Monday, June 20, 2011

NFL Owners Seek Rookie Contract Restrictions

The USA Today reports that some type of rookie contract restriction is being discussed between NFL owners and NFL player representatives. In Sports Economics I go through the likely effects of payroll caps, and I thought I would give the big picture on the cautions of a contract restriction.

First and foremost, the payroll cap is a restriction on the earnings of an employee, and in the case of rookies, it is a salary restriction on top of a restriction as to where to work (i.e. the entry draft). From the article it also seems that the negotiations are also in terms of the length of the contract as well. Each of these restrictions tend to make the labor market less efficient, and from an economic point of view this efficiency reduction is a loss to society.

If labor market efficiency is not that important to you, then from the players perspective a rookie contract restriction can lower incumbent players future salaries. How? In some cases, the rookie salary sets the bar for future players salary negotiations, and with that amount lower, some positions may end up seeing significant reductions in the growth rate of their future salaries. Quarterbacks and defensive ends come to mind as positions that may be affected by lower salary growth, since the bar would be set much lower with the rookie contract restrictions.

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