Since Major League Baseball team owners locked out the players this month, MLB and the players’ union have met only once to discuss a new collective bargaining agreement, according to people familiar with the negotiations. Neither side seems to be feeling much urgency. Neither side seems to believe a deal is within immediate striking distance.
The issues on the table are numerous and varied — and the expectation among multiple people involved in the negotiations is that no substantive progress will be made in addressing them until the new year.
But to the extent that any one issue can be separated from the others, one of the widest gaps in these negotiations exists between the way the owners and players view the economics of the game.
Revenue increased in the years leading up to the pandemic, according to data from Forbes. But average player salaries decreased in that span, with no major jump to speak of since.
Both sides agree, in theory, on the reason for this discrepancy: Less experienced players and veterans who are not stars are compensated in a way that allows teams to lean heavily on cheap, young labor. That tendency comes at the expense of veterans; players who wait years to reach free agency don’t always find a market eager to pay them.
Unsurprisingly — given Commissioner Rob Manfred is employed to represent the interests of the owners and union head Tony Clark is in place to champion the players — the owners and the players disagree on how to do that.
“When we began negotiations over a new agreement, the Players Association already had a contract that they wouldn’t trade for any other in sports,” Manfred wrote when he announced the lockout. “Baseball’s players have no salary cap and are not subjected to a maximum length or dollar amount on contracts. In fact, only MLB has guaranteed contracts that run 10 or more years, and in excess of $300 million. We have not proposed anything that would change these fundamentals.”
The owners’ position in some ways begins and ends with a comparison to other sports. Among the union’s greatest accomplishments is its stiff-arming of a hard salary cap for years. No other sport gives its players the kind of megadeals available to MLB players. Manfred pointed to that spending because it implies a relative strength compared with other leagues, which don’t feature the same guaranteed deals that baseball stars regularly receive.
The union’s response, though, could be pulled straight from a Bernie Sanders campaign speech: Sure, the top 1 percent or so are receiving plenty of money, but salaries for the middle class are not growing commensurate with the at-times explosive growth of the sport’s revenue over the past few decades. A system that works for those at the top does not automatically or even usually work for those at the bottom.
According to an Associated Press report published Tuesday, payrolls — or the amount of money that teams committed to player salaries — in 2021 dropped 4 percent since 2019 to the lowest levels since 2015. Similarly, a study published earlier this year found the average major league salary fell in 2021, dropping about 5 percent from 2019, MLB’s previous full season. The AP reported that about 60 percent of the players on Opening Day rosters were making less than $1 million. Of that group, 35 percent made less than $600,000.
According to that report, about 50 of the 900 or so players on Opening Day rosters in 2021 accounted for about 33 percent of all the salary in baseball. And according to data pulled from contract database Spotrac, the richest players are seeing their salaries grow faster than the others: Since 2011, the average salary of the 30 highest-paid players has grown 4.4 percent, but salaries as a whole have increased less than 3 percent.
It’s unclear how much the coronavirus pandemic has cost team owners, but many have found new ways to generate income in recent years, whether through development of the areas around ballparks or with the installation of sportsbooks in stadiums. To the players, these additional revenue streams belie any suggestion that owners don’t have the money to pay players more — and many of their early proposals, according to people familiar with them, have focused more on concepts such as raising the competitive balance tax threshold that are focused on increasing spending in general rather than targeting it to any one particular group.
“There’s top-down economics and bottom-up and they both work in kind of tandem, and when you continue to move the market as a whole, everybody kind of moves up together,” said pitcher Max Scherzer, a member of the MLB Players Association’s executive subcommittee who recently signed a three-year deal with the New York Mets that will pay him a record $43.3 million annually. “When certain parts of the market don’t function, well, then it drags down the whole kind of player market.”
According to people familiar with MLB’s proposals and approach, who spoke on the condition of anonymity to discuss the matter candidly, MLB’s negotiators are open to changing the way younger players are compensated but do not necessarily believe players need to receive a bigger share of the revenue pie to rectify those disparities. The union, meanwhile, wants to change the way players are compensated in large part by injecting a greater percentage of revenue back into player compensation — helping those at the bottom without costing those at the top.
