How financially deterministic is MLS?

One of the theses of Kuper and Szymanski's book Soccernomics is that team performance in a football league is strongly determined by its payroll; in other words, clubs with highest payrolls finish at the top of the league more often than not.  I've seen publications that state the correlation coefficient between payroll and points in the English Premier League is around 75%, and perhaps there are similar results in other European leagues (definitely Spain, to some extent Germany). 

I decided to look at the payroll figures for the recently completed 2011 MLS regular season to determine if the same principle applies here. 

The numbers that I am using are supplied by the MLS Players Union and reflect base salaries of the players.  Point totals for the teams are easily obtained from the league website, Wikipedia, or other site.  To make the numbers easier to work with (and facilitate comparison with other seasons), I divided team payrolls by a million dollars and team points by number of matches played.  Then I performed a simple linear regression:


Below is a scatter plot of the team payroll and points, overlaid with the regression line:

The dots on the far right side of the plot correspond to LA Galaxy (team payroll $12.8 million) and New York Red Bulls ($12.6 million).  Toronto FC have the third highest payroll in MLS at $5.6 million.  It is quite clear that there's not much of a correlation between salary and points per game in MLS, and for completeness here are the regression coefficients:

a0: 1.190 — about 38 points for zero payroll (34 game season)
a1: 0.033 — points per game added per $1m payroll, not statistically significant though

The R2 term for this regression is 0.1127, which means that 11.27% of the variance in the points-per-game data is explained by the team payroll.  It's a far cry from results seen in European soccer leagues, or even Major League Baseball for that matter where around 35% of the variability in the standings can be explained by team payroll. 

It's important to remember that MLS has had the Designated Player Rule since the 2007 season, which permitted clubs to make purchases for big-name and high-value players and count a fraction of the salary toward the salary cap.  You see more striations in the payrolls in the league then ever before but most of the team payrolls remain within a narrow band.  There are a few follow-on questions — first, does the low correlation between pay and league standings hold up from 2007 until now?  And second, if payroll does not adequately explain the differences between teams in the standings, what does?

So how financially deterministic is today's MLS?  Not so much.

MENTIONED: I see that this post was mentioned by Bobby McMahon in one of his recent web roundups.  Thanks for reading, Bobby, and welcome to those readers!  Also got some attention from BigSoccer. Someday I will get an account and start commenting over there.