Labor Unions, Profit Sharing, and the NFL
Is there a way to reconcile the loss of business innovation with the benefit of higher wages and benefits unions bring to workers?
National Football League (NFL) players make good money. The median weekly income for an NFL player is $16,538 (calculated from the NFL player’s median income of $860,000/year), significantly higher than that for all Americans ($1,100). These higher wages are partly due to the NFL’s unique pay structure. Based on the labor agreement between the NFL owners and players, NFL players get 48% of the gross revenue from football-related activities (excluding events such as music concerts at NFL stadiums). Owners keep 52% of gross revenue.
Profit sharing at its best. Players and owners alike strongly desire the NFL to make more money, as both groups benefit.
The owner and player labor agreement enforces this revenue-sharing with a minimum team player salary and minimum total NFL player salary. If a team fails to pay at least 89% of the player share over four years, the team must pay any remaining value that went unpaid during that time. And, across the NFL, if all teams pay less than 95% of the total share of player revenue, they must pay any remaining value later.
Why does the NFL have this unique pay structure? Because the workers (players) are exceptionally talented. Because it’s a high-demand product that earns a lot of money and incentivizes the owner structure to keep it going.Â
And because the players have a union. The NFL Players Association represents the players. Here are a couple of examples of how the NFLPA has benefited NFL players:
In 2011, the NFLPA negotiated a new labor agreement with a minimum salary of $375,000 for rookies. When the current collective bargaining agreement ends in 2030, rookie salaries will exceed $1M.Â
The NFLPA has also fought for and won many other player benefits, such as health insurance, retirement plans, and disability benefits.
The NFLPA’s success is the most shining testament to the power of unions. Should we duplicate unions because of the NFLPA’s success? It’s a nuanced question, and not for the reason you might think.
Americans support labor unions, but Americans don’t join labor unions. This contradiction puzzles experts. Do Americans need to be aware of the benefits of joining a union? Do they worry about losing their job if they try to organize their workplace? Do they not believe that unions can make a difference?
Americans support labor unions. Current public support is 71% positive, its highest point since 1965. Salary data suggests workers should support unions.
In 2022, the median non-union American worker weekly income was $1,029. A union worker’s median income was $1,216. That’s a difference of $187 weekly, around $9,700 a year. Some of the difference may be due to different occupations, but the difference appears even comparing similar occupations. Labor unions increase pay and benefits for workers across the board. Further, unions help mitigate the wage gap between races and genders.Â
However, most Americans aren’t members of a union. Only 16% of Americans live in a household where at least one member participates in labor unions. The highest-ever union participation rate was around 35% of workers in the 1950s, and it keeps dropping.Â
Union organizers claim Americans would join unions if they could. They claim Americans are unaware of the benefits of joining a union. That Americans worry that they will lose their job if they try to organize their workplace. That we need friendlier labor laws.Â
There are competing stances that ask—do Americans not participate in unions simply because Americans don’t want to join unions? If Americans wanted to join unions, why would union participation drop? If Americans wanted to join unions, why would attempts to unionize fail?
Should America take more steps to strengthen unions? Let’s break it down piece by piece.Â
What is the impact of unionization on business innovation? Will unions contribute to making a strong, innovative American workforce that can drive world markets?
This study from the University of Texas Rio Grande Valley found an 8.7% decrease in patents originating from a company in the three years following a union-winning vote at that company. It further saw companies move innovation activities away from union locations. However, the relationship between unions and innovation is complex. This study found unions can promote cooperation and provide workers with a voice, leading to innovation. The same study also found unions can lead to higher wages and less flexibility, negatively impacting innovation.
What’s the impact of unionization on setting conditions that enable Americans to provide for their own basic needs?
Unions raise wages and secure better benefits for workers.
We further have a guideline to focus on options that do not significantly burden the American taxpayer. Are unions a burden on the American taxpayer?
Unions do not represent a tax burden on Americans.
Is there a way to reconcile the loss of business innovation with the benefit of higher wages and benefits unions bring to workers?
Let’s look at the NFL and NFLPA again.
The NFL excels at innovation. The game is constantly changing. Coaches and players bring new schemes and fresh eyes, all to gain a competitive advantage. Any minute advantage can separate playoff teams from those left out. In addition, the NFL itself considers changing rules every offseason.Â
How does the NFL labor agreement encourage innovation off the field? It promotes that same spirit of competition.Â
The NFL and NFLPA labor agreement sets a healthy baseline for worker pay and benefits. Any additional player pay is competitive. In contrast, in a typical labor agreement, the union seeks equal pay for workers. This approach reduces the incentive for workers to compete.Â
Outside the NFL, this winner-takes-all approach drives innovation in business. The National Bureau of Economic Research led a study with the University of California at San Diego (UCSD) that found:
A winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation, but shared across the ten best innovations.
In a business, this approach could be executed as profit sharing. Companies need to be able to reward their high-performing employees with more pay. Businesses and NFL teams benefit from competition to encourage innovation.Â
Businesses need to pay their workers a livable wage that enables the workers to provide for their own needs. Livable wages reduce the need for taxpayer-supported social programs and give workers the dignity of being able to provide for their families. Pay above this level could be based on the production of the workers.
At the end of the year, businesses and workers could share profits based on the production of the workers.Â
In sum, should America take more steps to strengthen unions?
Americans support labor unions, but most Americans don’t join unions.
Unions may decrease internal competition and reduce business innovation.
Unions raise wages and secure benefits for workers.
Unions are not a tax burden on Americans.
There’s another component that we need to consider: political capital. A new administration typically gets two years to pass new initiatives before gridlock sets in.
If we fight for organized labor as we consider it today because it raises wages and benefits, but a minority of Americans join unions, what have we accomplished?Â
Can we instead fight for organized labor to set a healthy baseline of worker pay and benefits, with an added wrinkle of competition and profit sharing?
We need to put our political capital into making changes that matter to both American workers and American businesses.
Should America take more steps to strengthen unions?
Thanks for considering my perspective.
May God bless the United States of America.
