The impact of a rookie wage scale

We all know it’s coming and will arrive here with the completion of the new CBA. A rookie wage scale or a compensation structure with a ceiling on guaranteed dollars is a “for sure” component of a new CBA as it’s the one issue owners and veteran players can see eye to eye on.

Protecting the owners from themselves

Since 1993, agents asked for and received large sums of guaranteed money for the top draft picks in the first round. Keep in mind there were two sides involved with these negotiations and the owners signed off on the deals. When the numbers started reaching dizzying heights such as the $50 million guaranteed to Sam Bradford last year, many owners said, “enough is enough”. However, nobody was sympathizing or listening to their cry. But when they said, “enough is enough and that money should be re-allocated to veteran players,” they got everybody’s attention.

Jamarcus RussellICONA rookie wage scale will combat contract busts like JaMarcus Russell

<p> The sting left by the lack of value in the JaMarcus Russell deal ($32 million in guaranteed money), the loss of the ability to recoup a large portion of Michael Vick’s signing bonus (a dangerous precedent in the eyes of the owners), the Michael Crabtree holdout (71 days), and the opportunity to shift dollars to proven vets (a carrot for CBA negotiations), has made the implementation of a rookie wage scale a rallying point for owners.

The ironic truth of the matter is that when a team hits on a high first-round pick such as the Falcons have done with Matt Ryan and the Lions think they have with QB Matthew Stafford, the current system proves to be a good deal for both players and teams, with the team actually coming out ahead in the long term. The fact is that with a rookie wage scale, which will naturally bring shorter term contracts, will most likely result in larger portions of guaranteed money shifting to the 3rd or 4th year of a player’s career versus the current 5th or 6th year. Over the long run, owners will be dishing out more money for more years for proven players. But at least they will be limiting the financial risk for a faulty scouting department that misses badly on the performance projection of their top pick.

The shift of large guaranteed dollars from rookies to vets is really equivalent to throwing deck chairs off the Titanic to prevent it from sinking faster. The entire rookie pool dollars in 2010 only accounted for less than 5% of the overall pool for all players. The value received by owners for starting players in later rounds are the real value owners get for their money and can even make up for a first round bust. In addition, the holdout argument holds little water, as there have been 6 holdouts since 2006 that have lasted more than 3 weeks.

With less money at risk, will teams take more gambles on longshot first-rounders?

One may speculate that limiting the amount of guaranteed money invested in a top 10 pick, or “at risk monies” for the owners, makes teams willing to take more chances in the first round. I initially thought that made sense until I debated the idea with several GM’s. All the GM’s told me that having a rookie wage scale wouldn’t change how they do business. They are still going to draft the best players based on need and fit. However, one GM did say that a rookie wage scale might benefit a player like Cam Newton in that the risk-reward ratio now works to his benefit.

Will agents still invest?

There has been some rumbling from agents that they may no longer invest the thousands of dollars it usually takes to prepare rookies for the Combine and pro day. Many feel they won’t be able to recoup their investment if the guaranteed money component of rookie deals shrinks too much. The fact is that for every agent who pulls back there will be five ready to fill the void. Furthermore, with shorter years to free agency the incentive will still be there to make the investment. However, if our fees get capped at 2% versus the current 3%, than the economics will change dramatically and the investment in rookies will naturally decline.

The biggest net effect I see with a rookie wage scale will occur 3 to 4 years from now when great players are in the last year of their rookie deal. These players will strike monster deals with large guaranteed components at the ripe age of 25, 26 and 27. Until now, most second contracts have been struck at ages 28 and 29. With younger players hitting the free agent market earlier, I believe teams will be willing to make even bigger investments than we have ever seen in the past. We will see players from this draft class striking it rich in a few short years and given shorter-term contracts that will hopefully come along with a rookie wage scale. Even if a first round pick signs a 5-year deal, I doubt he will ever make it to the 5th year of his contract if he reaches Pro Bowl status. The effect of a wage scale could have the players being paid way under market value and something will have to be done before the final year of the contract.

With the new rookie wage scale, teams may see a short term saving on the front end, but still pay a huge price on the back end.

Follow me on Twitter: @jackbechta

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