By Jordan Chiotellis
The NBA’s new collective bargaining agreement has taken effect with the start of the 2023-24 season. This agreement between the league and the players association ensures stability in the league, and makes sure that there will not be a lockout. The deal brings about many new changes that will affect teams’ behavior in the free agent market, and in building their rosters as a whole.
In recent years, many teams across the league have shown a willingness to spend high amounts of money to build their teams, often going above the league's salary cap and into the luxury tax. With the new collective bargaining agreement, it will be far more difficult for these teams to add talent to their rosters by doing this. The NBA has implemented a second salary cap apron, set $17.5 million above the tax line, and many penalties have been put into place for teams that exceed this second apron when constructing their rosters. Applying this to economics, the league is essentially attempting to put stricter price ceilings into place for how much teams can spend, and punishing those who go above the ceiling. Without going into all the nuances of the agreement, while it is not illegal for teams to exceed the second apron, there is an extremely strong incentive to stay below the $182.5 million team salary it is set at.
These changes hold major implications for some of the league's highest spenders- the Golden State Warriors, LA Clippers, Milwaukee Bucks, etc. While these changes may be necessary to bring about balance to the league, these restrictions can unfairly hurt teams that have built very strong rosters from the ground up. With these stricter regulations on team spending, teams are left to make difficult decisions regarding their rosters. An example of this is
the Golden State Warriors, who have been one of the more dominant teams in the NBA for nearly a decade. They largely built their roster through the draft, but these stricter price ceilings have made it very hard for them to retain their players, almost unfairly punishing a team for drafting well. They have been forced to make decisions that may not be in their best interest, but are necessary to avoid exceeding the second apron. In recent years, they have had to get rid of talented young players like Jordan Poole and James Wiseman, simply because they command money that the Warriors could not pay them. Overall, while the new CBA certainly sets the league up for greater parity, it comes at the cost of hurting the league’s strongest teams.
There is no doubt that the league wants to move past the era of superteams, but it raises the questions of if these new money related punishments are totally ethical and fair, given the limitations that they set on teams. We know that price ceilings in markets often lead to shortages, with the quantity demanded exceeding the quantity supplied. The case may be the same in the NBA; a team may demand more talent for their roster, but they may not have the supply (money) to pay for these players, given that there are more strict price ceilings (the salary cap aprons we discussed previously) in place. These price ceilings will greatly change how the NBA operates, and will impact how teams approach roster building and spending.
In addition to further restraints on the maximum amount of money a team can spend, the league is also implementing stronger price floors that will greatly incentivize teams to stay above the salary floor each year. This means that there are also stricter punishments for teams that do not reach the salary cap floor, or the minimum amount of money that teams have to spend to build their rosters. Teams will not be able to use any of the money left over if they do not meet the salary floor, and this money will instead be added to their payroll. Looking at this through economics, price floors are often set in a market as a minimum wage law. This salary floor can
be seen as the minimum wage, or amount that a franchise has to spend to fill out their team. To sum up, with the NBA’s new collective bargaining agreement, the league is adding stricter price floors and ceilings that further regulate the money that teams spend constructing rosters. In conclusion, this no doubt spells great change for the league, and franchises will have to adapt to these restrictions, changing the way they approach team building and spending.