The New MLS Salary Release and Its Implications for Looming CBA Negotiations

Yesterday the MLS Players Union updated their MLS salary release, incorporating the wages of new signings and extensions granted recently to the likes of Kaka, Jermaine Jones, Graham Zusi, and Matt Besler.  This release paints a useful picture of overall spending trends in the league right now, and we can take a couple extra steps with these figures to see what they imply for spending after the Collective Bargaining Agreement (CBA), whose negotiations loom over the coming MLS offseason.

First, lets look at the salary data as it is. Here’s my visualization of all 568 players in the release that are assigned to one of the 19 current MLS clubs or next year’s expansion teams, New York City FC and Orlando City SC.

Yes, despite only listing five players here, Orlando City already has the fifth-highest payroll, driven almost entirely by Kaka, whose $6,660,000 base salary and $7,167,500 guaranteed compensation are the highest in MLS history. Orlando’s expansion partner, NYCFC, represents the biggest oddity in this data. One of their star signings, Frank Lampard is not mentioned, and the other, David Villa, shows only $60,000. Considering both these players’ histories and the high-spending reputation of the new employer, Mansour bin Zayed Al Nahyan, next it is likely that both will be pulling in a figure that would place them among the richest in the league.

These oddities, especially Villa’s farcical $60k, call to mind the history of managers, owners, and others within MLS downplaying the accuracy of particular players’ salaries listed in previous MLSPU releases. This is why these figures are most useful when viewed from a wide angle, and we should resist the urge to use them to label specific players “underpaid” or “overpaid.” They also don’t take MLS’ myriad salary cap mechanisms like designated player designations, allocation money, retention funds, pro-rated transfer fees, homegrown status, Generation Adidas status, trades in which a player’s former club continues to pay some of his wages, the fact that only 20 of a team’s 30 players hit the cap at all, and the general accuracy of the MLSPU release. Confused? You can read go read MLS Rules and Regulations if you’d like, but you should go in understanding that not all of the rules are publicly stated, and commissioner Don Garber has admitted that the league sometimes alters the rules when it is convenient to do so.

For this reason, I am not estimating clubs’ cap numbers armed with only the MLSPU release. Instead, what we have above is a simple ranking of clubs’ total wages, and a visual reminder of the disparities between the league’s stars, and its rank and file. It is alarming that Kaka will make over 135 times the veteran’s minimum, $48,500, but this kind of ratio is nearly assured by the Designated Player (DP) rule. Since only three players per club can make more than the DP level $387,500, it is 100% guaranteed that at least 90% of the players will make less than that. In actual practice this year, here is the breakdown of players within certain wage ranges:

The middle class in MLS is so barren that the above histogram has to skip every salary bin containing zero players. Without this filter, the number of rows would render the chart on the left absurd, displaying 204 rows, 171 of them blank. On the right, we can see the shift in this salary distribution based on potential post-CBA salary cap levels. This figure defaults to $4,500,000, but you can use the arrows or the slider to adjust it, $100,000 at a time. There still is not much of a middle class, but at the very least the lower class will make enough to stop fretting over their monthly expenses. Feeding this view is a calculation for hypothetical wages which increases every non-DP player’s guaranteed compensation proportionally to the salary cap increase. For a player making $50,000, if the cap rose from $3.1 million to $6.2 million, their hypothetical wage would be $100,000.

Hypothetical wages here are by no means meant to imply that every player will receive such a raise himself. The theory at play in the hypothetical visuals is that wage dynamics will stay roughly proportional across the board, and it is actually quite likely that some of the lowest paid (145 players, 25.5% of the player pool, currently make less than $50,000) will lose their jobs when/if the salary cap and minimum wage increase. Undoubtedly, many of these players deserve to make more money, but a fair number will get squeezed out in favor of new competitors who may have previously dodged MLS because the wages on offer were too low.