In the broadest possible terms, the difference can be distilled to this: MLB argues that the owners are putting enough revenue into player compensation but that mechanisms need to be implemented to make sure more of it goes to younger players and those in baseball’s middle class. Manfred and the owners are largely proposing structural changes that address player concerns such as competitive balance but that do so by limiting spending at the top to fund more spending in the middle — taking the same financial pie but slicing it differently.
The players, meanwhile, believe owners need to spend more to facilitate fairer compensation for all, starting with paying younger players commensurate with their on-field value so veterans who produce at similar rates no longer seem so expensive. Instead of reslicing the existing pie, players want the owners to chip in more money and bake a bigger one that allows everyone’s slice — younger players, veterans and stars — to grow.
As an example, team owners argue arbitration is clunky and full of unnecessary expenses such as lawyer fees; they have suggested replacing it with poorly received alternatives, including a performance-based formula. Players see arbitration as the first — and, because of the short length of the average major league career, often only — time they can use the free market to help determine their compensation, shedding MLB minimums and using their numbers to argue their value higher.
As the Athletic reported, the union is also hoping to shorten players’ wait for arbitration from three years to two. The more money that young stars make over the major league minimum, the less a team saves by choosing a young player over a veteran with similar on-field production. One argument floated by those against the move is that moving arbitration up a year will lead to even more players on the margins being non-tendered (not given contracts and therefore getting released) before those deadlines, hurting the middle class that the players want to help. But that notion is hypothetical.
Meanwhile, MLB is offering another solution: In his letter addressing the lockout, Manfred said the owners proposed an age-based free agency system designed to eliminate teams’ ability to manipulate the service time of players.
The argument for age-based free agency looks like this: Sure, a few free agents at the top might make less because stars such as Carlos Correa or Juan Soto would have to wait to cash in. But service time manipulation — keeping major-league-ready players in the minors to avoid starting the six-year clock that begins when they make their major league debut and begin accumulating service time — would be less effective if free agency is tied to age. Plus, teams that struggle to pay young stars when they hit free agency would be able to control those players longer — thereby helping small-market teams compete while also helping the middle class make more money.
One critique of age-based service time is that Latino players, who can break into professional baseball at 16 as opposed to 18 for American-born players, would be disproportionately hurt by rules that tie free agency to age. So instead of locking free agency to age, the players want to rework the ways players can accumulate service time, wresting some control from teams by allowing players to accrue it via performance milestones in addition to time spent on the major league roster.
To the players, who believe ownership simply needs to invest more in rosters all around, the idea of costing top-tier stars a year or so of free agent money to benefit the middle class represents a false choice.
“All of our proposals are meant to help every player, in every class, in every situation, in every position. A lot of times it may not seem as straightforward as others,” MLBPA executive subcommittee member Andrew Miller told the Athletic. “We have to be able to communicate that to guys so they understand, ‘Hey, this is the big picture; this is why this moving piece affects this piece.’ The reality is that’s exactly it: We’re looking to address every class of player in every situation and improve upon where they are now.”
Many of the union’s more prominent player negotiators — Miller, Scherzer, New York Yankees ace Gerrit Cole, Texas Rangers infielder Marcus Semien and others — happen to be in MLB’s top tier, meaning they are not the ones experiencing the pitfalls of the compensation system.
“Actually, it’s truly mystifying to see guys like Max Scherzer represent us because he has benefited from a system and rightfully so — he’s an amazing pitcher and deserves everything he gets,” said retired reliever Jerry Blevins, a former union rep. “But at the same time, he’s in there fighting for guys like me: middle-of-the-road, middle-of-the-pack guys who fill a roster.”
“It makes a big difference because they represent us, the normal guy, even though at the same time they’re benefiting from the system as it’s set up,” said Blevins, who pointed out that unlike major league owners, the “normal guys” in baseball often have just a few years to profit from their on-field talent. If Scherzer’s earnings are astronomical, a player on the margins whose career lasts a few years and earns him a few million dollars is far less secure in the long term than his more prominent peers — and will have to start over completely when his time in baseball ends.
The underlying assumption beneath almost every one of both sides’ proposals is that any new rule will foster a hundred new ways to exploit it, given that owners want to save money and players want to maximize earnings. Players, therefore, are wary of any rule that diminishes their ability to let the market dictate their earnings because of the expectation that owners will use those rules to suppress them.
Owners are operating in a system that helps keep costs down for young players but also rewards the game’s biggest stars with the richest contracts in pro sports. They are not eager to let the market push their spending further.