A Salary Cap Primer
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09-28-2003, 06:27 AM
Join Date: Jul 2003
Originally Posted by
As I noted above many fans fail to realize that the NHL already has a salary cap in place. The maximum entry-level compensation for players under the age of 25 is dealt with under Article 9 of the NHL CBA which limits the maximum yearly compensation for rookies to just over $1.25 million in salary and 50% of that in signing, reporting and roster bonuses for 2002. It went up another $50,000 this year. Rookie contracts are also deemed to be two-way deals under the CBA.
This is not a salary cap. It is a salary limit for a certain class of players.
A general salary cap for other players without the NHL owners agreeing to revenue sharing will be a non-starter. The NHLPA will never agree and do not forget the players have their agents and their own legal and finacial advisers who keep them informed of the effects and ramifications of any changes in the CBA.
Goodenow has flatly stated that there will be no salary cap. There has been no indication by the NHLPA that revenue sharing would make a salary cap a viable option in their minds.
Mark Witting in his extremely detailed study of salary caps has concluded a number of things. If a cap is in place there is less of a gap between the "haves and "have nots" and the wealth distribution is more even. That is not surprising since that is the starting point for a salary cap.
However he found that in the NFL the competitive balance difference pre- and post cap was negligible and had done nothing for league wide parity.
This is not his conclusion. To quote Mr. Witting: "More teams making the finals means more competitive balance, fewer means less." He then goes to show how the NFL post-salary cap meets this criteria for competitive balance.
He then talks about the standard deviations of winning percentages as an indicator of overall league parity. Since these are virtually the same pre- and post-cap, he argues that there has been no net effect on parity league-wide. But this argument is limited to season by season winning percentages. Having all NFL teams finish 8-8 (or 0-0-16), which he would consider evidence of ultimate parity, is not realistic. Parity should be measured as equal opportunity for franchises at the beginning of each season, not equal results at the end.
In the NBA the cap was instituted (according to the league) to protect smaller market teams and increase their competitiveness. It has not worked as in 18 years the 4 largest markets have won 14 titles while in the previous 18 years (pre-cap) the 4 largest market team only won 5 titles.
Largest markets overall or largest basketball markets? If the analysis had been conducted using basketball revenue for each team instead of overall market size, the results would have been quite different.
He finds that baseball with no salary cap has excellent competitive balance across the league and that the NHL has been its most competitive in the last 20 years looking at each decade since 1926-27.
But the analysis of competitiveness fails to take into account the number of teams in the league. It's no surprise a six team league will much less 'competitive' than a thirty team league if you are analyzing based on the number of teams winning the championship and making the finals.
A salary cap is just like anything else: it can only work as well as it is designed. Bad implementation ensures bad results.
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