Last week I looked at the most overpaid players in 2006-07. The surprising leader of this group was Shaquille O’Neal. What made this especially surprising was revealed on Friday. Across his career, Shaq has clearly been exploited.
To understand what this statement means, we have to understand the term “exploited.” Again, this is what I said on Friday:
The famed economist Joan Robinson stated (back in 1933): “What is actually meant by exploitation is usually that the wage is less than the marginal revenue product.”
Or to put it more simply… if you make more money for your employer than your employer pays you, then you be exploited.
This means that a worker who is paid $3 an hour, but only generates $2 in revenue, is not exploited. And a worker who is paid $200 million, but generates $300 million, is indeed exploited.
And again, according to this definition, Shaq has been exploited during his time as an employee of the National Basketball Association.
This past season, though, Shaq was clearly overpaid.
Who, though, was exploited in 2006-07?
The answer is in Table One:
Topping this list is the man who is supposed to make Orlando fans forget about Shaq. Dwight Howard was paid $4.8 million in 2006-07 by the Orlando Magic. In return, the Magic received 20.5 wins. With each win valued at $1.478 million (again, look at the post on the overpaid to see how this value was estimated), Howard was worth an estimated $30.3 million to Orlando. So he was underpaid, or exploited, by more than $25 million.
Exploitation of the Young
There is a clear pattern that stands out when we look over this list. The majority of these players have played less than five years in the league. This is not surprising, since the NBA has a rookie salary scale. To eliminate rookie hold-outs and large contracts to unproven players, the salaries paid to first round draft choices are set by the NBA’s collective bargaining agreement. These salaries, as the above table indicates, are often well below the revenue these young players are apparently creating.
To put “well below” in perspective, the fourteen players on the list with less than five years of experience produced $234 million more in value than these players were paid. Given this result, is it any wonder teams intentionally lose to enhance their draft position?
Exploitation of Veterans
The young were not the only players exploited. The top ten includes Jason Kidd, Steve Nash, and Marcus Camby. Kidd was paid more than $18 million. But with 24.8 Wins Produced, he was worth more than $36 million. Such a result tells us that even those who receive the NBA’s maximum salary can still be exploited.
So this means that even when the much bigger contracts of Chris Bosh and LeBron James kick in this season, these two players may still be producing more revenue for both their teams and the NBA than either will be paid. In other words, the days of being exploited may not be ending too soon for King James.
Our research on the NBA was summarized HERE.
Wins Produced and Win Score are Discussed in the Following Posts