How and why wages show the most likely winners and losers in the Premier League

Leicester won the Premier League in 2015-16 with the 15th-highest payroll. It was unusual, to say the least. Clubs have published accounts for every Premier League season from 1992-93 to 2019-20. Apart from Leicester, every winner ranked in the top four for payroll. In the 20 most recent seasons, every winner other than Leicester ranked in the top three for payroll.

Each season three teams are relegated from the Premier League. In the 20 seasons from 2000-01 to 2019-20, half of all relegated teams ranked in the bottom three for wages. Three-quarters ranked in the bottom six for wages.

Most clubs get more or less what they pay for most of the time.

Accounts for this season will not be published until it is over. For most teams the relationship between payrolls does not vary much from season to season. And those who do are easy to spot. Everyone knows when a new owner has come in and signed lots of players, for example.

My guess is that the four highest payrolls this season will be those at Manchester United, Manchester City, Liverpool and Chelsea, with little between them. My projection for the three lowest payrolls is Brentford, Norwich and Watford. More on Brentford in a moment.

Clearly the relationship between pay and performance in the Premier League is strong. But how strong?

I studied every possible pair of teams in each of the 20 seasons from 2000-01 to 2019-20. In eight out of every ten pairs the team with the higher payroll finished higher.

The average difference in payroll rankings between Premier League teams is seven. Teams who ranked seven places higher than another for payroll finished higher eight times out of ten. When the difference was smaller the percentage was smaller, and when the difference was bigger the percentage was bigger. Teams who ranked one place above another for payroll finished higher six times out of ten. Teams who ranked 17, 18 or 19 places above another finished higher every time.

The market for Premier League players, in the language of economics, is fairly efficient. That does not mean that every player is paid exactly what they are worth. It does suggest that for every one who is overpaid there is another who is underpaid.

And when a player seems to be better than his wages, the club will offer him more. And when a player seems to be worse than his wages, the club will try to sell him and he may have to accept less. Afterwards some of those players will perform differently. There are lots of errors in player assessment, but they seem more or less to cancel out at most clubs most of the time.

All clubs would like consistently to sign players who are worth more than they are paid. Hardly any do. Brentford did for six seasons in the Championship. I assume they did last season as well when they won promotion to the Premier League. Accounts for last season have not been published yet for the Championship or the Premier League.

I have read two books on how Brentford got value for money. Each was different from the other and neither convinced me that I was getting the whole story. Those who know all the secrets probably want to keep them. Who could blame them?

Clubs like Brentford are rare. If I was asked to make a prediction about a team and told I could have one piece of information about them, I would say I wanted an indication of their payroll – or rather, their payroll as a proportion of the total for the competition. I do not think there is a better guide to how well teams will do.

On the one hand, it might seem strange that there is a strong link between athletic achievements and figures in sets of accounts. On the other hand, of course, it makes perfect sense. Wages tell us what a club are willing to offer and what players are prepared to accept. They tell us how good the team should be.

The graph alongside shows the relationship between payroll rank and position in the Premier League. It was compiled with data from the 20 seasons 2000-01 to 2019-20. It illustrates what I am talking about in yet another way. The highest payroll rank is one and the lowest is 20, just as the highest finishing position is one and the lowest is 20. As a general rule, the higher the payroll rank the higher the finishing position.

The correlation between payroll rank and finishing position was powerful, though not perfect. Teams with a payroll rank of one had an average finishing position of third, teams with a payroll rank of 20 had an average finishing position of 17th.

Psychologist Daniel Kahneman says that at a party he would sometimes mention in passing that intelligent women who are married have partners who on average are less intelligent. Then he would shut up. He probably could not have got another word in anyway. He would hear passionate and contradictory explanations for the difference in intelligence between wives and their spouses.

The real explanation, he knows, is simple and boring. Intelligence is only one of the things a person may look for in a companion, and because there are other things there will be what is called regression to the mean.

Not even wages can explain everything that happens in football. So the team with the highest payroll do not always win the Premier League, and the average finishing position of those teams is lower than one. The team with the lowest payroll do not always finish last, and the average finishing position of those teams is higher than 20.

As I mentioned before, payroll ranks for this season will not be known until it is over. These are my projections: 1 Manchester United, 2 Manchester City, 3 Liverpool, 4 Chelsea, 5 Arsenal, 6 Tottenham, 7 Everton, 8 Leicester, 9 West Ham, 10 Crystal Palace, 11 Aston Villa, 12 Southampton, 13 Newcastle, 14 Brighton, 15 Wolves, 16 Leeds, 17 Burnley, 18 Watford, 19 Norwich, 20 Brentford.

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