The player salary structure of Major League Soccer is complicated and at times downright confusing.
The league enforces a wage hierarchy that includes a salary cap with a litany of rules, designated players, younger designated players (differentiated by two age groups; one consisting of under 20's and the other 21-23 yr. olds), budget players, off-budget players (not counted against salary cap), and a minimum salary for budget players and lower minimum for off-budget players. It's convoluted, and in the end it all trickles down and hurts the lowest earning players, those making the league minimum.
These salary rules, and many more, were created in an attempt to avoid the mistakes of the past. The league had less regulation in its early years, allowing clubs to over spend on payroll without enough income to cover it. This was one of multiple issues that contributed to their fiscal troubles in the beginning. Due to financial difficulties, in 2002 MLS was forced to drop both of the Florida teams (Miami and Tampa Bay), which took the league from 12 teams back to its original 10 teams. Things slowly bounced back. The Designated Player concept was then introduced in 2007 as a part of the David Beckham experiment.
Major League Soccer now operates under a single-entity ownership model. Each team has an investor or shareholder but their investment or ownership is technically in the league and they more or less represent a specific team. Obviously it's not that simple, but to properly explain the MLS ownership structure would take a lawyer and about 10,000 words. Neither of which are at my disposal.
This ownership model has helped sustain the league in recent years, but it has also made for a large contingent of mediocre teams, instead of a few great teams. That's not necessarily a negative as it's allowed more teams to be financially stable. But it has also divided a larger profit that might normally be shared by the top 5 or 6 teams and spread it down throughout the league.
How does that ownership structure and regulation on teams affect their ability to sign and maintain young elite players?
A deterrent to young players coming to MLS is not only the designated player situation and the salary cap, but also the salary minimums. MLS divides the teams' rosters into categories. The minimum salary for a player in the lowest ranking category, roster spots 25 - 30, which usually consist of generation Adidas players, younger players, or rookies, is $35,125. However, any player making that league minimum must be under the age of 25. The players in these roster spots do not count against the salary cap of a team. So, yes it begins to get confusing.
The problem exists if an American player is good enough to attract European attention, but not good enough to be a Designated Player in MLS. The league minimum salary in MLS is on average eleven times less than the minimums of the big European leagues. That doesn't make it easy for MLS clubs to sign a young American player out of college if they are competing with other clubs who are forced to pay more.
After watching a few of the pre-season friendlies between MLS teams and European clubs, including the MLS all-star game, the interesting contrast is not the difference in level of play, but the difference in pay. Not at the top level, but at the lower level.
In the Real Madrid vs. Galaxy game, bench players for a Madrid side who may never see the field during the regular season came on against the Galaxy with a salary that meets the minimum in La Liga of approximately $318,000 per season. Players of that same distinction for the LA Galaxy, Charlie Rugg and Kofi Opare for example, earn $35,125. Then you have the promising Galaxy youngster Jose Villarreal, who falls into the higher category of minimum salary, which is roster spots 1- 24. He only pockets $46,500 per year, which is the minimum for his roster position and does count against the salary budget. All three of these players saw action against the Spanish giants.
Admittedly, the Galaxy do not have the revenue options of a Real Madrid. They don't have the 85,000 fan capacity stadium, the handsome TV deals, or the UEFA Champions League profits. One could also argue it's not a fair comparison, but if the two teams can play against each other, why is it off-limits to evaluate them side-by-side?
The biggest issue is that the wages in MLS do not match the skill level, with few exceptions of course. La Liga in Spain has suffered some financial issues of its own, with multiple clubs struggling on the verge of bankruptcy and a player strike in 2011 over minimum guaranteed wages. The players' union negotiated a deal and increased the guaranteed wages. Some teams didn't have enough money to pay the the agreed upon minimum salary so the league created a wage pool to make sure the lower earning players took home a reasonable paycheck if their individual team could not afford it. Not exactly an example of the free market at work, but a way to make sure the wages reflected the skill level, at least to some degree.
MLS definitely lessens the risk for clubs and makes it much harder for them to be insolvent since they are a part of the whole, and not on their own. And since they are already operating in that one-for-all, all-for-one fashion, why not invest in the youth.
It's no secret that MLS has instead focused their attention on signing the older well-known players and building the league on the fame and notoriety they bring with them. It is a build from the top mentality. The main issue being discussed here is the minimum salary, but that can't be argued without mentioning the amount of money allocated for designated players.
There has been talk of increasing the allowed amount of designated players (DP) from 3 as it is currently, to 5 per team. These DP's can be paid any amount that the club or league can afford per year and only $368,750 counts against the salary cap of the team. That's a huge incentive. In a perceived effort to encourage clubs to sign younger players, the league states that a DP under 20 years old only counts as $150,000 against the club's salary budget and a DP who is 21-23 years of age takes up $200,000 of the club's salary budget. That can be commended, except that the players of that level, and at those ages, can often make much more in Europe and play at a higher level. And if the league really wanted the top 20-23 year olds, they would make the amount of salary budget used for older DP's even higher, or maybe have a cut off age. No DP's when signed can be over the age of 31. There is no guarantee this would increase the league minimum salary, but it might put the focus in the right area.
This increase in allowable DP's will likely happen at some point in an effort to expand and improve the league, but how will that affect the bottom dwellers making $35,125 per season? Many professional soccer players in MLS are making less than an administrative assistant. It's significantly low especially in markets like Los Angeles and New York where the cost of living is much higher.
So, in asking for de-regulation it might seem that I'm arguing for more regulation. The conflicting argument is recognized, but it's actually a plea for giving the individual clubs more freedom. It would mean less regulation overall but with more focus at the bottom. It would force the clubs to pay the lowest level player a respectable salary, or at least more than an office assistant.
Part of what makes MLS clubs weaker than European clubs is the lack of depth. Yes, the famous players attract fans, but it's the other 9 or 10 guys on the field that help win or lose a game.
There will always be regulations, and this isn't a Robin Hood type scenario I'm recommending where we steal from the rich players and give to the poor, but they need to figure out a way to ease up with all restrictions so that teams can bring the best young players to MLS.
The top players should earn as much as the market dictates but the league should not angle things so drastically that it creates imbalance, giving an overwhelming advantage to one side. You can only control the market for so long until it backfires.
The difference in the level of play between the lowest paid players and the highest paid players in MLS is not drastic enough to warrant the gulf in salary.
You could make a million arguments to contradict this idea, but at the end of the day league minimum players in MLS are making 114 times less than the highest paid player, who garners over $4 million per season not including signing bonuses. If that player is Cristiano Ronaldo or Wayne Rooney or Juan Mata or even David Beckham (in his 20's), I'm fine with it, but Thierry Henry at 35 years old? That's the problem.