints and Cowboys where they move money all over to fit a player in today even though it means committing more in the future. But those teams are more of the exception.

Now you pay as you go to maintain flexibility. It’s far better to sign a player a 1 year contracts to see if you like him on the team rather than a three year contract where you commit right off the bat. If you don’t like him he goes back to the free agent pool with less leverage.  If you do like you extend.  It is just smarter to do when building a competitive roster but it has taken job security and long term earning potential down for many players.

A player like that is a variable cost. You negotiate the deal and you have the flexibility to let him walk or offer a new contract. One of the things that this proposal fails to take into account is that there are also generally fixed costs and how large those costs are.

In general I would consider a fixed roster cost to be that of any player drafted, most of whom make the minimum each year. Last year there were 655 players in the league who were draft picks on their rookie contract (including those on an option year). That is about 30% of non-Practice Squad players. The teams invest a great deal of time in draft picks and also see the upside in those players. The upside makes it hard for me to believe that making salaries equal would shift the number of draft picks on a roster.

546 of those rookies played for under $1 million in non-prorated money. To increase their salaries to $1 million would shift an additional $247.9 million, or $7.75 million per team, to drafted rookies. That is actually a conservative estimate as the application of the 25% rule would increase every 1st and 2nd rounders compensation over four years by $3 million rather than the $1.68 million the proposal would have on future contracts. While running through all the math would take some time, I think a fair estimate might be an added $50 million to the total. That brings us to just under $300 million, or about $9.35 million per team. Those are essentially fixed costs.

Where is that money going to come from?  Is it going to come from ownership simply upping their budget and increasing their commitments?  If that was the case the last CBA would not have been such a difficult negotiation.

Is it going to come from the “rich players”?  I guess it depends on what we define as rich.  While my records are not complete nor official here is my breakdown of player class by APY and what would happen if $300 million was redistributed from each group:

SalaryNo.TotalAdj. TotalAPYNew APY% Change
> $15M27$509,088,000$209,088,000$18,855,111$7,744,00058.9%
> $10M76$1,088,775,206$788,775,206$14,325,990$10,378,62127.6%
> $7.5M142$1,674,525,427$1,374,525,427$11,792,433$9,679,75717.9%
> $5M280$2,505,466,226$2,205,466,226$8,948,094$7,876,66512.0%

Does anyone honestly believe that the agents for the players making over $10 million a year would leave that much money on the table? The answer is clearly no. The authors themselves at first compared this to “Robin Hood” before realizing a short time later that it won’t be the rich that suffer but those who may best be described as “better off”.

The group that would get squeezed the most is the $1-$5M category because that is the group that has the least leverage and bargaining power. Those with the most leverage in that group would likely keep salaries close to the same. Those who don’t have the leverage may find themselves out of the NFL.

The table also shows where the second part of the argument falls short:

“As a practical matter, non-superstars who currently are making a significant amount of money would likely lose the most. But that group isn’t nearly big enough to dictate policy for the union at large.”

The thing is the group that is going to get squeezed is the largest group. Whatever salary figure you want to use for superstars and non-superstar, as a voting block these are the voices of the union. 401 players earn between $1 and $5 million. Those are the voices of the many not the few. Add in the current veterans on the minimum type deals and we have 500 players. The only block that is bigger is the non-veterans (draft picks, UDFAs, street rookies) which is over half of the NFL, but this proposal is not written to benefit them even though they wind up the biggest benefactors.

And thus far all we have done is offset the cost of rookies. We have done nothing for the costs of the undrafted players, the non-veteran street free agents, or the low cost veteran. How many more players and dollars are we talking about here?

Last year I had recorded 146 undrafted players who made teams. I also recorded 434 players earning $660,000 or less that were signed off the street. Under the new proposal those 580 players would have cost an additional $290 million. While those costs are not fixed the general amount of players are (there is some variation based on injuries).

Might some veterans get these jobs? They might. But how many are we talking about. Thus far we have about 100 players working on minimum salary benefit type of contracts in 2016 Based on how things went last year that number will likely rise to around 170 by years end as the league signs players through the summer and in season to deal with injuries. Most of those roster spots will now get raises as well, though not as great as the rookies (a minimum veteran makes $760,000 compared to $450,000 for a rookie).

All told the player pool will need to shift over $600 million from the “rich” to the “poor”. Will a few more veterans be given a chance in the NFL?  I’m sure they would, but to get there you have now taken 400 players that currently earn less than $5 million a year and turned them all into $1 million per year players. How is that fair?

The rookies that play in the NFL are a gigantic group. The real nuts and bolts of the proposal puts far more money in the hands of the rookies than it does veterans. Maybe you shift 100-150 UDFAs/SRFA out of the active league and replace them with minimum salaried veterans, but that just doesn’t justify the cost. The only way to justify the increase without touching the amount of overall money is to be like the NBA and hard cap salaries at the top, except in the NFL it would have to be done by position. That isn’t fair either.

To justify this increase you need to make a much harder argument that the entire group of players should earn more and going beyond revenues in the next CBA and working on profit share agreements with ownership to better justify the split between the two sides.  That’s not a bad argument either but it is more complex.

Are there ways to keep veterans in the NFL longer in the current CBA revenue calculations?  There might be.

One thing to consider is the elimination of the rule that salaries are guaranteed for skill if on the roster in week 1 and 25% anytime thereafter. That is a big negative for teams when it comes to signing veterans.  They want a fluid roster and committing a full season or ¼ of a season is not the dynamic needed by teams. At least make it negotiable like an injury waiver.

If a veteran player on a minimum salary contract lands on season ending IR during the summer he should have his salary completely eliminated from the salary cap and have his full salary, even if paid a split, count in full towards the cash minimums. That somewhat mitigates the injury risk associated with veterans in training camp.

Remove the severance pay clause from the CBA being tied to credited seasons and have it be tied to being active for at least 6 games before a team is liable.

Consider a veteran practice squad. Injuries in practice are much rarer than in a game. It keeps the veteran on pace with a team’s coaching staff, personnel, and conditioning. It gives them a far greater chance in practice to show a team they are worth a commitment in the future. Will that have the same reward as $1 million?  No but $200,000 would be better than $0.

Im sure there are many better ways that people can suggest but in my mind the answer is attacking the root causes of why teams shy away from veterans and making them more attractive to the teams. Raising the salary to $1 million without a fundamental shift in revenue sharing primarily benefits those who have not spent much time in the NFL, not those who have given multiple years of service to a team.