How the MLB economy puts owners and players on a collision course

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With the MLB in lock-out, baseball faces its biggest job crisis since the 1994-95 seasons. And even though the games weren’t lost – Again – this move is just a new step in what has become a increasingly ugly relationship between the team owners and the players’ association. After several hot freezes and extremely controversial negotiations over how to restart the 2020 season shortened by the pandemic, it was virtually inevitable that the back and forth around a new collective agreement would bring the MLB union battle to a head this offseason.

Why are things so tense between the two parties at the moment? While there are lots of problems widening the gap between players and owners, perhaps the two most important relate to the salary structure in MLB and the willingness of teams to spend in order to be competitive.

MLB current financial configuration usually involves players being under ‘team control’ for their first six years in the major league service time, including three years of pay in (or very close to) the league minimum wage and three years of salary arbitration – in which the team and the player each propose salary figures and a jury decides which one is fairer. It is only after six years of service that players become free … and even then there are wrinkles (like the qualifying offer) made for restrict player movements.

This system makes young players, as a group, extremely valuable in terms of net productivity. In 2021, players in their season 29 and under generated 63% of the league wins over replacement but were only paid 38 percent of total MLB wages. This, of course, means that the reverse – older players are paid more than one would expect from their production – is also true: players 30 and over earned 62% of total salaries while generating only 37% WAR.

This gap has existed in one form or another throughout The era of free MLB agencies, and several years ago it was actually even worse than it is today. (In 2015, players under 30 produced 73% of the WAR total when they only paid 38% of wages.) Because players are typically the most productive before the years when they have their greatest bargaining power, the MLB system effectively guarantees that young players will be the best bargains in the game.

Knowing this, young players waited for their wages in free agency, where they were often paid based on what they had done in the past rather than what they were going to do in the future. But as teams have become smarter about how to spend their money – aided by the influx of analytics in the post-Moneyball era of baseball – the market for older free agents has become more difficult, coupled with with changes in the aging curve after MLB took action discourage the use of performance enhancing drugs. Modern front offices also have service time of manipulated players by artificially delaying the debut of top prospects, giving the team an extra year in which to pay these players less than full market value.

Naturally, all of these factors became major sticking points on the union side of the CBA negotiations. The players would like to be paid more earlier in their careers, which would narrow the gap between who generates the most value and who makes the most money, and maybe even help salaries catch up with league income. The owners, of course, prefer the current system – a system where they consistently underpay young players in their best seasons, then turn around and ask veterans “what will you do for me in the future?” When they finally reached free agency.

Another major point of contention between owners and the union concerns the willingness of teams to spend enough to put in place a product in the field that is minimally acceptable. In 2021, five teams spent less than half of the median MLB payroll – the most in a single season since at least 1985 – and nine teams spent less than two-thirds of the median payroll (also a record) . These teams combined to win just 43.8% of their games, and only two (the Tampa Bay Rays and the Seattle Mariners) were above .500, so about a quarter of the league didn’t even not tried to compete… and achieved this uncompetitive goal. mission.

This is bad for players because when teams aren’t actively trying to win they are much less inclined to raise free agent salaries. After all, why spend more on a veteran if, for paraphrase the legendary CEO Branch Rickey, a team might as well end up without them (and using a cheap replacement instead)?

The issue of competitive equilibrium is not without its complications on both sides of the labor dispute. The union would have wishes to reduce the effect of luxury tax, which penalizes the big spenders, especially those who splurge several years in a row. But it’s very likely that allowing top teams to spend more would allow them to earn more through financial brute force. And the league proposal to extend the playoffs (from 10 to 14 teams) would probably only give the illusion increased competitive balance by introducing even more randomness into playoff crapshoot.

The players too having rejected appeals for a minimum wage – a minimum amount of expenses that each team must do each season, something other leagues have – because they (probably exactly) see it as a step towards a salary cap system, a red line that the union will not cross. But in a vacuum, a minimum salary would discourage teams to tank by forcing them to spend up to a certain level on their MLB rosters. And as pointed out by Sheryl Ring Several years ago, the NBA’s salary floor coincided with its average player making a lot more money. (Okay, the NBA isn’t ideal for anyone when it comes to competitive balance, but that’s yet another side of the debate.)

As we wait for the start of next season (when it does), MLB players and owners have a large gap to fill between them. The charts above show just a few of the ways the league’s financial rules have turned into weapons against players over the years. The big questions now are how much that will change as the two sides negotiate the next CBA, how long it will take to finalize these changes, and what damage will be done to the game and its ongoing fans. of road.


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