Major League Soccer and the Effect of Egalitarianism

By Brendan Kent

A key feature of Major League Soccer that separates it from European leagues is the salary cap. For the 2014 season, that salary cap was $3,100,000 spread over roughly twenty players. There are, of course, several caveats including the “Designated Player” rule, which allows teams to sign up to three high profile players – such as David Villa at NYCFC or Clint Dempsey at Seattle – for which the salary does not count towards the salary cap. But even with the Designated Player rule, wage bills remain relatively similar across all MLS squads.

The egalitarianism of MLS is held in sharp contrast to the major European leagues. It would make little sense for a European league to institute a salary cap given the importance of the Champions League. If, say, the Italian Football Federation decided to implement a salary cap, Italian clubs would struggle to compete in Europe with English and German clubs playing with unrestricted wage bills.

What effect, then, does a MLS salary cap have on competition within the league, when compared to Europe? For their book, Soccernomics, Simon Kuper and Stefan Szymanski studied wage bills of English clubs from 1978 to 1997 and found that a club’s “wage bills explained a massive 92 percent of variation in their league positions, if you took each club’s average over the entire period.” They found a similar result when examining data from the decade up to 2012 (Kuper 14-15).

Kuper and Szymanski’s work tells us that, theoretically, a salary cap should keep teams on a relatively level playing field. There is, however, a slight problem when applying this to MLS. Currently, MLS does not have free agency – but as I write this, the players and owners are negotiating a new Collective Bargaining Agreement, for which the players are demanding free agency – and without this “free market” for players, it’s hard to know for sure whether a player’s salary accurately reflects ability.

This concern aside, I decided to test the competitive balance of MLS against that of the five major European Leagues: Germany’s Bundesliga, England’s Premier League, Spain’s La Liga, Italy’s Serie A, and France’s Ligue 1. For my measure of balance I used the Gini Index, replacing money with points accrued over the course of the season. The higher the Gini coefficient, the less balanced the league. If the egalitarian system of MLS has the effect that it theoretically should, MLS should have a lower Gini coefficient. Below are the mean Gini coefficients for the top five European leagues and MLS over the past five seasons.

gini

MLS has, in fact, had the lowest mean Gini coefficient over the past five seasons, with a mean of .134. This can be compared to the Premier League, which at .179 had the highest mean. The Lorenz curve for last season alone (2013/14 for the European leagues and 2014 for MLS) is shown below.

lorenz

The red MLS Lorenz curve bends closest to the line of equality, indicating that MLS had slightly more competitive balance than its European counterparts last season.

Albeit slightly, MLS does seem to be more balanced than the top five European leagues. Whether that is for better or worse is a matter of personal preference. But change may be on the horizon for MLS with a new Collective Bargaining Agreement expected soon (or not?) that may allow an additional Designated Player, increase the salary cap, allow free agency, or make some other change that will let teams distinguish themselves by spending more.

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