By Radio Free Arsenal
July 18 2012

Having proved that Arsenal have declined from the heights of 1998 -2004 since 2005 in part 1, it was illustrated in part 2 that the drop in transfer  spending had undermined the strength of the squad. I also examined the relationship between that drop in spending and changes in the wage structure.

 In this section I want to go over some previous ground to establish and draw out the key lessons of Part 1 and 2 before moving onto part 4. In particular I want to develop the concept of "Wage Efficiency", or in this case "Wage Inefficiency". In other words not just how much the wage bill is, but how it is distributed. How many bangs for its buck is the club getting?

The figures quoted previously in part 2 of this article (see link below this feature) confirmed that there had been a major reduction in transfer spending at Arsenal football club in the last eight years over the previous eight. The evidence also shows that investing in the transfer market is not the only component  for the success of a football club.  It is evident having an efficient wage structure is as crucial in the successful winning of silverware.

This has been well documented by  Simon Kuper  from Soccernomics, and Paul Tomkins in his book Pay as you Play. Bloggers like The Swiss Ramble, or the Political Economy of Football and research sites like transfer-league or Futbol confirm the importance of a wage structure for the success of any club. Financial people studying the business of football will also add their weight to the argument that investment in player wages matters as much, or even more, than investment in the transfer market itself.

I believe that wage investment matters more than transfer fees. If you invest more in wages you are more likely to keep your best players even if you do not invest heavily in the transfer market.

Consequently you will always have the best player to help win silverware.   The evidence has shown that the more you compensate your players the more likely you are going to win silverware and it becomes easier to hang on to the best players. Having a more ambitious wage structure has the added benefit of making it easier to attract and recruit world class players and hence making the pursuit of silverware much easier.

A close analysis of Arsenal current wage structure (2006-2012) shows it is counter-intuitive and inefficient.  The evidence has shown that the restrictive wage structure has made it very difficult for the club to retain its best players and is now labelled as a “feeder club”.  The board has failed to understand this important point.  The transfer of Ashley Cole to Chelsea is the epitome of this argument. 

When Arsenal wage structure is compared to Chelsea and Manchester United's it shows that it has failed miserably.  Chelsea and Manchester United have five to seven players who earn more than one hundred thousand pounds a week. This has been the case every year.  Henry was the last Arsenal player to earn one hundred thousand pounds or more per week.

In 2007 Dan  Fiszman claimed the following "Our wage bill is very similar to Manchester United and substantially above Liverpool's – it's substantially below Chelsea's but that's expected. We pay good salaries and pay them probably more evenly so we have less of the extremes. There is an ethos of a team effort."

It is now evident the Board initiated and endorsed this policy fully.  And this shift in wage spending regardless of who conceived it or who approved it clearly has hit the Club negatively in building a successful team on the pitch. It has undermined the club's ability to recruit and sign higher quality proven talent from other clubs, and is inhibiting the ability to retain the best players already under contract at the Club.

In fact it is  becoming a vicious cycle. Arsenal cannot compete for top players in the transfer market, and cannot keep the best players either. It has weakened the team twice over, while it clearly has made and saved the Club tons of money even with the increasing total wage bill. Has this savings really been essential to Arsenal's financial viability and survival, or actually benefitted the club? That is far less clear at this point.

But what we do know is that the result of this shift in investment has been on the pitch. And what is again beyond argument or dispute is that the decline in the team’s fortunes on the pitch has happened exactly as the shift in policy has. There is no way it can be claimed this is all mere coincidence or an accident of history. The competitive decline in Arsenal Football happened exactly in concert with the shift in financial policies and priorities of Arsenal Holdings PLC.

This leaves the question to address next why exactly did this drastic shift in spending happen in Part 4. Why did the club have to make a reduction in investment into the team?

End Part 3

Part 4 to follow