USWNT “Equal” Pay Lawsuit

At MWG we don’t pride ourselves on timeliness.  This one isn’t all our fault as we had some technical difficulties.  The US women’s National Soccer team (USWNT) sued the US Soccer Federations over the collective bargaining agreement (CBA) they had both signed.  The USWNT’s CBA and the men’s CBA are vastly different.  The pay part of the lawsuit has been rejected so after we review the facts we would like to explain why the CBAs are so different and speculate why The Frontrunner has got involved.

The National Review editors did a nice job of reviewing the results.  Their title is Soccer Decision Scores A Goal For Women’s Choice.  Of course you should subscribe and read the whole thing.  Here is a great summary:

Los Angeles federal judge R. Gary Klauser did two things that don’t happen often in public arguments about gender and wages: He looked at the evidence, and he took women’s choices seriously. The result was a defeat for a class-action lawsuit filed by the U.S. Women’s National Soccer Team against the U.S. Soccer Federation, but a victory for women’s priorities in the workplace.  USSF is the governing body for both men’s and women’s soccer, and it collectively bargains contracts separately with the unions for the men’s and women’s teams.

The editors make three points from the case:

  1. The USWNT made a lot more money than the men.
  2. The USWNT would have made more money under the men’s CBA but the men would have made more money under the USWNT CBA.
  3. The USWNT rejected the men’s CBA

Why would the USWNT choose a very different CBA then the men?  Men’s soccer is really big deal world-wide.  You know how much some US athletes make but the top three highest paid athletes in the world are soccer players.  They all make over $100 million per year.  There is club soccer and international soccer (playing for the national team).  The Women’s [soccer] World Cup is a big deal.  It is not nearly as big as the World Cup but the differences in  men’s and women’s club soccer are comparatively enormous.  When Arsenal plays at home at the Emirates Stadium in the Premier League they almost always sell out meaning over 60,000 fans and the game is televised all over the world.  Leeds United, the top team in the second tier of British soccer attracted 36,500 fans to a recent game.  The Arsenal women, a very good team with many World Cup veterans, often play at Meadow Park that has an attendance record of 4,030 according to Wikipedia.  So a rough guess is that the ticket revenue for the men is three million pounds and the women is 40,000 pounds.  The revenue of women’s club soccer teams means that women make the most money playing for the national team rather than the club team.  This list from 2020 has just four women making over $100,000 playing soccer.  We think it includes club, country, and endorsement earnings like the men’s list but it is not specified.

Sidebar: We think it is likely that both the World Cup and soccer giants like Arsenal subsidize the women’s game.  It is a economically rational choice as the men’s game is close to saturated while the women’s game has growth opportunities.  End Sidebar.

The USWNT might choose otherwise but it is a rational decision for the women to choose a low risk CBA and the men the opposite because most of the men have a substantial club contract while the women do not.

So why did The Frontrunner wade into a situation where the facts are so against him? Here is part of a report from a British newspaper:

“Don’t give up this fight,” Biden wrote on Twitter on Saturday. “This is not over yet.”

The presumptive Democratic candidate for president then turned his attention to the governing body.

“To US Soccer: equal pay, now,” he wrote. “Or else when I’m president, you can go elsewhere for World Cup funding.” [Emphasis added]

We were, or perhaps he was, confused about the last item in bold.  The World Cup is rolling in revenue.  Who needs money from the federal government?  It turns out The Frontrunner is trying to threaten the 2026 World Cup to be held in North America:

Moreover, he warned U.S. Soccer that should the equal-pay dispute not be resolved, he would withhold funding for the men’s World Cup in 2026, which is due to be staged in the USA, Mexico and Canada.

There are some Congress critters that agree with The Frontrunner.  They have come up with the misnamed Give Our Athletes Level Salaries (GOALS) Act.  We are not sure what he can do or the wisdom of it.  In the United States stadiums, the big funding issue for the World Cup, are built by cities, states, and private enterprise.  Has the federal government promised to build stadiums for 2026?  We would like to know.  We might agree on the withholding but not GOALS.

