Is Baseball’s Age of Parity Over?

If the postseason started today, five teams in the top half of major-league payrolls at the beginning of the year would qualify for the playoffs: the Boston Red Sox, Chicago Cubs, Los Angeles Dodgers, New York Yankees, and Washington Nationals*. That means that five teams in the bottom half of Opening Day payrolls would make the playoffs as well — in this case, the Arizona Diamondbacks, Cleveland Indians, Colorado Rockies, Houston Astros, and Minnesota Twins.

*Numbers current as of yesterday.

Presenting the standings in this way might give one the impression that we remain in an age of great baseball parity. An age in which the Kansas City Royals can win the World Series, Cleveland can get there, too, and teams like the Pittsburgh Pirates can sustain multiple years of playoff contention.

That isn’t quite the case, however.

Of the clubs that feature top-six payrolls this season, three have playoff chances of at least 96% (Dodgers, Red Sox, Cubs). A fourth, the Yankees, aren’t too far behind. If the Twins can’t hold on to a playoff spot and are overtaken by anyone but the Rays, the only team in the bottom 12 of payrolls this season to make the playoffs will be the Arizona Diamondbacks, and even their spot isn’t a guarantee. Money buys players, and those players rack up wins for their ball clubs. Last season, at around this time, I took a look at the relationship between payroll and wins, and noted that the relationship was one of the strongest we had seen in a while. This is what it looked like at the end of last season.

Last season saw one of the strongest relationships between payroll and wins to exist in several decades. Here’s how the relationship has developed since 1990, with help from data courtesy Brian MacPherson

In the early 90s, Major League Baseball was coming off an era of collusion and lack of expansion. That, combined with a new influx of talent from outside the United States, meant that simply paying for major-league talent wasn’t the only solution to winning major-league games. (To track back further, read Dave Studeman’s piece in Hardball Times on the subject.)

At the height of the steroid era, when expensive players still performed at a high level, there was a strong relationship between money and payroll, but as teams became more savvy regarding the value of young players — and as PED testing ushered in a downturn in the performance of older ones — the relationship between payroll and wins on a single-season basis declined, becoming almost non-existent from 2011 to 2015.

Back in 2015, despite the weak correlation between payroll and wins on a single-season level, I expressed some concern about the relationship between a team’s overall wealth and win totals. Even if single-season spending didn’t correlate strongly with victories, multi-year spending did seem to have a positive effect, even then. Last season helped to validate those concerns, as money bought wins in a manner unprecedented in recent seasons. So far this year, the relationship hasn’t been as strong as it was last, but it is still exceeds the period between 2011 and -15.

The graph below shows this year’s numbers through August 22, with payroll figures from Cot’s Contracts.

This season hasn’t been as extreme as last year, and last season’s relationship did increase from this point in the season, but there’s still a pretty strong relationship. The biggest correlation with wins is always going to be talent, and there are a lot of ways to amass talent, but it certainly seems possible that, as teams reach a sort of analytical parity, that money can help be a deciding factor. Of the teams with a payroll above $130 million, only the Detroit Tigers, New York Mets, and San Francisco Giants have fewer than 60 wins; meanwhile, six of 10 teams with payrolls of $100 million or less are at that level. Some of those teams aren’t actively trying to compete. That said, all but Philadelphia are in smaller markets, have a really old stadium, or both. We can see some of this more clearly when we look at franchise values.

The chart below takes wins from 2014-2017 and compares that to the franchise valuations from Forbes.

The 11 teams above the average of $1.536 billion dollars have averaged 86 wins per season while the other 19 franchises have averaged 79 wins per year. For the bottom 10 teams, the average drops to 77 wins, and if it weren’t for Cleveland and Kansas City, the average would be down at 75.

At the other end of the spectrum, remove the Philadelphia Phillies, and the top-10 teams average 88 wins per season over a nearly four-year period. When we do the same exercise from 2014-2017 with payroll, we see an even stronger relationship.

There are certainly teams that can outperform their payroll over time, but having a higher payroll makes things a bit easier. Every team with an average payroll above $110 million over the last four years has a winning record except for the Philadelphia Phillies and Detroit Tigers, who are just one game under .500. Of the 14 teams with an average payroll below $110 million, only three — Cleveland, Houston, and Pittsburgh – -have winning records over the last four years. Some of this isn’t just big market versus small market. Teams that win tend to increase payroll to capitalize on their recent success, continue fan momentum and keep winning. We’ve seen the Mets, Royals, and (most recently) the Indians do this, while bigger market teams like the Astros, Cubs, and (more recently) the Phillies all carry low salaries as they rebuild. That doesn’t really change the fact that money is more tied to winning than it has been of late.

The relationship between money and winning is cyclical. We recently came out of a period where it didn’t matter as much, and we are currently in a period where it matters more. If we assume teams are on a level playing field when it comes to analytics, and we know they are on a level playing field when it comes to spending on amateurs, it could be that the difference on the field will be spending at the major-league level. However, we don’t yet know how the new Collective Bargaining Agreement is going to influence this trend. If the richest teams stay at or near the tax levels, we should see a bunch of teams in the middle rise up to meet them as revenues across baseball continue to grow. If many teams all have payrolls at close to the same level, other factors will come in to play when it comes to fielding winning teams. If the new tax levels are more of a mild deterrence than hard spending levels we could see the current relationship between wins and payroll continue, at least until small-market teams can figure out the next great advantage, whatever it might be.

Craig Edwards can be found on twitter @craigjedwards.

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6 years ago

Maybe because it’s so much harder to “beat” other teams with trades than it used to be? Earlier, smaller markets could build effective teams by utilizing savvier baseball knowledge, but these days the gaps of market inefficiencies have closed up?

6 years ago
Reply to  GhandieagIe

Not all the large-market teams are smart, but you now have big-spending teams who are also spending big on having the best front offices or front office teams (the Dodgers have what, 5 previous ML Gms in baseball operations?). When the Cubs and the Dodgers are out there using their wealth to not only go get the best available talent on the field, but the best available talent for the front office, it makes it hard to compete by just having a great FO.

You can criticize Theo or Andrew Friedman, but they’re certainly not definitively dumber than the smart small-market GMs the way that Ned Colletti was outclassed by Billy Beane.

6 years ago
Reply to  mikejunt

Any evidence for using Beane to rip Colletti? Andre Ethier for Milton Bradley trade?

6 years ago
Reply to  rubesandbabes

I wasn’t speaking to any particular deal between the two, but Colletti made a lot of questionable trades and Beane was the class of the league among small market GMs back then, before Friedman got the Rays going.

6 years ago
Reply to  rubesandbabes

The Dodgers were in pretty poor shape when McCourt sold them – very little major league or prospect depth. Partly that was because the Dodgers weren’t really a big spending team in McCourt’s later years, but it took the new ownership throwing tons of money at the problem to turn the team around.