The Bizarre Economics of MLS

The salary cap structure in Major League Soccer is unique in world football. Entry-level players regularly play alongside high-profile signings making nearly 100 times their salary, with both players often actually overpaid relative to their quality.

Ratings for European soccer and international tournaments have shown that interest in the sport is at an all-time high in North America. Many of those fans, though, have long been skeptical of MLS, rating the quality somewhere at the level of a glorified men’s league with a sprinkling of international talent.

Earlier in the league’s short history, it wouldn’t have been a stretch to say that some of the worst players on an MLS roster were no better than the top players in local amateur and “ethnic” leagues.

Those amateurs, though, would have little reason to risk their livelihood and their family’s future by taking on a minimum contract with MLS (set last year at $48 500 USD annually and $36 500 for young players), particularly if there’s a better entry level salary available elsewhere. Office jobs, construction, and the trades can all offer better money than a minimum deal in MLS, with teams restricted by more pressing needs at starting positions.

This means that the best young talent in North America face the choice of dropping everything and going to Europe, taking on the risks of an MLS deal, or choosing another path (and many do) while playing part-time or amateur soccer.

Instead, players even further down the scale – who likely wouldn’t get a look-in on an English 3rd tier roster – take those minimum contracts and end playing significant minutes, eventually being found out in many cases and dropping out of the league within a few years.

Many top players at the age of 15 or 16 don’t make it that far, opting instead to concentrate on other sports or career options, especially if they lack family ties to a European Union country that would allow them to join a youth academy with minimum fuss.

The second-tier NASL side New York Cosmos have seen an opportunity to one-up MLS teams bound by the salary cap. They recently signed highly-rated prospect Haji Wright, presumably by offering him a wage closer to his “global” market value than the single-entity MLS would offer.

The Cosmos have sought to bring back the glory days and recently signed Real Madrid legend Raúl to both play for the club and lead their youth academy. It’s a refreshing alternative to the usual transfer mechanisms of MLS, which has seen rules discarded or made up on the spot where required.

On the other end of the MLS roster, up to three “Designated Players” can make more than the individual limit of $400 000. The additional amount does not drain the salary cap.

As such, teams with the means to do so might as well overpay those three players – logic would suggest getting the best possible players, as no matter how overpaid they are, as they’ll have the same “cap hit” as any other player making $400 000 or above.

The backbone of an MLS roster is composed of those players making somewhere in between, but their job security is not much better – fail to impress and you’ll be waived, while those who have a great season find themselves unable to negotiate a bigger deal due to their team’s precarious balancing of salaries to fit under the cap.

To get what they’re worth, players might seek a transfer to places like Scandinavia or Mexico.

At the end of 2013, Camilo, a Brazilian who had a standout season with Vancouver, decamped to Mexican club Querétaro, forcing MLS to admit defeat in their assertion that he was obligated to return for an “option year” at the club’s discretion.

All of these factors mean that MLS teams go through incredible player turnover, with casual fans unable to recognize a significant number of players from one season to the next. It’s difficult to develop a long-lasting commitment in that case, especially when the product reflects poorly compared to the quality and production values in televised European football.

The recent negotiations between the league and Players’ Union saw a slight increase in the salary cap, with a very small number of players now getting a say in their future, but it’s unlikely to make a significant difference in retaining and attracting young talent.

A completely open market may be a step too far for some ownership groups in the league, but working towards that goal can only improve the quality of play in the league in the long run.