Did Payroll Matter in 2020?

In previous seasons, I have taken a look at Opening Day payrolls and team win totals in August to see how closely the two figures correlate. Given that the 2020 regular season was just a few weeks old in mid-August, I didn’t write that piece then, and since the season was only 60 games long overall, I wouldn’t have been able to make the same type of comparison as in past seasons. Sixty games means more randomness and not as much of an opportunity for the good and bad teams to create separation between each other. It should come as no surprise, then, that the relationship between payroll and wins was not strong last year. The difference between the Dodgers and the Pirates last year was just 24 wins, but if you pro-rated their win percentages over 162 games, it would be a 65-win gap.

It isn’t really the top and the bottom that bunched teams together, though, relative to each other. Sixteen teams finished with a win total from 26 to 34, an eight-game spread. In a normal year, those winning percentages would be the difference between a 70-win team and a 92-win team. Typically, we can be confident that the 92-win team is significantly better than the 70-win team, since the amount of luck required to close a gap of that size is enormous. In a 60-game season, though, that confidence erodes a bit. For example, the Mets and Cubs finished with the same 31–29 BaseRuns record, but Chicago won the NL Central with a 34–26 mark, while New York missed the playoffs at 26–34. The Diamondbacks and Marlins had the same 24–36 BaseRuns record, but Miami finished two games above .500 and made the playoffs, while Arizona was 10 games below .500 at 25–35.

Comparisons between teams were made even more difficult by the unbalanced schedule. Teams played 40 games in their own division and another 20 games against the same directional division in the opposite league. The wins in the West, Central, and East all even out, but the pre-pandemic average payroll for the 10 West teams was around $157 million, followed by $147 million in the East and $122 million in the Central.

With all of that out of the way, here’s how the wins and payroll numbers shake out for 2020.

When it came to winning baseball games last year, payroll was not a significant factor. It’s worth noting that if we used BaseRuns standings, the correlation coefficient (r) moves up to .3, which is in line with what it was for actual wins and payroll for most of the last decade. Here’s a year-by-year look at wins and payrolls over the years.

On its face, last year’s correlation is the lowest since before baseball’s strike. As with much of 2020, the lack of a full season tends to distort the numbers and our ability to get value from them. Would the Marlins and Astros have maintained their roughly .500 trajectories, or would they have moved more toward their projected status? Looking at BaseRuns shows a significantly higher correlation between expected wins and projected payroll, and it’s likely that a full season would have resulted in a much stronger relationship, but the shortened season limits certainty.

In past years, I’ve discussed the relationship between wins and franchise valuations as well as looking at payroll and wins over multiple seasons. There doesn’t seem to be as much fruitful ground to cover beyond what I’ve previously written given the way the 2020 season turned out, though I will note that going back to 2014 puts the relationship between payroll and wins at .52 with the Forbes valuation and wins over that period at .56. Even with the 60-game season, the overall trend remains the same: Money, in terms of payroll or organizational worth, has a strong relationship with how much a team wins.

While I performed this exercise mostly out of habit, it is good to see the intuition of 2020 randomness supported here. Given a shortened season, we would expect to see a weaker relationship between payroll and wins, and that’s exactly what we got. The more games, the more likely we are to see talent win out, and talent is often acquired in exchange for significant sums of money. There isn’t much reason to think the dynamic that has existed in previous seasons has undergone significant change, and 2020 will simply provide an asterisk-laden blip in history. We will see how 2021 turns out for payroll and wins, but I would expect that most teams will continue to be rewarded for higher payrolls while exceptions like the Rays and A’s succeed despite their competitive disadvantage when it comes to player salaries.

Craig Edwards can be found on twitter @craigjedwards.

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3 years ago

I wonder how this compares to other sports? Basketball, football, etc. Interesting comparison.

3 years ago
Reply to  letswinmets

Other Major North American sports have salary caps…

3 years ago

And salary floors