Could star NBA players some day command and receive salaries above $1 billon a year?

Ask an Economist
Question: 

Looking centuries into the future, is it plausible to believe that star NBA players could command and receive salaries at and above $1 billon a year? Could a future economy support such excess?

Answer: 

Some of the highest paid pro athletes today are paid $30-40 million per year. For example, Lebron James (NBA) just signed a two-year extension with the Lakers at over $40 million/year. Just based on the 'time value of money' concept alone, if one assumes a salary of $30 million/year increases at 5.25% annually for 100 years, its equivalent value 100 years from today is over $5 billion. Even at a 3.25% annual increase rate, the future value is over $2 billion in 100 years. So, yes, it is possible star pro athletes can be making $1 billion/year, 100 years from now.

I am not sure what the basis is for the assertion that these salaries are in "such excess." The value of an athlete is based on their income-earning ability, which is known as derived demand. Wages paid to labor inputs, such as athletes, are based on this concept and it is related to the overall supply and demand conditions in that market. Those of us who aren't athletes don't believe we should be paid less than the going market wage. Athletes feel the same way. In recent years, television revenues have been mainly responsible for the rapid revenue increases for professional sports leagues and teams. TV coverage of sports got its start around 1950. Whether such revenues continue to increase over time as they have recently will be based primarily on us fans and our willingness to watch broadcasts of sporting events and to buy the products advertised during those broadcasts.

Answered by:
Dr. Ronald Deiter
Professor
Last updated on December 7, 2020