As we celebrate the success of the US women’s soccer team, attention has turned to the lawsuit demanding equal compensation for male and female players. Winning the World Cup seems to bolster the claim, but there’s more to the issue than just “equal pay.”
Compensation in any job is based primarily on someone else’s willingness to pay for the products or services provided by the workers. The US Soccer Federation (USSF) employs both female and male athletes and negotiates the contracts for both teams. The men’s team has generated much more revenue over the years. Because of this, women have been paid a higher percentage of revenues than have men. From this perspective, men could demand a pay raise.
But there are several misunderstandings about the pay issue. Some—including several Democrats running for president—claim that the women should receive “equal pay” because of their success on the field. Are they suggesting that compensation should be tied to the number of wins and championships earned by the team? Perhaps so, but you can’t apply this type of model after the fact. If pay is to be based on performance, then all parties should agree on the measures in advance and be willing to accept the outcomes. I don’t think anyone would be demanding less pay for the women if they didn’t make it to the medal round.
Others argue that female athletes should make as much as their male counterparts simply because it’s fair. I agree with the principle, but this is more complicated in practice. Consider an example with a simpler revenue model—men’s and women’s professional basketball—the NBA and the WNBA. On average, male basketball players are paid more than $6 million, while their female counterparts earn less than $100,000. This happens not because their labor running down the court does more for humanity, but because they generate a lot more revenue for their teams. In other words, LeBron James and other male basketball players enjoy a higher market value. American consumers are willing to spend much more to go to NBA games, watch them online or on TV, and support NBA sponsors. If “equal pay” for female basketball players was mandated, the WNBA would not exist because teams could not afford to pay the players. This logic also explains why there are not professional baseball and football teams for female athletes.
In a market economy, compensation is based on market factors. When consumers demand more healthcare or entertainment, the market value of doctors, professional athletes, and others who provide these specialized services increases as well. This is an excellent system because the higher compensation lures workers into high-demand jobs. If you pay doctors the same as teachers, then few people would be willing to pay the high price of medical school. If female soccer players had to be paid as much as male soccer players in previous years, then it would not have been financially feasible to have a women’s team in the first place. In this respect, a market economy allows for innovation. When the demand for a new product or service grows, those who provide it will be paid more.
The USSF example is unusual because of complex revenue sources and different demand patterns for male and female athletes. For most jobs, gender does not (and should not) play a role in the business model. If USSF revenues for women’s soccer is equal to or higher than revenues for men’s soccer, then female athletes should earn as much or even more than their male counterparts. But ignoring the revenue side of the equation means ignoring the market, and doing so will have unintended consequences for all of us.