Thursday, May 2, 2013

2013 NHL Pay and Performance

Today let's take a look at how well NHL (relative) team payroll and team regular season performance relate to each other.  I am interested in how payroll and team performance related for both just this (lock-out shortened) season and over a longer period of time, so I will present both below.

For NHL team payroll data, I usually use USA Today's payroll database, but USA Today does not have that data for the 2013 NHL season, so I found NHL team compensation data at the National Hockey Leagues Players Association (NHLPA) website, which I assume is very accurate.  Note this is total compensation, not compensation against the payroll (or salary) cap.  The NHLPA notes that their measure of team compensation "is comprised of base salary plus signing bonus for the current season".  Prior data comes from USA Today's NHL salary database, so there may be some differences in the two.  For NHL team performance data, I used the 2013 regular season standings data reported on  ESPN's website.  Prior regular seasons standings data come ESPN as well.  Here is the step-by-step details of how I calculated the relative payroll - team performance relationship.

So, for just the 2013 NHL season, running the numbers I find that the relationship between relative payroll and regular season performance is positive and statistically significant and results in that relative payroll "explains" 29.7% of NHL regular season performance, which is rather high as compared to the NFL.  Again by "explain" I mean that the amount of variation in relative payroll that is related to the amount of variation in regular season performance.  Even so that still leaves 70% of regular season performance not explained by payroll.  I will leave it to you to decide if that is a lot or a little.

Over a longer time period (2000-2001 to 2013) seasons (without the 2004-2005 cancelled season) we see that the relationship between relative payroll and regular season performance in the NHL is positive and statistically significant.  Relative payroll "explains" about 24.8% of NHL regular season performance, which is very similar to prior estimates, resulting in that relative payroll does not explain over three quarters of team performance.  As we contend in The Wages of Wins, the argument that team payrolls determine team regular season performance does not seem to be as big as some claim.

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