I hate blog posts that begin this way, but I will do it anyway: Imagine that Wal-mart, Target and a hundred other major retailers all got together and agreed to an industry plan to hold down workers’s wages. Anyone involved with even rudimentary economics training would know that there would be enormous incentives for individual retailers to “cheat”, ie offer wages above the agreed to levels to try to get a particular advantage hiring the best employees. So imagine that the cartel actually forms an enforcement body, that goes around the country levying fines and punishments against any individual participant who breaks ranks and tries to share some of the largess with their workers.
Now imagine the NY Times rooting the enforcement body on, cheering it when it adopts a new get-tough stance on organizations that pay its workers too much. Hard to imagine, but that is exactly the case in this article, where the Times writes about the NCAA’s new efforts
to get tough on what it calls “recruiting violations” but in any other industry would be called “trying to pay the workers more than the cartel allows.”
NCAA division I sports are made up of a 100+ mostly public institutions that make a fortune off of their athletic programs, particularly men’s football and basketball. Large institutions like the University of Texas or Ohio State reap tens of millions each year in ticket sales, TV deals, merchandising sales, and Bowl/tournament winnings. One of the reasons this is so profitable is that they basically pay the key workers who generate this income close to zero. Sure, they give them a scholarship, but what is the marginal cost to, say, the University of Texas for providing a few hundred free educations on top of their 40,000 paid customers? This is roughly equivalent to McDonald’s paying its employees nothing more than a couple of happy meals each day.
While many of these university’s athletes will make nothing after college playing sports, the ones involved in these “violations” are typically athletes who are offered millions, even tens of millions of dollars the moment they leave college. In effect, these colleges are getting tens of millions of dollars of labor virtually for free, and so the incentives to cheat on their cartel deal are huge, which is why the cartel enforcers have to be so aggressive in stopping under-the-table payments to the grossly underpaid workers.
It is an ugly process, and one wonders why so many folks support it when they would be appalled at such practices in any other industry.