College Athletes Get Paid - Part III

The grant-in-aid compensates college athletes by affording them a chance at a college degree and a professional sports career, as explained in Part I. Compensating athletes individually, such as by salary, poses some difficulties in identifying the largest revenue producers, although these problems are likely not insurmountable, as argued in Part II.

What is perplexing about the debate over paying college athletes is the common assumption that, if athletes were paid a competitive price for their services, their compensation would increase. Proponents of the compensation argument point to the millions of dollars earned from college sports and assume that eliminating the NCAA prohibition against paying athletes would enrich the comparatively impoverished student-athlete. Not necessarily.

Assume players were allowed to sell their services to college teams in a competitive market. Some would earn a substantial salary, for example the star athlete in a major revenue sport such as basketball. Colleges would bid against each other, and perhaps even the professional leagues, for the player’s services. (Even if the player were ineligible for the NBA, he might opt for a year playing in an overseas professional league instead of college ball.) But remember, the star college athlete already in effect receives a substantial salary: in the near future he will be eligible for a professional-level income stream. If necessary, the star can borrow against that income while in college, as presumably many players do, as the bling and Escalades appear to attest. So the star can already capitalize on his income potential; the fact that the source of the income is his future professional team and not his one-year alma mater makes no financial difference.

But what about the rest of the players, whose dreams of college stardom do not materialize? Presently, in most cases, those players are protected from the non-renewal of their scholarship, because the rules of the NCAA and of most schools combine to limit termination to cases of academic failure, attendance problems, drug abuse and the like. As a result, as long as they adhere to team and university rules, these athletes will get to pursue their degrees and the lifetime income those degrees entail. Coaches can do little about malingerers or others whose talent they misjudged in awarding them a scholarship. (No wonder college coaches are famed for their histrionics and anger: what else can they do to players except yell?). College sidelines are full of scholarship athletes whom coaches would love to cut.

But in a world in which yearly salary, not scholarships, constitutes the primary means of compensation, coaches might not be as restricted by rule to maintain pay grades. Coaches might over-promise recruits, only to cut their pay when athletic performance does not meet expectations. Certainly reputational fears would slow most college coaches from “bait-and-switch” recruiting; nonetheless, establishing a clear employer-employee relationship between the student-athlete and the school would probably render the player more vulnerable to the vagaries of at-will employment, with the college coach/madman as the boss.

A scholarship package that approximates $40,000 per year in value clearly does cap certain players’ earnings; at the same time, it probably over-compensates other players. Is today’s lock-step system of compensation wrong, in the fundamental sense that reformers seem to claim it “wrong” that colleges profit while their athletes do not? Lots of employers and unions prefer pay grades and lock-step systems, in part because they help to insulate the employees from the caprice and vindictiveness of the boss. Judging from the inappropriate and immature behavior that is put on display by some of the adults who roam the sidelines, a little insulation might be needed. Put another way: suppose all entering college athletes were to join to set wages: would they prefer the star system or lock step? Clearly they would want more money (who doesn’t?), but the current pay rate appears sufficient to clear the market of suitors.

If one day the NCAA does allow colleges to compensate players directly, the impetus will probably come from schools who want the ability to out-bid professional teams, and not from those who say that a full college scholarship is not enough.

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