Daniel Sutter: Is it payday for college athletes?

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California recently passed a law allowing college athletes to receive compensation. This stokes anew the debate about paying college athletes and may provide an example of competition between governments producing legal change.

Whether college athletes should be paid provokes strong responses. On the one hand, student-athletes already receive numerous benefits, including a scholarship and tutoring assistance in addition to recognition and fame from playing on television and in front of huge crowds. Do they really need more? On the other hand, FBS football and Division I men’s basketball together generate billions in revenue. The fans pay to watch the players, not the university’s faculty or administrators. Why shouldn’t the persons doing the hard work and bearing the risk of injury get a share of the pie?

The bill was passed by the California legislature and signed by Governor Gavin Newsome in September. The law has sometimes been described as paying student athletes, but this is not accurate. Athletes will be able to make money off their name and image, basically by legalizing endorsement deals. Athletic departments would not pay student-athletes. This arrangement would be good for universities because the payments will not come from athletics department budgets, but raises equity issues.

How many college athletes have marketing potential? Tua Tagovailoa certainly, but even most Alabama football scholarship players are pretty anonymous and largely interchangeable from an endorsement perspective. Teams could have stars with six figure endorsement deals playing alongside others earning nothing. The seemingly limited potential endorsements for women athletes also raise Title IX gender equity concerns.

Economics provides a reason to downplay the pay disparities. In the market, the money to pay employees (or spokespersons) must come from their employer’s revenues. With sufficient competition for their services, workers get paid the value of what they produce for a business. Economists are very used to thinking in these terms. We see no problem with Men’s World Cup soccer players getting paid ten times more than Women’s World Cup players because the men’s tournament generates so much more revenue. Nonetheless, pay disparities trouble many people.

Competition between governments hastens social and legal change, and we may get to see competition in action. For example, 15 states gave women the right to vote before passage of the 19th Amendment. Research shows that Western states and territories enacted women’s suffrage to attract residents.

Let’s consider competition between states more closely. Politicians will balance the benefits of allowing player compensation against the costs. California’s legalization of payments changes the balance of benefits and costs for others. Universities now face a competitive disadvantage recruiting the best players, making other states more likely to legalize payments.

Florida legislators have already introduced a bill to follow California’s lead. Other states will likely join. Alabama legislators never enacted a lottery. I make few predictions here, but I suspect that our lawmakers will legalize these payments to keep Alabama and Auburn football competitive nationally.

Competition may not play out in this fashion. The NCAA may bar California schools from competing. If the NCAA carries through with this threat, then legalizing payments would keep a state’s universities from participating in the College Football Playoff or March Madness. This should deter competition between states. Congress could also preempt state-by-state legalization by legalizing the payments nationwide.

Whether the NCAA will kick out California schools is uncertain. It would be hard to imagine college football without USC or basketball without UCLA. An NCAA hardline would invite creation of a rival athletics association if just a few states legalized paying college athletes. The top talent would almost certainly gravitate to a rival allowing compensation.

California has acted to enable college athletes to receive compensation for generating billions in revenue. Even should the NCAA parry this thrust, California or other states might take other steps in pursuit of this goal. However the drama unfolds, college athletes seem closer than ever to being paid to play.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.