You can't figure out where you're going until you understand where you've been, or some Bob Dylan lyric like that. As the NBA lockout rolls on -- I'm all out of dystopic verbs here, having exhausted "slinks", "trudges", "dallies", "plods" -- it's worth training a weathered (and wearied, oh so wearied) eye back on the last 13 years under the collective bargaining agreements that resulted from the last lockout.
One of the obvious and frequently stated impacts of the last lockout and the CBA that was eventually approved was the rebirth of the NBA middle class. The thought is that before the 1998-99 lockout, there was mass income equality among players: you had select superstars (Michael Jordan, Patrick Ewing) making huge salaries, a few stars making good chunks of changes and everyone else making relatively little. The new CBA in '99 capped salary at the top and invented new mechanisms (all hail the mid-level exception) to redirect payroll to the mid-rung players of the league.
Now, the concern is that those middle-class players make too much money. The '99 CBA was too effective as an income redistributor, and it's driving the league out of business because no one can afford to pay all of these Travis Outlaws and Amir Johnsons $7 million a year.
But has the salary distribution in the NBA really changed? Using data from Patricia Bender's invaluable website, I looked at the count of players at certain salary levels to judge whether the structure of NBA payrolls had changed. And it has, in the raw count: in 1998, 331 players made $3 million or less. In 2011, that figure was 196. In 1998, 10 players made more than $10 million. In 2011, that count was 65.
That, however, isn't terribly telling on its own. Of course more players are making eight-figure salaries: the number of players in the league has only increased marginally (thanks to expansion in 2004 and roster size modifications), but payrolls have bloomed. In 1998, total league payroll was under $1 billion. It eclipsed $2 billion in 2011. Of course players earned higher salaries in 2011. That's not the question we're looking to answer.
We're concerned about the structure of the league's payroll, to what type of player all of the money is going. So I looked at the percentage of total league payroll for each given year (1998 and 2011) dedicated to each $1-million salary slot. If 10 players made $4 million, then $40 million would be dedicated to that salary slot. If total payroll was $1 billion, 4 percent of total payroll would go to $4-million players.
Here's the result.
The red-orange bars are 1998, and the blue bars are 2011. The general pattern stands out immediately: most of the league's payroll in 1998 went to players making less than $6 million. In fact, some 77 percent of the league's entire 1998 payroll went to the 417 players making less than $6 million. After that range, there's a huge drop-off, where the other 23 players in the league share 23 percent of the payroll. (MJ himself earned 3 percent of all NBA player payroll.)
By 2011, the salary structure had flattened and stretched significantly. In 1998, those 417 players making less than $6 million constituted 95 percent of the league. In 2011, 71 percent of the league made less than $6 million. But while that made up 77 percent of total league payroll in 1998, it came out to only 39 percent of salary in 2011. That means that over that $6 million level, 29 percent of the league's player base made 61 percent of its salary.
It's a bit more eye-opening when you drill down further. Sixty-five players, or 15 percent of the league, made more than $10 million in 2011. Their combined salaries constituted 42 percent of league payroll. But just as was the case in 1998, there were only a couple of $20-million players in 2011. A huge chunk of 2011 salary in concentrated in players making $10-20 million, a population that was (by comparison) nonexistent in 1998, where you had tip-top superstars and everyone else. It's not just the "middle-class" that is making more money at the expense of superstars -- it's a lot of the mid-rung stars too.
But what this ignores is the context of those $10-20 million stars: a fair number of them would be up in the $20 million range if not for max salary limitations.
Consider LeBron James, who sits at $15 million. In 1998, he would have been up in Jordan territory. But the max salary rules ratified in 1999 stuck a big ol' anchor on players like him who entered the league post-lockout and weren't grandfathered into big deals. Dwight Howard, Chris Paul, Dwyane Wade and Deron Williams fit the same mold: younger stars waiting to get up to $20 million increment by annual raise allowance increment.
Now owners apparently want to revert back to the good ol' days, when your stars drew huge checks but everyone else would sign to non-backbreaking deals. That's what the hard cap would effectively do: if faced with a choice of giving up a star making $15 million or three solid roleplayers making $5 million apiece, every team will give up the roleplayers. Every team. Those roleplayers will sign somewhere else for less. The market will dampen for these players. Shawn Marions will become Matt Barneses. Drew Goodens will become Joe Smiths.
The real brilliance of the NBA's plan to bring back something like a hard cap is that max player salaries will almost assuredly remain in place. That means that the league could get the best of both worlds: the salary inequality and muted roleplayer commitments of 1998 and the deadened superstar paychecks of 2011. That's when they'll profit.
The Hooks runs Monday through Friday, but will be taking Monday off due to Labor Day. See the archives.