A Super Two Compensation Update

One major point of contention in this offseason’s collective bargaining impasse is compensation for young players. In the two sides’ competing proposals, the existing Super Two system, which each year awards an additional year of arbitration to some pre-arb players with two-plus years of service time, has come up repeatedly. Whether it’s being replaced with an algorithmic solution, increased pay for some players based on performance, or an expansion of arbitration within the two-plus group, compensating these pre-arb but multi-year players is a key point of debate as the lockout wears on.

If we want to understand this debate, we need to understand how Super Two players have been compensated in the existing system. Without that context, the dispute can feel more theoretical than consequential, and it is obviously very consequential to the players involved. To that end, I decided to look at the last eight years of Super Two awards and come up with a rough heuristic for how their compensation relates to their production in those years. From there, I’ve created some rules of thumb, which I’ll share with you here before we get into the nitty-gritty details of how I did the calculations. Here it is, separated out by player type:

This table displays the amount of money a given player should make above the major league minimum based on how many times they’ve been through the arbitration process, their position, and their previous year’s production. Broadly speaking, the numbers make sense — players receive less per unit of production than they would in free agency, but their compensation gets closer and closer to free agency levels (roughly $6.5 million above minimum salary per WAR) as they go further into arbitration. Now let’s talk about how I got to these numbers, and the merits (and limits) of using this style of calculation to model arbitration awards.

First things first: the sample here is every player to hit Super Two arbitration starting in 2013. The current system started in 2013, which provided a natural cutoff for this strategy. The top 22% of players by service time among everyone with between two and three years of major league service comprises the Super Two pool in a given year – in other words, it’s the players who are closest to three years of service time, which would give them standard eligibility for arbitration.

From there, I divided the players into groups by position: hitters, starters, and relievers. I tried separating hitters further, but there seemed to be little difference in awards relative to production across different positions, so I grouped all hitters together to maximize my sample size. Relievers are clearly compensated differently than starters, so I separated the two groups.

For each player in the population, I took their WAR in each season preceding an arbitration hearing. Let’s use Kris Bryant as an example. He first went through arbitration in the 2017-18 offseason. In his initial hearing, his most recent season was 2017, when he put up 6.7 WAR. That 2017 season, in addition to his strong performance in ’15 and ’16, determined his arbitration payout. When he went through arbitration a second time in the 2018-19 offseason, he did so coming off a 2.4 WAR season, and so on, until his final arbitration hearing before last season.

In addition, I took the salary that each player received for each season starting with their first arbitration eligibility. For Bryant, that was an arbitration award each year – $10.85 million for the 2018 season, and upwards from there. Importantly, I didn’t only consider arbitration awards, because not every player who hits Super Two eligibility goes through arbitration in each of their pre-free-agency years. Some sign extensions. Some are non-tendered and sign a contract afterwards.

These two points are important in understanding total player compensation. Teams retain the option to non-tender players if they expect an arbitration payout higher than what they are willing to pay for that player’s services in the next year. The archetypical example of this is Chris Carter; in 2015, he had a down season, accruing only 0.3 WAR in 460 plate appearances. Given his previous award in arbitration ($4.175 million), the Astros expected to pay more for Carter in the 2015-16 arbitration process than they were willing to spend. They chose not to tender him a contract, and he instead became a free agent, signing with the Brewers for $2.5 million. He led the NL in homers in 2016… and again had only a middling season, with 1.0 WAR over 644 plate appearances. The Brewers also chose to let him go (again, he probably would have been compensated handsomely in arbitration), and he signed with the Yankees for $1 million.

Those contracts that he signed outside the arbitration process nonetheless give us information about how players who enter the process are compensated. Carter was arbitration-eligible in both of those years. What he received for his next year and what he did on the field are both matters of record. A full accounting of what a player can expect to receive based on his previous production needs to include the opportunity that they might make less than the arbitration process alone would suggest.

