From Strikes to Lockouts: Consequences of the Shift in the Balance of Power from the Players’ Union to the Owners in the National Hockey League

Abstract

The development of a players’ union in the National Hockey League lagged behind the organization of unions in the other American major team-sport leagues by a decade. Moreover, the union leadership was ineffectual until Bob Goodenow succeeded Alan Eagleson as the head of the NHLPA in 1992. Under Goodenow the players used strikes and the threat of strikes to leverage mobility rights including unrestricted free agency and salary arbitration, all of which substantially and steadily increased salaries and the players’ share of revenue for more than ten years. In 1995 ownership locked out the players, a radical move at the time as it was the first owner-initiated work stoppage to cancel scheduled games. The lockout enabled owners to roll back some of the mobility concessions gained by the union. Yet, the league was unable to implement a desired salary cap and player salaries continued to grow. Nine years later a second lockout resulted in the cancelation of the entire 2004–2005 season. The outcome this time was very favorable to owners including a hard salary cap and a limit on individual player salaries. In this chapter the NHL eras before and after the salary cap are compared. Competitive balance and payroll dispersion across teams are examined empirically through means tests. The analysis indicates that the players’ share of revenue is much lower under the salary cap and that payroll dispersion across clubs has diminished. The results also show a significant improvement over three different dimensions of competitive balance. Finally, it is anticipated that owners will continue to leverage their bargaining position and gain more concessions.