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Abstract
Sports teams that seek to maximise the number of wins, rather than profits, may not comply with league labour market regulations that compress payroll structures to promote even competition. This strategic behaviour depends on others, as teams choose a strategy to create team incentives, to which rivals will respond. A case study of four teams in a semi-professional Australian Rules football league tests the effectiveness of strategies to evade these regulations on winning percentages. Both compliance and non-compliance within this labour market regulation regime, based on different wage structures and talent distribution, were effective strategies to improve team performance.
Disclosure statement
No potential conflict of interest was reported by the authors.
Acknowledgment
We are grateful to Ross Booth, Jeff Borland, Robert Brooks, Youjin Hahn, Liam Lenten, Rodney Maddock, David Merrett, Vinod Mishra, David Prentice, Russell Smyth, John K. Wilson, and two anonymous referees for comments on earlier versions of this paper. We are grateful to Col Hutchinson (Australian Football League) and Trevor Ruddell (MCC Library) for assistance and access to data.
Notes
1. A reserve clause to contain the growth of player salaries was introduced in 1879 by Baseball’s National League, itself formed in 1876 to increase the profits of the game’s leading teams. When the English Football League was established in 1888, its rules included a retain-and-transfer system that allowed clubs to deny players permission to transfer to other clubs, which was likely to have been modelled on the reserve clause (Szymanksi & Zimbalist, 2005).
2. Vrooman (Citation2015). Sloane (Citation1971) is the seminal work on utility (and win) maximization as an objective of owners in professional sports. For a recent overview of the literature, see Fort (Citation2015).
3. All VFL clubs were based in Melbourne, except one in Geelong. The VFA admitted new teams and continued to operate as a Melbourne-based league in its own right.
4. Of the players who left the four sample clubs during the sample period, only 17.8% moved to another VFL club.
5. A sample of playing lists shows that Collingwood drew 82% of its players from its metropolitan zone in 1935 and 89% in 1945. Carlton, Melbourne, and Richmond drew an average of 52% of players from this source in 1935 and 60% in 1945. Calculated from data in Rodgers (Citation1996); Collingwood Forever (forever.collingwoodfc.com.au/); Blueseum (blueseum.org/tiki-index.php#&panel1-1&panel2-1); Demonwiki: The History of the Melbourne Football Club (demonwiki.org/Home); Tigerland Archive (tigerlandarchive.org/tiki-index.php).
6. In 1939, the VFA unilaterally ended an agreement with the VFL that required players to obtain a clearance before transferring between the two leagues. For the rest of the sample period, players could move freely between VFL and VFA clubs without the permission of their original club.
7. In 1955 and 1965, an average of 53% of Melbourne’s playing list was drawn from outside the metropolitan area, compared to an average of 41% at Collingwood and Richmond.
8. David Williamson’s play, The club (Citation1978), is a thinly-disguised portrayal of Collingwood and its struggle to adapt the tradition that it ‘would never stoop to buying players’ to a modern era, in which the ‘days when recruits would flock to the Club from all over the country simply because of its name are long gone’.
9. In 1949, Essendon’s secretary wrote that ‘Essendon has never paid more than the Coulter Law allows … The game has become too mercenary already’ (Quoted by Ackerly, Citation2014, p. 44). Strike action by a group of Essendon players in 1970 was the trigger for the VFL to abolish the regulations.
10. This is a variation on standard efficiency wage models, in which workers are heterogeneous and firms choose to pay above the market-clearing rate if a lower wage will reduce the average quality of new workers (Weiss, Citation2014). Schmidt and Zimmermann (Citation1991) follow a similar approach, using firm size as a proxy for wage determinants for which no data is available, such as job satisfaction and labour quality.
11. The dataset is constructed from information in Rodgers (Citation1996).
12. During the sample period, the VFL scheduled 18 home and away rounds in almost all seasons, which in a 12-team competition meant that each team played four others only once during a season.
13. Tests were conducted for stationarity and autocorrelation. In (1), there are combinations involving all of the sample teams and the data is panel in nature. A panel-data unit-root test was conducted once the variables were demeaned (Levin, Lin & Chu, Citation2002). All variables were found to be stationary and there is sufficient evidence to reject the null hypothesis.
14. (2) and (3) involve only one pair of teams and the data is times series. An augmented Dickey-Fuller unit-root test was conducted, with the variables found to be stationary. For the panel data, the Wooldridge test for autocorrelation did not find that the presence of autocorrelation (Drukker, Citation2003; Wooldridge, Citation2002). In the time series regressions, a Durbin-Watson and Cumby-Huizinga general test for autocorrelation in time series is performed (Baum & Schaffer, Citation2013). In Durbin-Watson and Cumby-Huizinga, (2) passed at the 5% level. Model (3) passed the Cumby-Huizinga at the 5% level, but was within higher and lower bound for Durbin Watson, thus there is a lack of evidence to reject autocorrelation.
Additional information
Notes on contributors
Luc Borrowman
Luc Borrowman is a Lecturer in the Department of Economics at the Monash Business School, Monash University. He has published in Australian urban and economic history. His recent work includes Borrowman, L., Kazakevitch, G., & Frost, L., (2017). How Long Do Households Remain in Housing Affordability Stress? Housing Studies 32: 869–886.
Lionel Frost
Lionel Frost is an associate professor in the Department of Economics at the Monash Business School, Monash University. He has published extensively on urban and economic history in Australia and the Asia-Pacific Region. His recent work includes “The Economic History of the Pacific,” in The Cambridge World History Volume 7, 1750 to Present, eds. J.R. McNeill and Kenneth Pomeranz (Cambridge: Cambridge University Press, 2015).
Abdel K Halabi
Abdel K Halabi is a Senior Lecturer in Accounting at the Federation Business School, Federation University Australia. He has a special interest in accounting history as it relates to sporting organisations.
Peter Schuwalow
Peter Schuwalow is a lecturer in Education in the Melbourne Graduate School of Education, University of Melbourne. Recent research has included the history of labour market regulation in professional sports and the economic value of professional sport.