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Economic Efficiency In The Premier League And Bundesliga So Far This Season

This article is more than 4 years old.

In Soccernomics, Stefan Szymanski and Simon Kuper demonstrated a quantitative relationship between wages paid by Premier League teams and their standings. The logic is obvious: Teams that can afford to pay higher wages can attract better players, and in general, better players lead to more wins. As Szymanski writes in Money and Soccer, “This does not mean that spending guarantees championships, but that wage spending dominates in any explanation of the relative status of clubs over time.”

We can use the strong relationship between wages at the start of the 2019-2020 season and sporting success to create a ranking of economic efficiency of teams. Here I report economic efficiency rankings to date in the 2019-2020 season for the Premier League and the Bundesliga. Wage data comes from the incredible Global Sport Salaries report compiled annually by Nick Harris of Sporting Intelligence. What the data shows is that while wages are crucially important to sporting success, they are only one part of a complicated mix.

The Premier League, for 2019-2020, pays almost $2 billion in wages to its first team players. Manchester City is at the top of the table at about $220 million and Sheffield United is at the bottom at $23 million. So far this season 743 points have been won in the Premier League, which enables a calculation of the wage cost per point.

During the season so far, on average across the Premier League it has cost teams more than $2.6 million in annual wages to earn one point. Wages alone explain about 50% of the difference in points earned so far, which is remarkably consistent with an analysis by UEFA of the relationship of wages an sporting success across the top five leagues in Europe.

If we calculate the relationship of wages and performance, we can then use that formula to identify which clubs are outperforming their expected success this season and which clubs are under-performing. Based on the average wage cost per point gained this season, we can then associate over- and under-performance with an economic benefit or cost.

Here are the results for the Premier League as of February 26, 2020.

Liverpool, as they are in the league table, are way out in front, creating about $82 million in point value above what would be expected by their wages along. Sheffield United, in 7th place in the table, and Leicester, in 3rd, also show impressive over-performance.

Seven clubs are within 3 points of where they would be expected to be in the table, with Tottenham and Chelsea right where they would be expected based on wages alone. Norwich, Manchester United and West Ham bring up the rear, collectively 27 points under where they are expected, totaling a remarkable economic under-performance of about $75 million.

The same analysis for the Bundesliga shows Freiburg and RB Leipzig leading the economic efficiency table, show below. Total salaries in the Bundesliga (which has 18 clubs versus 20 in the Premier League) are about $975 million for 2019-2020, equating to a value per-point season-to-date of about $1.7 million.

Despite sitting at the top of the table with 49 points, Bayern Munich has the third-worst ranking in terms of economic efficiency, under-performing by an expected 7 points that are worth about $11 million. Werder Bremen, currently in the regulation zone, sits at the bottom of the table, under-performing by about $20 million. Seven Bundesliga teams are within 3 points of where we would expect them to fall in the economic efficiency table.

The difference in economic efficiency of the top to bottom performing Bundesliga team spans about $50 million, or about 30 times the average wage value of a point in the Bundesliga. By contrast, the difference in economic efficiency from top to bottom in the Premier League is more than $110 million or about 42 times the average wage value of a point.

The differences in economic efficiencies between the leagues indicate the greater wage disparities across clubs in the Premier League, as compared to the more equitable Bundesliga. Notably however, in both the Premier League and the Bundesliga wages explain the same amount of sporting success in each league, at about 50%.

Player salaries are an important factor in explaining success in top-level soccer, but these data indicate that there is much more going on in explaining why some teams succeed and why others fail.

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