The Frontrunner has promised to alienate the large group of men’s fans to possibly attract women’s fans.  We hope everyone sees that the lawsuit deserves to lose on the pay part but that might be asking too much in a Twitter world. The odds don’t look good for him because the World Cup is really popular.

The good news is the pay part of the suit has been dismissed for the right reasons.  The bad part is The Frontrunner wants to follow in the steps of the 44th president and The Donald by getting involved in events that he should ignore.  The Frontrunner just can’t seem to provide a reason to vote for him in the 2020 general.

 

Income Inequality Part ???

Income inequality is a bogus issue.  If you want to help the poor then you need to look at serious issues including how to keep families intact, how to get folks to move to economic opportunities like the fracking boom in North Dakota, and reduce barriers like regulations on jobs or minimum wage increases.  The other thing you want to do is pay homage to the growth fairy.  The growth fairy has made us all rich.  Whether you call it Jonah’s Miracle or Deirdre’s Great Enrichment, growth is the key element to why we are all better off.

Robert Verbruggen at NRO has a nice article on how folks are trying to repackage income inequality to gin up the politics of envy.  He is reacting to a NYT article touting The Triumph Of Injustice by Emmanuel Saez and Gabriel Zucman.  Robert starts out with the book’s claims:

Per Saez and Zucman, while the rich have been pulling in more and more of the nation’s income — grabbing about a fifth of it now, double what they got a few decades back — they’re paying lower and lower tax rates. Indeed, in 2018, the richest 400 Americans paid the lowest overall tax rate (including state, local, and federal taxes) of any income group. While the very richest Americans in 1950 paid two-thirds of their income in taxes, in 2018 it was down below a quarter; even the full top 0.1 percent barely pay more than the bottom 90 percent these days. It’s not that much of an exaggeration to say we have a flat tax system, not a progressive one.

These claims seem silly when compared to the data on federal tax returns from the Tax Foundation:

The share of reported income earned by the top 1 percent of taxpayers fell slightly to 19.7 percent in 2016. Their share of federal individual income taxes fell slightly, to 37.3 percent.

The rich are making less than 20 percent of taxable income but paying over 37 percent of federal income taxes.  What the book is doing is making an invalid comparison between taxes computed on one basis and income computed on another basis.

Robert tell us measuring income is complicated:

As the JEC report details, this is only the first of many technical decisions researchers must make that affect the results. Should we worry about income inequality before or after taxes are taken out? Should we include governmental transfers as income? Should we analyze married couples together or separately, bearing in mind the decline of marriage in recent decades, especially among the poor? How to handle corporate profits that are retained rather than given out to shareholders? How to handle stocks that have grown in value but have not been sold?  [Emphasis added]

Yup, computing income is complicated.  We would like to give an example of the last item that we have made bold.  Income, as accountants and especially PhD students know, can be measured in a variety of ways.  Taxable income would be one and financial accounting income (GAAP) would be another but there are others.  When measuring the income, what accountants call unrealized holding gains (UHG) become a big issue especially for individuals. An UHR happens when an asset owned by an entity or individual goes up in value.  Taxes are not paid on the UHG until the asset is sold or in the case of your house not paid at all.  This is one of the reasons that the individuals in top one percent of taxable income varies so much from year to year.  Individuals (generally) only pay taxes on your cash income as your start up company prospers but when the individual sells it to a bigger company, depending on how it is structure, it might cause a big income year.

Let’s take a plausible example to help you understand.  Bill Gates is estimated currently to own over 400 million shares of Microsoft.  He doesn’t pay taxes on the UHG unless he sell the stock.  So let’s say (this is total guess) Bill has cash income of $100 million.  Microsoft is up almost $40 per share this year.  It is a bit of an over estimate but it keeps the math simple.  Bill has an UHG of $16 billion versus taxable income of $100 million and taxes of less than $37 million.  Of course in 2000 when Microsoft decreased in value by over $30 per share and Bill owned many more shares then his tax rate would be astronomical.

Sidebar: It makes good policy sense to tax on a mostly tax basis because taxes must be paid in cash.  End Sidebar.

The argument is all about timing.  When you measure income one way by including UHG and taxable income another way then trying to make a ratio is …  [we pause here as we try to find a word other than crazy or insane] … bad methodology [as we retreat to jargon].

