Sports leagues across the world are structured into several different forms, with one of the most notable being leagues with a draft. Predominantly found in the US, draft leagues involve the selection of up and coming university players by professional teams once a year. The team who finished last in the previous year is given the first pick from the player pool and thus end up with the best player. This process is repeated until the winning team from the previous year is awarded the final player (most likely the worst player) in an attempt to ensure an equitable distribution of talent amongst the leagues. However, the question of whether the drafted leagues are intrinsically fair remains more complex. We can split the idea of ‘fairness’ into two: firstly, whether the players themselves are paid fairly, and secondly, whether fairness is maintained in drafted leagues in a more sustainable fashion than other league structures.

The first question of whether athletes are paid fairly can be answered through economic theory.

We can apply labour market basics to the talent pool of players in the sports leagues. In typical labour market economics, firms are willing to hire up to the point where the marginal revenue product of labour (MRP) is equal to the market wage. The marginal revenue product of labour can be defined as the amount of revenue each extra additional unit of labour brings to a firm. If the MRP is greater than the market wage, then firms will be receiving greater revenue from each additional unit of labour than the wage they have to pay pack to their employees. Naturally, firms will hire more labour to maximise their profits until they reach the point where the MRP is equal to the wage rate. Before applying this theory to sports leagues, an adjustment has to be made. In typical labour market economics, quality of labour is assumed to be the same amongst all workers and hence they are paid the same wage. This is evidently not the case regarding the wages of players as there are varying amounts of talent in each team which results in varying wages. To accommodate this, we can assign labour to ‘units of talent’. We must assume that pay per unit of talent is constant, but levels of talent vary amongst players in a team. For example, if player A has 10 units of talent and player B has 20 units of talent, then player B will be paid twice as much as player A. Going back to basic economic theory, we can conclude that if firms hire to the point where the MRP = W, then the final unit of talent is paid the value of what it itself produces and so Wt = MRPt (where is t is talent). Therefore, we can argue, using this analogy, that players’ wages are fair and they are not exploited as their labour is paid the value of its marginal product.

However, we could argue that certain players in the leagues are exploited as a result of the wages they receive. In the leagues, there are drafted players and free agent players. The players purchased through the draft system are arguably exploited as in the draft system there is a monopsony. A monopsonist is a single buyer of an item, and this is evident when it comes to the selection of players in the draft as only one team has access to a player (as they take it in turns). Therefore, there is no competition regarding the purchase of draft players as teams are unable to bid against each other. This is where we can see a degree of exploitation from the player’s point of view. In a market where there is competition from multiple firms, the worker, or in this case the player, will likely choose their best option, being either the highest salary, or perhaps the most favourable contract agreement.

This is not the case for drafted players as they are essentially forced to play for the team that signs them, even if they are not prepared to pay them an appropriate wage. It is particularly difficult for drafted players to refuse the salaries of teams in the US as there is a rather strong ‘monopsony power’ in certain sports.  A team’s monopsony power is limited to the extent where there is a viable alternative for the player. An example of this may be a baseball player turning down an offer from a US team to play in Japan instead. However, with most sports in the US, the next-best alternative is usually significantly less attractive than the idea of playing in the US. From the teams’ point of view, this is beneficial as they can pay the player that they wish to sign a lower wage than required and still successfully sign them as there is essentially no other alternative for the player. For the player however, they may feel a degree of exploitation as they are aware that they are being paid a lower wage than they perhaps deserve.

Conversely, there is perfect competition between teams when it comes to the signing of free agent players. Free agent players are not attached to a particular team. They must have played in the league for a minimum of 5 years, having been signed through the draft originally, to be classified as free agents. These players have the freedom to choose whichever club offers them a contract and hence they have the to opportunity to choose higher wages or more favourable contracts. Thus, the drafted players are arguably disadvantaged.

With that being said, it could be argued that the idea of a ‘monopsony’ and essentially no competition regarding the signing of players can actually be a good thing for the fairness of the league. Giving the worst teams the best players and vice versa promotes an equitable distribution of talent within the league. This removes the possible danger of matches becoming too predictable due to one team having much better players than the other. At the same time, enjoyment levels are still high as a result of the unpredictability of the leagues. We have seen matches become overly predictable due to inequitable distribution of talent, as certain teams are able to spend more money on players than others in several leagues across the world, with the most notable being in the Saudi Pro League (football). Evidence of this is that Al-Hilal, the highest spenders in the league who have dished out a whopping £353 million on players, by no surprise are leading the league having not lost a game yet. This severely contrasts with the bottom team in the league, Al-Hazm, who have only spent £1.75 million resulting in only 2 wins out of 19. Therefore, it could argued that a draft system is a better alternative than a bidding scheme in sports leagues as although players may not feel that they are paid fairly (they are already on tens of thousands a week) the fairness and unpredictability of the league is maintained, making it much more enjoyable from a viewers perspective. Evidence of unpredictability in drafted leagues is the fact that no team has won the Super Bowl consecutively since the Patriots in 2004/5. Meanwhile, Manchester City have won the English Premier League 5 times in the last 6 years. Another possible alternative is the idea of a ‘salary cap’, which has been adopted by the NFL since 1994. (A salary cap limits the amount of money a sports team can spend on their athletes. This also maintains financial stability while creating fairness and unpredictability throughout the league.)

In conclusion, we can confirm that the players themselves are paid fairly as they are paid the exact value of their marginal product. However, it is understandable for drafted players to feel exploited as they may find themselves cast under the illusion that they are paid unfairly simply because they compare themselves to free agents who will inevitably be paid more than them. It must be stated that these players, who have played in the league for at least 5 years, likely bring more attraction to the sport through either their talent or media presence and so their higher wages are deserved. Additionally, we can confirm that drafted leagues are more sustainable than non-drafted leagues as the possibility of sports washing, which leads to an inequitable distribution of talent, is removed. Ultimately, having an inherent ‘restart’ at the beginning of each season brings hope to all supporters and hence, enjoyment from matches is maximised due to their unpredictable nature.