For the past week or two, we have witnessed a stunning climb in NBA free agent contract prices. Mike Conley, a Memphis Grizzlies player, now has the richest annual contract in the league, at an eye-popping $30.6 million per year. new L.A. Lakers center Timofey Mozgov now has a contract worth as much as the Cleveland Cavs Tristan Thompson, who just won an NBA championship, despite playing far fewer minutes.
The reasons for this sudden rise is a little complicated. Basically, because the NBA's salary cap is set to increase dramatically next year, team owners are being forced to reward players who are, in essence, being penalized for becoming free agents this year rather than next.
But as ridiculously large as top NBA salaries seem, they actually look incredibly reasonable when compared to rich people outside of professional sports, and to the inequality in America's economy more generally. According to a Fusion analysis, if NBA salaries followed the same distribution as all U.S. incomes, at least five players would be making more than $100 million a year—quadruple the salary of the highest-paid player in today's NBA.
Right now, the NBA salary distribution curve looks like this.
It's relatively fair: Only about $25 million separates the highest-paid player (as of Wednesday, the Memphis Grizzlies' Mike Conley) from the median salary. And the bottom 10% of NBA players almost all make more than $1 million.
Outside the NBA, incomes are much, much less equal. As of 2014, according to University of California-Berkeley economist Emmanuel Saez, the top 0.1% of U.S. earners had about a 4.9% share of all U.S. income. The top 1%, meanwhile, got more than one-fifth of all U.S. income, and the top 10% had a nearly 50% share of all U.S. income. The Political Calculations blog has calculated what this income distribution curve looks like (here's the 2012 version).
If we made NBA salaries follow the same distribution as U.S. incomes, players' salaries would look like this:
The new median NBA salary in this imaginary league (call it the "U.S. Income Distribution Association," or USIDA) would be $4.6 million, not far off from the real NBA median salary. But at the high end of the salary scale, the differences would be huge.
Under this scenario, Mike Conley, as the top 0.1% player in the NBA, would make more than $122 million a year—more than 5-times what LeBron James made last year.
The top 1% of NBA earners, a group that includes players like Toronto's Demar DeRozan, Boston's Al Horford, and Golden State's Kevin Durant, would be making a median of $105 million each, roughly four times what they're making in today's NBA. ($29 million, $28 million, and $27 million a year, respectively).
Meanwhile, in the fictional USIDA, life would get much worse for the bottom of the league. A player like Larry Nance Jr. of the Lakers is currently in the bottom 10th percentile for NBA salaries, at $1.2 million. In the USIDA, he would make just $850,000. And the bottom 5 percent of earners (whose contracts are around $850,000 a year) would see their salaries cut roughly in half.
You can argue about whether NBA players are really worth the mega-millions their teams are shelling out for them. But you should also know that the NBA is producing much fairer economic outcomes for its players than the U.S. produces for its citizens. And maybe, instead of complaining about the stratospheric salaries of talented professional athletes, you should wonder whether the hedge fund managers, tech titans, and media moguls at the top of the U.S. income ladder are really entitled to what they're making.
Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.