One would think that the more money a team spends on its players, the better the team will perform. Right? Well, this doesn’t necessarily seem to be the case with teams in Major League Soccer. In fact, in some cases it appears to be the opposite.
To investigate this link between team salaries and performance, I looked at data for MLS teams from 2007-2011. I started by compiling salary data on every player in the league 
and summing up each team’s salary by year. Then, I plotted these numbers against the total number of points that each team earned that year and ran regression analysis. (To account for league-wide differences in points from year to year as a result of a different number of games, I divided each team’s points by the total points possible that year. To account for league-wide differences in salary expenditure from year to year—it increases significantly over time—I divided each team’s salary by the total league salary that year.)
The results were very interesting to say the least. I looked at the entire dataset, I looked at each year individually, I even tried excluding the outlier teams (usually LA and NY with their disproportionately high salaries)—and not one of these analyses came up statistically significant. This means that there is no statistical link between team salary and performance in Major League Soccer. *
In less than half of the datasets, including the set of all teams over the entire period (Exhibit A below), there was a VERY slight positive relationship between the variables. This would imply that spending more money would improve your performance. However, the regression analysis showed that these results were not statistically significant.* In the rest of the datasets, including all of the teams in 2008 (Exhibit B below), there were
negative relationships between the variables. This would indicate that spending more money actually hurts your performance. Of course it is important to note that these results were not statistically significant either, but it is still a fascinating relationship. *
So why do teams spend so much money on players if they don’t improve the team’s performance? Well, it may not help the team on the pitch, but it does seem to have a significant effect on the team’s performance off the pitch—specifically, with attendance at their home games. There is a positive and statistically significant relationship between how much a team spends on players’ salaries, and how many fans attend their games. ** A plot of the salary expenditure of each team against their average home game attendance for 2007-2011 can be seen in Exhibit C below.
All of this analysis begs the question, should teams spend large amounts of money on players? Will it really help them out? Those are difficult questions to answer, as there certainly are examples of teams that defy the analysis I’ve done here (and I would have loved to have access to salary data from before 2007). However, what I can say for certain is that if a team is looking for a quick fix to catapult themselves to the top of the league, just throwing money at players is probably not going to cut it.
*It is not statistically significant at conventional levels, meaning a p-value of <.05 or <.1
**It is statistically significant at a p-value of <.01
Exhibit A:
Exhibit B:
Exhibit C:
