Racial Differences in National Basketball Association Players' Salaries: A New Look

By Dey, Matthew S. | American Economist, Fall 1997 | Go to article overview
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Racial Differences in National Basketball Association Players' Salaries: A New Look


Dey, Matthew S., American Economist


INTRODUCTION

Professional sports, unlike most other industries in America, have provided blacks with the opportunity to succeed. The participation and success of blacks have not always been readily accepted and appreciated, however. In the late Arthur Ashe's book, A Hard Road to Glory: The African-American Athlete in Basketball, the former tennis great and black leader details the history of blacks in organized basketball. He offers insight into the past struggles faced by blacks and cautions readers not to become complacent in the future.

Proportionately, the black athlete has been more successful than any other group in any other endeavor in American life. And he and she did it despite legal and social discrimination that would have dampened the ardor of most participants.(1)

Ashe provides intuition about the trials blacks faced during their early years in the National Basketball Association and warns his readers about succumbing to the same treatment in the future. Although Ashe documents the history of the NBA until the 1992-93 season, he fails to answer the question of whether equality between black and white players currently exists in the NBA.

One possible focus of such a determination may be the present economic situation faced by NBA players. Specifically, is the NBA a labor market which differentiates between its black and white players?

Three studies since 1988 examine the racial difference in NBA salaries, holding observable productivity constant. Although the estimated black disadvantage varies across studies, each finds a significant differential.

Kahn and Sherer (1988) use eleven lifetime player productivity variables plus race, position, NBA tenure, and draft position to estimate the wage gap during the 1985-86 season. They find a twenty-one to twenty-five percent black disadvantage. Koch and VanderHill (1988) use lifetime, recent, and college productivity statistics, center, race, all-star appearances, age, attendance, and city population as determinants of player salaries. They report a white advantage of almost twelve percent. Brown, Spiro, and Keenan (1988) estimate the wage gap with seven independent variables. These include lifetime productivity measures, all-star appearances, tenure, race, and draft position. Their model yields a black disadvantage over fourteen percent. Both Koch and VanderHill (1988) and Brown, Spiro, and Keenan (1988) use 1984-85 data in their studies.

Thus, previous research has shown a significant wage differential in the NBA during the mid-1980's. However, since the time of these studies, the structure of the league has changed in three key respects. First, four new franchises entered the NBA between the 1988-89 and 1989-90 seasons. The expansion of the league effectively increases the demand for potential NBA players. Secondly, there was an increase in the level of free agency allowing players greater mobility in seeking the highest bid for their services. Finally, the NBA instituted a salary cap. Although teams have found many ways to beat the restrictions, the cap's purpose is to equalize teams in small and big markets. Meanwhile, mean player salaries have shown remarkable growth from 1987 to 1993, increasing by fifty-nine percentage points for the entire league, sixty-four percentage points for whites, and fifty-nine percentage points for blacks.

It appears as though the NBA provides an abundance of economic advancement opportunities for both white and black players. In this paper, we investigate the recent status of racial inequality in the NBA. Our first area of concern is whether a salary differential still exists, and if not, why it disappeared. The next area of study is the possible existence of customer discrimination effectively driving up the relative salaries of preferred white players. Finally, we concentrate on the distribution of NBA players' real annual salaries. Specifically, we study what factors contributed to the remarkable salary expansion in the past six years.

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