Don’t listen to the envy lobby.  Income inequality isn’t important even if we could agree on how to measure it.  Regulations (generally anti-incentives) and incentives are important.  Let’s worry about those.

 

Faculty Workload

Paul Caron, over at TaxProf Blog has parts of two articles on the dispute over faculty workload.  Joseph Epstein asks, “Who’ll Take A Pay Cut For Free College” over at the WSJ (subscription required).  Among other things, Joe says faculty have a sweet racket.  Coleen Flaherty calls shenanigans on Joe and wants to fact check him.  We’re generally with Colleen but think even Coleen could do better.  Do read all of what Colleen has to say.  Only read Joe if you want a rant.

Joe leads with a picture of Nick Saban, the Alabama football coach, and spends three paragraphs on college athletics.  We are not a fan of Division I sports, but they are irrelevant to the tuition cost.  Students do pay a separate fee but Division I athletics generates essentially all of their own revenue.  You can also ignore the college president but Joe has an important point on administrative creep.  He does get a bit wound up but he is close the the mark when he says:

The next big cut in the cost of higher education would be in superfluous administrative jobs, for the contemporary university is nothing if not vastly overstaffed. All those assistant provosts for diversity, those associate deans presiding over sensitivity programs, those directors for student experience—out, out with them.

He actually only spends two paragraphs on faculty.  Joe starts out imprecisely:

Which brings us to the faculty. Faculty jobs in American universities have risen well in excess of any visible improvement in the quality of university teachers: $200,000-a-year-or-more professorships are now not uncommon.  [Emphasis added]

Joe should have given us a little data on what the bold part means.  Yes, there are some highly paid faculty members in some departments.  Because we are retired we don’t have access to the data we did before.  Here is an AACSB summary of worldwide salaries for 2018/19.  AACSB is an organization of business schools.  It is hard to become part of AACSB so we could describe it as an elite organization.  Business school faculty make substantially more than most other faculty and elite schools pay more too.  There are just under 5,000 accounting (to pick a large discipline that is close to our heart, highly paid, and at the beginning of the alphabet) faculty in the survey and at least 300 are in the $200,000 category.

Sidebar One: We only have a very rough estimate from this data as it is 75 percentile, median, 25 percentile, and mean for four levels of faculty.  We can infer that there are some big salaries because the mean is above the median.  End Sidebar One.

So in one of the highest paid disciplines at the tonier universities, to use Joe’s term, perhaps 10% (that would mean 500 out of 5,000) make $200,000.  Some make much more than $200,000 but there are lots of schools and lots of disciplines where nobody is making $200,000.  We are close to certain that no faculty member at our former school is making $200,000 per year.  There is substantial faculty income inequality within and among universities.

Then Joe gets silly and decides he wants to pay us all on an hourly rate by experience. We might be able to staff the English department but the business school and many other departments would be out of luck.  We are not sure about what Joe plans to do about scholarship and service.  It is a bit of an overstatement to say that the faculty run the university but faculty committees do stuff like hire, fire, and budget.  Colleen notes one study finds professors spend 17 percent of their time in meetings.

Colleen brings up the opposite of the racket: the expansion of what are often called adjunct faculty who are paid by the course at a much lower rate than faculty and are not expected to do service or scholarship.  She says:

Among other things, Epstein’s essay ignores the structural shifts that have occurred since he began teaching — most significantly the transition to majority-non-tenure-track work force. This means that many professors don’t make a salary at all, but are paid on per-course basis. (In this sense, he’s closer to his “strict hourly wage” reality than he thinks. But adjuncts say that the $3,000 they often get to teach a course vastly undervalues the actual work they do to plan it, teach it and be available to students taking it while staying current in their fields. And that shift, in turn — along with public funding cuts — has led to a greater overall workload for tenured and tenure-track professors.)

She makes good points that this is Joe’s idea and that this increases the workload for the remaining faculty.  To be specific, there is more work because there are fewer people carrying a bigger service load.  Colleen leaves out that there is a mezzanine section of instructors who are full-time with a service expectation but (usually) no research expectation and no tenure.

