I Changed My Mind: Let NCAA Student-Athletes Make a Little Money !

Last year, my son wrote a high school essay in opposition of allowing college athletes to be paid.  In my opinion, he correctly made the case that athletes who receive scholarships, are already being paid in the form of a free education, the equivalent of earning the same as a recent college graduate in the job market over four years. He also pointed out that purpose of college was to get an education that itself provided better lifetime earnings prospects than those without a college degree. In fact, the NCAA gives out $2.9 billion in annual scholarships to 150,000 Division 1 and 2 student-athletes.  That clearly means that scholarship athletes are already being paid in the form of a very valuable asset while also playing a sport they love. Seems like a very fair deal for the extra work they put in beyond their studies.

However, the recent “Fair Pay to Play Act” passed by the California State Legislature and signed into law by the governor, takes a much different view. Starting in 2023, athletes at California colleges will be able to accept money from endorsements for use of their name, image and likeness. Initially, I thought this was just par for the course for “crazy California” but after I heard a segment on NPR on the topic, I decided to do a little more research.

The top 37 highest paid coaches in the NCAA are exclusively from top men’s football and basketball programs (football dominates the list). Lot’s of familiar names including #1 Mike Krzyzewski, the Duke head coach for hoops, who makes nearly $9 million annually. Right behind him is Nick Saban who coaches Alabama football and makes $8.3 million. Collectively, these 37 coaches earn about $190 million in salary which represents 17.3% of the $1.1 billion in total revenue for the NCAA across all sports.

About 2,800 players on the rosters of these 37 school football and basketball programs, and about 80% receive full scholarships. Using cost data for each school at CollegeTuitionCompare.com, the total value of scholarships for these players is about $112 million. Over a four-year career these equates to nearly $40,000 in real value these student-athletes are receiving.  If you gross it up 15% to account for taxes, these young men are earning about the same $46,500 starting wage as the average college grad with the additional major benefit of not having any student debt.

For decades the NCAA has used this reasonable argument to support it’s strict policy of preventing student-athletes from earning money or accept gifts while they play.  However, when I stepped back and looked at the data, I arrive at a different opinion. Playing college sports at a high level, takes a lot of work and undoubtedly many players have dreams of playing professionally and earning the big bucks. The reality is that only 1.5% of college football players ever make it the NFL and 1.1% make it to the NBA.  So out of the 2,800 players on my original list, only 41 will play at the next level. Most of the remaining 98.5% of those student-athletes will have a far less lucrative career. 

So, what’s the problem with letting them earn some extra money endorsing products? It is the American way that people should be allowed to legally earn whatever their market value is.  If I decide to take on a second job, moonlighting as waiter, my full-time employer can’t stop me from doing that. As long as I show up and do my job in the morning, it’s my call.   I see the NCAA earning over $1 billion from the hard word that ALL these athletes put in, not just the ones that eventually go professional.  I see coaches and apparel companies making millions. Sounds like the dreaded “good ‘ol boy network” to me.

Opponents correctly point out that this new law will give California colleges an unfair advantage over other states without a similar law.As if on cue, many other states have their own versions of the law in the works. Fantastic.This is what competition is all about. Distributing economic benefits more broadly rather than concentrating them with a privileged few makes more sense to me.States that refuse to allow college athletes to earn some extra money for their efforts will be just like states that have high taxes. They will bleed talent to states with better incentives.This is how our 50 state laboratories are supposed to work and hopefully the federal government will keep its nose out of it. A hard and fast rule of economics (and raising kids) is that you get that you get the behavior you incentivize. So, bravo California. You changed my mind