Question

1. Recently Nick Saban agreed to leave his job as head coach of the Miami Dolphins to take a job as head football coach at the University of Alabama at a salary of $4 million per year for eight years. Boise State paid their coach Chris Petersen $500,000 in 2007 and they went undefeated that season. Might Saban still be worth a salary of $4 million per year to Alabama even if he is not “eight times better” than a coach being paid $500,000 at another school? In your answer, be sure to refer to the marginal product of labor and the marginal revenue product of labor.

Answer 1

Yes, we can make the arguement that a good coach like Nick Saban would be worth $4 million a year. We can say that since he is a renowned coach, all the students at the University of Alabama would have a sense of respect and strive to perform better in the eyes of the new coach. Also, since this coach has more experience, he will use better methods to train the students and put them into more difficult situations while training and overall the output would be greater.

Hence 'the marginal product of labor(the students)' would increase due to this.

Also in such a case the value and worth of the players who train under the new coach would definitely rise and they would be more 'marketable' (shirt sales, merchandise, etc.) and would overall lead to a rise in the revenue generated from these players.

Hence the 'marginal revenue product of labor' would increase too.