Colleen has data from AAUP (all disciplines for American schools).  Income inequality shows up between private and public and by research intensity.  Here is some data:

At public doctoral institutions last year, the average full professor salary was $141,000. Associates made about $97,000. Assistants made $84,000. Full-time instructors made about $63,000, while lecturers made about $57,000.

Colleen leaves out the income inequality by discipline.  There are not many, if any, English faculty above the averages and no (well, there could be an exception) accounting faculty that are not above the averages.

Colleen give some examples of faculty working really hard.  She is right.  All faculty do teaching, scholarship, and service but the emphasis is on different things at different schools.  At doctoral schools the emphasis is on scholarship.  At comprehensives there is more of a balance among the three.  At smaller schools scholarship is less of an emphasis and service is more of an emphasis.  Faculty work hard but lots of the work is not obvious to everyone.  Faculty committees like assessment of learning, curriculum design, and retention of other faculty are not obvious.  The value of scholarship is hard to evaluate.

Coleen mentions one thing we get as faculty and leaves two out.  She is right we get flexibility but doesn’t go far enough.  We might work seven days a week but we can usually pick up the kids when needed.  Faculty members also have flexibility about what to teach, what scholarship to engage in, and service areas.  The flip side of flexibility is that each faculty member has to figure out what to do.  She leaves out, once we are tenured, we get exceptional security and a good retirement plan.

Sidebar Two: Tenure is a double-edged sword.  Tenure must be granted.  The percentage of probationary faculty earning tenure those schools with big salaries is pretty low.  It is hard to get good data because most folks leave voluntarily before the sword falls.  If you don’t get tenure then you are fired.  End Sidebar Two.

When we were finishing our MBA program some of the teaching assistants had a discussion.  Should we teach or work?  We chose to teach and learned that it is more than teaching but it is different than work because you have so many choice.  We can’t put a number on it but we were willing to trade off lower current income for flexibility, security, and a good retirement plan.  Like any career, it is a racket if you like what you do.

 

 

 

Math Is Math But

We were already convinced that the US Women’s National Team earned more than the men based on their performance.  John Hirschauer at NRO links to Carlos Cordeiro, the head of US Soccer who gives us the details.  The headline is

Over the past decade, U.S. Soccer has paid our Women’s National Team more than our Men’s National Team.  From 2010 through 2018, U.S. Soccer paid our women $34.1 million in salaries and game bonuses and we paid our men $26.4 million—not counting the significant additional value of various benefits that our women’s players receive but which our men do not.

The part we found most interesting is it turns out that the women have negotiated a very different contract than the men.  As we have pointed out before, an important reason for this is that club soccer can pay extraordinarily well for men but not for women.  US Soccer has chosen to support US women’s club soccer in two ways.  First,

U.S. Soccer also pays WNT contracted players a $67,500-$72,500 salary for playing in the National Women’s Soccer League.(In contrast, we do not pay salaries for men who play in Major League Soccer or any other men’s professional league)

Second, they pay benefits like health care etc. for women but not for men.  Why do the women negotiate this and the men don’t?  You know why, it is the different market for men and women in club soccer.  According to this (we can’t find a date) the lowest paid starting player in the Premiership is 3,600 British pounds per week.  Here are the average Premiership team salaries for 2018/19 in dollars.  They are annual salaries in millions of dollars and range from $1.26 at Cardiff (which was relegated) to Manchester United at $8.6.  The big money for men is getting to play for the big teams in the big leagues.  On the women’s side, the US federation, and probably other ones, support the club teams.

There is no reason for the government to be involved in this.

More On World Cup Pay Comparisons

A.G. Hamilton at the Corner on NRO concurs with us on the World Cup pay comparisons and adds more data.  We checked on about the author and found: A. G. Hamilton is the pseudonym of a licensed attorney.  That makes personal pronouns difficult.  Of course you should educate yourself by reading it all but here is a taste of it with A.G.’s conclusion:

Almost everyone who read about this topic from mainstream press sources came away with the impression that the women’s teams were being treated unfairly in the World Cup despite the numbers clearly telling a different story. That’s a problem with the press, not discriminatory pay.

You will notice that we left it to you to find the relevant data from A.G..

