By Daniel Adler
It is annoying to see the Heat rewarded for wasting one of Dwyane Wade’s prime seasons by making little attempt to get better and instead clearing cap space. Equally frustrating is the fact that the Cavaliers were punished for continually appeasing LeBron in a series of short-term, expensive moves. They constantly mortgaged their future and now that payment comes due. However, today I would like to talk about a greater systemic annoyance: the NBA maximum salary.
While the “maximum” salary varies depending on contract length and other factors, the important thing to know is there is a maximum amount any team can offer a single player. For all teams beside the Cavaliers, that number was something like $96 million for five years. The system promotes players staying with their current teams and the Cavaliers were allowed to offer about $30 million more for a six year contract. Is the concept of a maximum salary good for basketball?
It is important to define what we mean by good for basketball. For the moment, let’s just consider whether it is good for competitive balance. There are some compelling reasons why perfect competitive balance is not good for basketball (people like to see dominant teams, big cities should win more frequently, etc).
A look at the top earners in the NBA shows a wide range of talents contained within a small range of salaries. Many of the players on the top 30 list earned the max (which is dependent on experience and when they signed the deal). Essentially, a max player like LeBron offers huge excess value (worth over actual earnings) to a team while the players who barely merit the maximum (Michael Redd and Rashard Lewis) offer little (if any) excess. The maximum salary system basically allows those teams that have the top players extra salary cap space.
To put some actual numbers to this example, first we need to decide the value of a win. Using a very simple methodology (dividing total league payroll by total wins in the league), David Berri determines that the value of a win in 2010 was about $1.71 million. Using Berri’s Wins Produced stat averaged over the past three seasons, Arturo Galleti shows that LeBron is worth $41 million, Bosh is worth $17 million, and Wade is worth $25 million (low due to missing most of the 2008 season)…yet they will all make nearly the same salary ($16 million or so) with Wade possibly getting more due to the fact that he is re-signing with the Heat. Even those who disagree with Berri’s method or the exact dollar figures know that LeBron is much more valuable than many players receiving maximum money. Take a look at Joe Johnson’s huge payday in Atlanta.
Let’s try a thought experiment. Imagine that we still have a salary cap, but no maximum salary (similar to the NFL). Would LeBron, Bosh, and Wade be so willing to take A LOT less money to play together? True, they may sacrifice a couple million per season the way things stand now, but let’s say teams could offer as much of the cap as they wanted. Would LeBron pass up $45 million per year just to play with his buddies? How much does he really value winning/friendship/living in Tony Montana‘s old house?
The next NBA collective bargaining agreement promises to bring a far different salary structure. In the past six months, I have spoken with and heard from people representing both the NBPA and NBA and neither side has mentioned eliminating the maximum salary. In fact, most people seem to feel that it will actually decrease. Getting rid of a maximum salary is something the NBA should really consider if they value competitive balance.