Monday, 25 October 2010

Why Rooney makes £200,000 a week and a nurse is on £27,000 a year

Wayne Rooney makes up to £200,000 a week on his new contract which is staggering considering a nurse makes on average £27,000 a year. Wayne is on around 380 times more than a nurse yet nurses help save lives and Wayne probably can't spell patient (not that i can talk), what is going on?
Some would question "what is going on! Its an outrage" maybe even doubt how economist works, but economics and example this quite easily: DEMAND AND SUPPLY.

The theory
Footballs have always been in short supply, there are very few players with the skill to play at the top in Football. To show this we draw an inelastic supply curve, as shown bellow in the graph
This first graph shows the demand for football players forty years ago, when plotted across this translates to £2300 a week. The second demand lines shows demand in 2010, demand has increased dramatically and because the supply of football players is inelastic this is multiplied and the salary sores.
At the bottom we can see that Q was the supply of skill football players and this now have increased to Q1, this is because the high wages incentivise more people to try and be football players, but if you don't have the skill you can't become one so Q is not effects much at all. This is what inelastic supply is all about.

Where is the high demand?
Why has demand increased? Whats the evidence? Well increasing viewing figures is the main reason, increasing merchandise e is another reason and the size of the top football as increased.
Football clubs are now seem all over the world and sell shirts and other merchandise in millions, for this reason an iconic football player is in very high demand: by the owners wanting to sell shirts and make money and by the fans that want to win.
The table bellow shows the value of rights to the premier league overseas, this is doubling every three years, which means the demand for players is being forced up as well.

Why do nurses get so little?

What about the nurses? well its simple, there is larger supply of nurses than skilled football players which drives down the 'price per nurse'.

Want to lower pay for football players?
If you still think its outrageous what football players get  paid then you can start by stop buying any merchandise from any team, so the value of a team or a players name falls and its not profitable for the owners of a club to pay so much for them.
Then you can stop watching all football games on TV so viewing figures falls and Sky, BBC and others don't bother paying for the rights to football and the value of it falls (low demand). Also advertisers will be put off football as a method of selling their products.
The question is would you really want to do that? and get everyone else to do that..? Or would you rather do the British thing and just moan and enjoy some fantastic goals? I'd rather do the latter.
The COCA COLA championship...

So next time your staggered by the amount Wayne Rooney gets pays consider how much people talk about football, all the matches you've watched and how much you care (or know someone who cares) about your team. Thats translates globally into HUGE demand which is why he gets a huge salary.

Primary sources:
Fags to Wags- The Times
Premier League world's favouriate league -Telegraph

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