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A Modest Proposal to Address the Labour Unrest

MLB: Winter Meetings Reinhold Matay-USA TODAY Sports

Frustration among players at the slow pace of the hot stove has boiled over in the New Year, exemplified by the statement agent Brodie Van Wagenen released last week alluding to collusion, bemoaning the lack of $100M/$200M/$300M contracts and suggesting the players are spoiling for a fight. More recently, Scott Boras has been duelling with MLB about the state of the market.

It’s certainly jarring to have so many good players unsigned a week or so before Spring Training. But it seems to me that the real frustration is really that there aren’t (m)any front offices left who will overpay for what a player was rather than what he is likely to be into his decline years covered by a long free agent contract, notwithstanding that “algorithms that have helped determine player salaries in recent years are suggesting dramatically higher values“.

This reality is colliding with various provisions in the Collective Agreement agreed by the Players on luxury tax thresholds and incentives for rebuilding teams that have given a lot of teams reason not to bid aggressively or at all for 2018 wins. And who knows, maybe there is collusion going on, at least of the soft variety.

But there’s not a whole lot the players can realistically do. Van Wagenen talks about “1,200 alpha males“ who are “outraged“ and “willing to sacrifice“, but as he also notes salaries are still going up. For years, they’ve been getting a smaller piece of the pie, but the pie is growing and they’re still left with more pie. The owners have the players in essentially the ideal negotiation outcome, where the result is slanted very strongly towards them, but not so far that it’s better for the other side to blow things up.

But if the players and the union regroup and push back when the CBA comes up, the owners have a lot of incentive to make some concessions rather than put the golden goose in peril. There’s room for them to make some gains, but addressing the underlying issues would require some fundamental changes. Below is a proposal for what that could look like. On balance, it would favour the players, but not beyond the pale of what the owners should be willing to swallow.

1. Free agency after 5 years

The fundamental issue behind the player/agent/union discontent is that players generally tend to peak in their mid-to-late 20s, but most don’t become free agents until closer to age 30. Moreover, almost every front office is literate in aging curves, and they value player decline years accordingly and are skeptical of longer term commitments to them.

Part of the success of the free agent system Marvin Miller (an economist) negotiated in the 1970s was the restricted supply of free agents, as relatively few players make it to six years MLB service. Limited supply against the demand from 30 teams sent salaries and contracts skyrocketing, which other players could then bootstrap off in salary arbitration or to sign their own extensions.

But the tables have turned. Particularly in the last 10-15 years, players are peaking younger and younger, and thus more of their prime production years are before they can hit the open market. Unlike the surge in production by older players in the late-90s, this is unlikely to be something that reverts over time, as it’s something happening across most sports. And it makes sense, with increased youth specialization, dedicated training and development. It used to be there were “old player skills“ to offset physical decline like batting eye/getting on-base: 50 years ago, the aging curve for walk rate was pretty much an upwards sloping line until the mid-30s age. Now, it’s just another thing that peaks in the 26-29 window.

The only real solution to address this is to get players to the open market younger. Reducing the service time needed for free agency to five years MLB service from six would give players an additional year closer to their prime to offer.

In fact, I’d do one step further. If a player was over age 28, they’d only need four years of service to quality for free agency. This would be to benefit essentially the bottom half of the labour pool, who generally toil for more years in the minors. Take Danny Barnes for example. He was drafted in 2010 and has already been under team control for 8 seasons, but is at least five years away from free agency, when he’ll be 33 and unlikely to be able to command much of a contract (in the event he’ll still a MLB calibre player).

The real cost to teams of losing that last year of control isn’t even financial (it’s already the most costly and not that far from open market salaries), it will likely be that players are less likely to sign team friendly extensions at 2-4 years of service time. So this is a pretty big ask of owners/teams, with leads us to...

2. The end of salary arbitration

Achieving the right to salary arbitration was a big win for the players, giving them the ability to have real earning power for three years rather than having their contracts renewed by management.

But the truth is, it’s a pretty crappy system. Marvin Miller said the primary union goal was not to increase salaries (as it certainly did) but to “correct the gross inequities, where two people doing the same job weren’t getting the same pay”. Yet 40 years down the road, the link between pay and on-field value...arbitrary, creating large inequities between players of various skill sets.

That’s basically inevitable given that the arbitration panels are staffed with experts in arbitration, not experts in baseball. The awards are based on precedent, and those precedents are based on the traditional counting stats. With one or two of the arbitration eligible years being done away per the expanded free agency in the first point, it would be less significant anyway. So let’s do away with it entirely. But that will require some provision for young players to be paid...

3. Increase the payscale for young players

If young players are producing more of the value than ever before, it follows that they should be paid proportionately. Over time, the MLB minimum salary has actually done a reasonable job keeping up with the increases in average and top salaries in relative terms, though that means the absolute gap widens dramatically. But nonetheless, at just over $500,000 it’s still absurdly low compared to what wins cost on the open market. So I’d start by doubling the minimum to $1-million.

But that only does so much, with no arbitration and 4-5 years to free agency. So I’d add tiers based on service time, for players having their contracts unilaterally renewed by the team. Perhaps an additional $1-million for every year of service time. Alternatively, the increases could be based on playing time rather than service time, say every 500 PA or 150 innings results in the player’s renewal minimum increasing by $1-million (or some combination of both).

The net effect of these three provisions would be players hitting free agency earlier, with more generous salaries in their first couple years at the cost of reduced earnings for most players where they would have otherwise had salary arbitration. It’s not a panacea, but on balance it should address some of the bigger issues.