Likewise, players who signed contracts that superseded arbitration are part of the population of arbitration-eligible players. When Buster Posey signed an eight-year, $159 million contract that bought out all of his arbitration years, he provided an important data point: hit arbitration after an early career like Posey’s, and you can expect to make a chunk of money in a contract extension. Posey’s Super Two status also played a part in that contract extension; he’d received a salary of $8 million for the 2013 season in arbitration that was ripped up as part of his extension. If he hadn’t been eligible for Super Two, he’d have been earning the league minimum (or near it) in 2013, and the Giants surely would have offered him less money in acknowledgement of that fact. Want to know how much money Super Two-eligible players make? You have to count the money they make even if they don’t do it in arbitration.

For each group of players, this approach gave me four years of paired seasonal WAR and subsequent seasonal salary. From there, I engaged in two transformations. First, I considered all WAR totals below zero as being zero-WAR seasons. Teams can’t pay negative dollars for negative contributions, so if we’re considering a dollars-per-WAR framework, we need to deal in non-negative numbers.

Next, I subtracted the league minimum from each salary. If a player accrues 0.5 WAR and receives the league minimum ($507,500 in the first season of this study and increasing thereafter), it would be incorrect to say that a team was willing to pay roughly $1 million per accrued WAR. They were willing to pay the minimum – the same thing they’d have to pay for a player who accrued 0 WAR, or -2 WAR, or so on. Thus, each player’s season and subsequent salary can be turned into a ratio: dollars above the minimum salary per positive WAR accrued.

By summing across an entire cohort, I also produced that ratio for the position as a whole. In the charts above, for example, position players going through their fourth year of arbitration were paid, on average, $2.44 million above the minimum per positive WAR they accrued in the previous year.

I considered using a player’s total career WAR and previous compensation as an additional input, but decided against it. It’s a useful component for individual awards, and if I were projecting each individual payout like MLB Trade Rumors does, I’d include those details. I think it’s less useful, however, when looking at the aggregate population. We simply want to know the total amount of positive WAR a class accrues, and what teams pay for it. For broad averages, I prefer a more straightforward approach. Heck, for individual players, WAR is the wrong statistic to use – arbitration payouts depend heavily on traditional statistics. If we’re considering the league as a whole, however, I find it important to know how much WAR the group we’re looking at accrued, and how much teams paid for it in arbitration.

Some other methodological details: all of these salaries were paid in the past. To account for this, I assumed a steady 2% inflation rate. I considered varying the rate by CPI (or core PCE, if you’re Janet Yellen and reading this wondering why I’ve disregarded your favorite inflation rate), using overall major league revenues, or using overall league salaries. None of these meaningfully changed the conclusion, and a static rate comes closer to matching actual arbitration awards, so I stuck with that.

For players who haven’t yet completed all four years of arbitration, I used data up until the 2020 season (and 2020-21 offseason). For players who accrued WAR in 2020, I scaled their performance up to a 162-game season. For players who stopped playing in the major leagues before reaching their fourth year of arbitration, I used every year where they signed a major league contract. I removed pitchers who went through arbitration in a season where they didn’t appear in the majors, mostly those recovering from elbow surgery.

Conclusions
Position players and starting pitchers were compensated roughly equally, while relievers earned a higher salary per accrued WAR. That’s consistent with free agency, which we’d expect given the arbitration system. For every player type, more years in arbitration meant a higher salary the next year, even for the same accrued WAR – consistent with the aims of the arbitration process and also previous estimations of arbitration payouts.

If you want to estimate the economic impact of adding players to the Super Two pool, this is a good place to start. In their first year of eligibility, they’d make an additional salary above the minimum, mostly based on their performance in the majors. This year, I count 46 players above the two-year, 116-day cutoff for Super 2 arbitration, as compared to 204 players with at least two but fewer than three years of service time.

That would mean an additional 158 players in arbitration if they all became eligible. Based on their production in 2021, teams would owe roughly an additional $110 million in arbitration awards using our established scale. This doesn’t apply directly to targeted service time rules – like Tuesday’s MLBPA proposal – but it’s a useful jumping-off point for analyzing any future proposals.

To work out how much it would matter in years past the first year of Super Two arbitration, we need the same analysis for players who reach arbitration the regular way, to compare a Super Two player’s second year of arbitration eligibility with what would otherwise be a player’s first year of arbitration. That analysis will run later this week – so stay tuned.