More World Cup Economics

We are still celebrating the US Women winning the Women’s World Cup.  And there is lots of stuff about equal pay that we dispensed with yesterday.  Today we want to look a couple of more things: equal pay by team and incentives to keep playing for the national team.  We have a research project for some enterprising sports economics researcher ready to go.

It appears that all members of each national team are paid equally.  They are not equally talented.  Lots is published about men’s club salaries and we know that that soccer salaries, like all major sports, vary widely.  Here are the top twenty earners from 2018 according to Forbes.  The salaries range (they also have endorsements) from Messi’s $84 million to a measly $15.5 for Zlatan Ibrahimovic.  There is lots of inequality among the top twenty on the men’s side as there is down the list.  The woman’s list (this one from 2016) has much smaller numbers but substantial variation.  If the reports that all team members are paid equally including bonuses is correct then the unused goalies on the US women’s team are among the highest paid female soccer players in the world.  On the other hand, for Messi the salary impact (the endorsements impact might be a big deal) using US incentives would be trivial.

The research project becomes a comparison of the incentives to men versus women to play on their national team.  There are incentives other than financial to play for the national team.  Do the financial incentives cause men to retire from national teams earlier than women?  Is it different for great players?  There are many parameters to consider but we don’t want to do all the work but it looks like an interesting project.

2019 Women’s World Cup

The USA has won the 2019 Women’s World Cup (WWC) for the second consecutive time and the fourth time over all.  The have been eight WWC and the USA has four golds, a silver, and three bronzes.  We have team to be proud of.

There has been much talk about equal pay for the US national teams.  Here is a story from Business Insider (BI) published a few years ago with some details.  It appears that a chant for equal pay broke out after the USA won the WWC final against the Dutch.  What is the rationale for such a recommendation?  Is it equal pay for equal work?  No, none of the women would make the men’s team.  Is it revenue generation?  Perhaps. The WWC does get high TV ratings in the US.

As of 2017, the 2015 FIFA Women’s World Cup Final was the most watched football  [soccer] match in American history with nearly 23 million viewers,[25] more than the 2015 NBA Finals and Stanley Cup.[26] It was also the most watched Spanish-language broadcast in tournament history.[25] More than 750 million viewers were reported to have watched the tournament worldwide.

The total revenue, however, generated by the WWC is minuscule compared to the World Cup.  The same Wikipedia item tells us:

The 2015 Women’s World Cup generated almost $73 million, the 2018 men’s tournament generated an estimated $6.1 billion in revenue. [Emphasis added]

We could find similar numbers for club soccer.  It doesn’t seem that you would get far towards equal pay using revenue generated as a rationale.  As a related issue, the national team can outbid clubs for women but not men.

The success of the women’s team is more reasonable argument for equal pay.  It appears from the BI story (we expect all the prices have gone up) that the US men’s and women’s teams do earn about the same.  The US women win almost all of their matches.  The US men do not.  The US women win the WWC.  The men didn’t even qualify to the last one and have won eight of their 32 matches in the World Cup.  So, using the BI chart, and saying that the women win 20 and the WWC and the men go ten and ten and miss the WC then the men get $182 K and the women get $174 K.  We could argue about the exact details and they are different than they were in 2016 but the structure looks close to right to us.

 

Engaging Shaw

We accompanied the Lady de Gloves to American Players Theatre (APT) to see the closing performance of Engaging Shaw.  The play, by John Morogiello, is about George Bernard Shaw’s relationship with Charlotte Payne-Townshend.  We approached it with some trepidation because we feared it would give us some of Shaw’s best lines without being much of a play.  We knew the cast of Colleen Madden as Charlotte, James Ridge as Bernard, Tracy Michelle Arnold as Beatrice Webb, and APT relative newcomer Gavin Lawrence as Sidney Webb would make it interesting.

The opening music told us it was going to be a fun time.  The play turned out to be an excellent rom-com with a conservative heart.

Sidebar: APT is becoming our favorite Wisconsin conservative institution.  True most of their conservatism is about the theatre.  They are, however, fearless with the conviction to freedom of expression and that means they are different from almost every other similar organization.  Experiencing Shaw is a great example.  End Sidebar.

