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The Joe Sheehan Newsletter
Vol. 8, No. 1
February 16, 2016
Josh Donaldson, 2015 AL MVP, will make $11.65 million in 2016 after settling with the Blue Jays on a two-year deal in advance of his arbitration hearing.
Brandon McCarthy, who made four starts and threw 23 innings in 2015, will make $11 million in 2016.
Angel Pagan, who was by one measure the third-worst position player in baseball last year, will make $10 million in 2016.
You can do this all day. The relationship between how a baseball player played in 2015 and how he will be compensated in 2016 isn't random, but it can appear that way at times. Bryce Harper was the best player in baseball last year, and he will make $5 million in 2016. Mike Trout was second-best, and he'll make $15.25 million. You can have some fun with the data on position players at baseball-reference and Cot's…
Life Is Not A Meritocracy
2015 bWAR 2016 Pay
Top Five 44.5 $57.7M
Bottom Five -9.3 $51.2M
Top Ten 80.0 $89.4M
Bottom Ten -16.1 $102.1M
There are many reasons for the disparity above, but the most critical one for the MLBPA is this: the pay structure in baseball is more closely tied to service time than to performance in an era where teams value service time -- experience -- less than they ever have. You see what teams truly value in the hoarding of prospects, in the…we're not supposed to say "tanking," apparently, so we'll say "aggressive pursuit of draft budget," in the struggles second- and third-tier free agents have in finding a market for their services, in the willingness teams have to tie themselves financially to players with limited service time but significant talent.
From its first fitful days in the 1950s, scraping for pensions and better health care, the MLBPA and its predecessors have always made service time, not performance or age, the currency by which its members earned benefits. The first pension plan offered a pension to players with five years' experience, later reduced to four (and now, just a few weeks). You needed three years' service time to be eligible for salary arbitration in 1974. You needed six years' service time to eligible for free agency starting in 1976. The ability to block a trade was granted to players with ten years in the league and five with their current team. At every turn, the MLBPA has acted as a traditional union in valuing time-served above all other factors. That's shaped the compensation structure we have now, in which no matter a player's performance, he has almost no control over his compensation until he's played as much as three-and-a-half seasons, and limited control through as much as six-plus seasons.
I remember in the early days of Prospectus, and even before that to online discussions in the run-up to the 1994 strike, making the point that while many online voices, younger voices, outside voices lined up behind the MLBPA's positions, a baseball industry run by stathead principles would not be a pleasant one for players. Twenty years on, that's what we have, an industry that evaluates players based on their expected hitting, fielding and pitching value, and cares far less -- though not zero -- about the value of experience in the major leagues.
The compensation structure isn't the only challenge. The actual distribution of player value is changing. In the 1980s, Bill James discovered that the career path for position players was a bell curve centered on age 27, with a broad peak from 25 to 29. This challenged the established idea, which was a motivator for the experience-centric MLBPA mindset, that players peaked later, in their early thirties. More recent research by Fangraphs' Jeff Zimmerman has modified even that notion, showing that the "bell curve" James discovered has been replaced by a path that sees players entering the league more or less at their peak, and declining from there.
This isn't a minor point for the MLBPA. Performance and compensation aren't just out of sync, but set in opposition to one another. As currently constituted, teams have every incentive to pass on the six-year player, in his late twenties or early thirties, in favor of the player with little to no experience at age 23 or 24. Statheads have always argued that buying free agents was a mug's game where teams paid for past performance. Teams are now signing on to this idea, backed not by the aging "curve" per James, but the aging "ski slope" per Zimmerman. There will always be a market for the top 1%, 2% of players in the pool, your David Prices, your Zack Greinkes, but more and more, enough teams are rejecting the players even at the level below that in favor of trying to produce and lock up 22-year-olds. The contracts signed by Jason Heyward, Justin Upton and Alex Gordon certainly seem lucrative on their faces, and the money will spend nicely. Relative to industry revenues, relative to the top of the market, relative to the expected value of their performances, those players were all underpaid to some degree.
We can focus on issues that affect free-agent compensation, such as the current incentives bad teams have to be as bad as possible (and the way revenue sharing mitigates the risks of doing so) and the punishments for signing free agents. Those are issues that should be addressed in the next CBA not only for their impact on player income, but their impact on competitive integrity. However, the fundamental challenge the MLBPA faces goes to the heart of what they value and have valued for nearly 70 years: experience. If the MLBPA is going to reclaim its rightful percentage of industry revenues, it may have to, for the first time, trade off the interests of veterans in favor of the interests of younger, less experienced players, because those are the players producing.
There are a number of ways to do this. The first, and probably easiest, is to push for a far higher minimum wage: double or more the current $507,000. This would not only pay new major leaguers -- who as Zimmerman notes, are performing at or near their peak -- better, but, by doing so, lessen the leverage teams have in getting those players to sign long-term contracts that buy the players out of their upside. Not all of the John Hart deals have worked out for the teams -- hi, Jon Singleton -- but on balance they have transferred hundreds of millions of dollars in value from players to teams. A higher minimum salary, especially one that increased as a player gained service time, would give players a stronger negotiating position.
A higher minimum salary could be part of a package of reforms that traded off arbitration for a quicker path to free agency. Arbitration is often held up as a bugaboo by the media, but it's been a wildly successful process that eliminated holdouts and forced teams to negotiate salaries in good faith. Ignore the innumerate "Joe Outfielder got an 866% raise in arbitration" headlines and focus on the number of cases that are settled after figures are exchanged and how all your favorite players will be in camp next month.
A higher minimum salary, especially a stepped one, will raise salaries for players with four or fewer years of service time. Perhaps players would accede to eliminating salary arbitration in exchange for the higher minimums and the time to free agency being reduced to five years. Just eyeballing some of the salaries for arbitration-eligible players, it seems as if most MLB players would do no worse, and some better, under a system that guaranteed them, just pulling a number, $12.5 million in their first five years, rather than one in which they could be paid as little as $2 million total in their first three-plus seasons and then hope to make it up over the next two. The players who would not do as well -- the very best players -- would gain by reaching free agency a year earlier.
I don't want to minimize how radical a change this would be. It's not just the MLBPA that values experience. When I talked about this in December with a veteran writer I respect, he objected, noting that experience isn't just the coin of the realm for the MLBPA, but for the entire baseball industry. He's right. Even in our era of hiring statheads off the street and the game's front offices populated by MBAs rather than MLBs, the culture of baseball is one that respects, even prizes, longevity. To alter the compensation structure to better pay youth at the expense of experience goes against not just 50 years of MLBPA history, but 140 years of baseball history.
The thing is, though, that is already happening. Teams are making that choice for the players, pushing their money into young players and the development of young players and even the purchase of what amounts to baseball player embryos, because that's more cost-effective than paying 30-year-olds $40 million over three years. The MLBPA is no longer choosing between getting youth paid and getting veterans paid. Its choice is either standing in the way of industry trends or going to the owners with a plan that acknowledges those trends and rebuilds the compensation structure accordingly. This has to be the central battle in the upcoming CBA negotiations.