The dynamic there portends an oddity in the pending CBA negotiations, where up to a quarter of the current players may want to avoid pushing salaries very far beyond the status quo for fear of losing employment. Meanwhile, the more secure players will surely want an increased cap so they can reap the benefits not only for themselves, but for the sake of getting better teammates. Consider that MLS sponsors and broadcasters may also be calling for increased spending, and you see that CBA negotiations look to be complex even before considering topics that go beyond wages.

In any event, despite some conservative parties on both sides, it seems very likely that we will see a substantial increase in the MLS salary cap. Television ratings are increasing (though the numbers are still far below other leagues), attendance continues to rise, and broadcast rights fees and sponsorships are bringing in more money. My hope is that they set the salary cap as a percentage of league revenues, so it can self-correct over time. With that in mind, here’s a version of the first chart, but using hypothetical wages and also containing a interactive salary cap selector.

Again, the hypothetical wages here run off the assumption that the spread of sub-DP salaries on club rosters will raise roughly in proportion to the salary cap increase. This prediction won’t be 100%, but given the league’s insistence that the cap and single entity isn’t going anywhere, it’s a safe bet that it will be close. The key dynamic I will look for in CBA negotiations is whether each senior designated player will still account for 12.5% of his club’s cap. If that percentage lowers, it will be an enormous victory for the richer clubs, as they would then have more freedom to spend elsewhere on the roster in support of their high-price stars. That could portend an enormous rise in the importance of spending, a factor whose relevance has been quite small thusfar in MLS.

The roster for Chivas USA (who will go on hiatus for two years) stack onto the hypothetical Orlando squad as a means of seeing how the wages of a full team with Kaka would look. NYCFC’s reported squad was so thin that I didn’t alter their player list, but that does make for a notable under-reporting of potential league wages, especially with Sheikh Mansour expected to spend as aggressively as possible, as he has at Manchester City.

Commissioner Garber has stated many times that he wants MLS to become a top league in the world. If this is his true objective, the coming CBA is a prime opportunity for the league to aggressively increase wages, thus attracting and retaining better players with an aim to improve the standard of play and the marketability of the league and its clubs.

4 thoughts on “The New MLS Salary Release and Its Implications for Looming CBA Negotiations

  1. I love your visualization of this data. The CBA negotiations surrounding the salary cap are going to be interesting. As you noted, the number of salary mechanisms in MLS makes getting a read of what is going on challenging. However, your discussion of hypothetical salary growth made me compare the salary numbers under the last year of the old CBA (2009) to the just released ones and some surprising things jumped out at me.

    The salary cap during that time increased 35%, meanwhile the mean salary jumped 70%. This is not that surprising because there has been a significant increase in usage of DPs and they significantly skew the mean calculation. What I found more interesting is across the entire team, there was a greater 35% increase at nearly every roster slot. For example, the guaranteed compensation for the median starter (calculated as 6 times the number of teams in the league at the time, 15 in 2009, 19 now) rose from $140K in 2009 to $210K now, or a 50% increase. In 2009, the 90th highest paid player was Ugo Ihemelu; in 2014 the 114th was Jhon Kennedy Hurtado. Likewise for the median last starter (11 times number of teams), 92.5K to 135K (46% increase); last sub (14) 70K to 102K (46%); and last bench player (18) 39.5K to 72.5K (84%).

    In total, the data suggests about $450K per club of salary growth outside of DP spending and cap growth. Where this money came from and the continuation of these funds are key to what effect the salary cap growth in the next CBA has. If teams are better utilizing GA and homegrown contracts or if it is allocation money from the past sale of players, then this growth is likely to stay intact because it has a contractual basis for spending going forward. If it is from retention funds, other sources of allocation money, or other league mechanisms not attached to contract status this money could easily be rolled into the new salary cap. If all $450K were able to be rolled in and figuring the current 5% annual increases in salary cap, $3.7 million in 2015 would represent the status quo.

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  3. Fantastic visualization. This paints a great picture for the upcoming CBA and can continue to be used for viewing league cap dispersion going forward. Fantastic job


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