Bernard, Beatrice, and Sidney are (in the play and real life) socialists who are members of the Fabian Society.  Their foolishness is often pointed out.  For example, Bernard and Charlotte are discussing income (in)equality and it goes roughly like this: Bernard says incomes should be equal.  Charlotte inquires as to how much income.  Bernard says just enough to get by.  Charlotte asks who will decide.  It take Bernard awhile but he admits that he plans on deciding.  It is wonderful romp both as a rom-com and skewering socialists.  The latter is something we can never do enough.

Ignore Income Inequality

A few days ago Paul at PowerLine had fun with Jeff Stein at Washington Post trying to use income inequality to support a wish list on the left.  Do read all that Paul has to say but he puts the major point succinctly:

I like to ask those who throw such numbers around questions like “how much wealth in relation to the poorest 80 million households should the richest 400 Americans control?” and “what percentage of the wealth created in this country since 1982 should have gone to the top 5 percent?”

Unless you have a goal there is no reason to play.  We would have put the goal as a Gini Coefficient but the effect is the same.  We want to play too.

Early on Jeff says:

But while there’s consensus that America is a wildly unequal country, there’s broad disagreement on what, if anything, should be done to address that. [Emphasis added]

It is hard to define wildly in the sentence above but our response would be that there is no consensus that America is a wildly unequal country and there is broad agreement that nothing should be done about income inequality per se.  Perhaps we are being hopeful on the consensus but we hope not.  There is much to do to improve the economic lot of Americans but trying to change the some aspect of income inequality is taking your eye off the ball.

Jeff has a couple of fun suggestions from Americans For Tax Reform and the Heritage Foundation.  They are Get Government Out Of The Way, Repeal Rules And Regulation and, our favorite, Send The 1% To Venezuela.  The latter is tongue in cheek but it is likely to reach the goal without much damage to the economy.  Why not much damage to the economy?  Well Facebook, Microsoft, and Walmart will still be American companies.  America might lose some spending by those rich folks but we won’t lose the capital.  Most of the rest are just a wish list from the left like universal government childcare or union rights often combined with taxing capital.  It is not clear that any of those suggestions will help income inequality and, as proof of the distraction of income inequality, the proponents rarely argue their suggestion is the best way to combat income inequality.  Let’s worry about important stuff.  Changing income inequality is not important in America.

 

 

 

Ignore Income Inequality

Income inequality seems to have great resonance.  An example is where Scott S. Powell argues in the WSJ that we should do away with or change Sarbanes-Oxley (SOX) because it increases income inequality:

With corporate tax reform in the rearview mirror, Congress and the Trump administration should pare back a misguided regulatory regime [SOX] that imposes unnecessary costs on public companies, discourages initial public offerings, and skews the distribution of wealth toward the very rich.

We would support adjustments to SOX but not because it changes income inequality. In addition, it is not clear what impact SOX has on income inequality.  More public companies might mean more rich folks.  On the other hand, Michael Tanner has a great article at NRO where he takes issue with what he properly describes as our dangerous obsession with income inequality.  Read it all but here is how he starts:

Yippee! Last week’s sell off on Wall Street wiped out more than $3 trillion in wealth. Overnight, economic equality increased. True, you and I aren’t any better off — in fact, some of those losses came out of our 401(k)s and pension plans — but the important thing is that the biggest losers were evil rich people. Warren Buffet lost more than $5 billion, Jeff Bezos more than $3 billion. All together, the world’s 500 wealthiest people lost more than $180 billion. Aren’t you happy?

He answers his rhetorical questions with of course not.

Sidebar: One of the problems with our dangerous obsession over income inequality is the challenges of measuring it.  The losses Michael describes are not part of a US tax return so it would be difficult to measure the impact.  Two major problems with any argument about income inequality is how to measure it and what is the goal using that measurement system.  End Sidebar.

Michael points out that capitalism has provided great benefits in the US.  Others (here is a video) have pointed out how it has helped the the world.  We need to promote economic freedom, defeat crony capitalism, and protect the needy.  Any argument that cites changing income inequality as a benefit should be ignored so that we can focus on serious stuff.