In a recent video discussing WNBA players’ wage protests—some of whom wore shirts reading “Pay us what you owe us”—Ben Shapiro addressed the controversy. I anticipated at least a competent lay explanation of how wages are valued by firms and capitalist-entrepreneurs. Instead, what followed was an incomplete explanation. He stated:
Now, this is the part that’s really funny. Okay, forget about the equal pay argument or pay us what we’re worth. Okay, you’re worth what the market will pay you. If you think that you are irreplaceable in the WNBA, you got another thing coming. They could bring in all the scrubs tomorrow for every player except for Caitlin Clark and no one would notice.
In discussing WNBA wage protests, Ben Shapiro quipped, “You’re worth what the market will pay you.” This is a tautology masquerading as analysis. The economic question isn’t what the market does pay, but how a factor’s value is determined in the first place. Shapiro’s truism skips over the very mechanism of labor valuation in a market economy.
Economics of WNBA Accounting Losses
According to Yahoo Sports, the WNBA loses roughly $50 million per year. If a firm, individual, government, etc., incurs explicit costs greater than its revenues, it must raise money (via debt, equity) or it will go bankrupt. In this case, the difference is subsidized by the NBA.
Persistent losses—like those in the WNBA—indicate systematic overcapitalization of factors of production and, consequently, capital destruction. This means capitalist-entrepreneurs have previously overestimated the DMVP of the unit factors that they were employing. This implies that if the factors of production that the WNBA employed were capitalized at equilibrium prices, total cost would be lower than it actually was. It is possible that the WNBA will make economic profits in the future, and that recently employed factors were, in fact, undercapitalized, but this has not proven to have been the case historically. Forecasting these outcomes is the art of speculative entrepreneurship, and only time can validate such investments.
On WNBA Salaries
According to Basketball Reference, the average NBA salary for the 2024-25 season is projected at $11,910,649, while Spotrac reports the average WNBA base salary at $102,249. This large wage differential, to a significant extent, reflects a proportional disparity in the DMVPs between the labor factors in the two leagues. Since DMVP is agnostic to sex, race, or any non-productive attribute, firms that hire based on bias rather than value product will incur unnecessary losses. While such biases may be present in the real world, to the extent that they exist, firms guilty of them will be economically penalized.
Arbitrage as an Antidote to Prejudice
Suppose, for example, that a firm could hire a woman whose DMVP is identical to that of a man, but at 1/116th the wage. This would constitute an enormous arbitrage opportunity. (If a man is paid $11.6 million for a given value product and a woman with identical DMVP is paid $100,000, the firm could save $11.5 million in labor costs per worker while producing the same value output).
Any profit-maximizing firm indifferent to gender would enjoy a labor cost advantage exceeding 99 percent, generating excess returns relative to its competitors. Firms employing undercapitalized labor would, in pursuing further profits, bid up wages, narrowing the differential. As this process unfolds, wage rates would tend toward equilibrium.
The same logic applies to any pay gap in capitalization between unit factors with equal DMVPs. If women earned 10 percent less than equally productive men, that too would represent a non-trivial arbitrage opportunity. In disequilibrium, firms employing undercapitalized labor would earn excess returns. As these profit opportunities are exploited, firms seeking these profits would bid for the undercapitalized labor, and the increasing demand would bid up those wages, narrowing the differential.
Over time, the arbitrage process creates a tendency toward eliminating wage differentials between equally productive factors. Some people try to explain the wage gap between the sexes, for example, by pointing out that men are more likely to ask for raises. The problem with this theory is that asking for a raise has no inherent effect on your DMVP. A raise can only be justified to the extent that your DMVP justifies it. If men were to be systematically paid higher than women due to men asking for raises for any period of time, with equal DMVP, this would create an arbitrage opportunity as female labor would be undercapitalized and male labor would be overcapitalized. To the extent any wage gap persists—whether based on gender, race, religion, or other non-economic attributes—assuming equal DMVPs, firms that refuse to employ undercapitalized labor will earn systematically lower returns on capital. Indeed, a truly profit-maximizing firm will use the same principled process of imputation for valuing any factor of production.
How much of wages can really be explained by DMVP?
The closer a labor market is to equilibrium, the closer wages will be valued in accordance with DMVP. In the real world, unrealizable and inconsistent plans across society ensure that wage markets are not in equilibrium. Some wages will be closer to equilibrium than others. If the firm is private, then the profit-and-loss test will ensure that an overcapitalization of wages relative to DMVP will cause losses. Still, government distortions such as subsidies, taxes, regulations, and price floors on labor complicate the matter. Unforeseen changes in technology, market data, inventions, and consumer tastes constantly change the DMVP of a unit factor of labor. Labor is only paid exactly its DMVP in the ERE or general equilibrium. This equilibrium state is not a representation of the real world, but a model for understanding what the real world tends toward.
Conclusion
Calls for wage parity between NBA and WNBA players are economically incoherent. If WNBA salaries were raised to NBA levels, the resulting losses would far exceed the league’s already substantial deficits. The historical and ongoing losses incurred by the WNBA reflect previous overestimation of factor DMVP, which implies poor speculative forecasting by capitalist-entrepreneurs. While this could change in the future, the historical record suggests a chronic misallocation of capital.
A useful question for anyone asserting the injustice of the NBA-WNBA wage differential is: How does a profit-maximizing firm value a unit factor of labor in long-run general equilibrium? An inability to answer this fundamental question suggests a critic’s analysis lacks the foundation necessary for serious economic discourse.
