The Economic Impact of Yesterday’s CBA Proposals

Brett Davis-USA TODAY Sports

After more than a month of silence, talks between the league and the Players Association have finally heated up. Over the past week, the parties have exchanged proposals and counters, a welcome change from the negotiations’ previously slow pace; 42 days elapsed between the owners’ initiation of the lockout and their first proposal to the MLBPA. Yesterday, the two sides reportedly focused their discussion on players who have not yet qualified for salary arbitration, a key sticking point in the negotiations. Let’s go through each of those proposals and see what they would do to change the way young players get paid.

Before we begin, it’s worth mentioning that the two sides each recently dropped aspects of past proposals that the other disliked. The league had previously proposed changes to the arbitration system, including the elimination of the Super Two classification that allows some players to reach arbitration a year early, a non-starter with the union. The union had proposed an age-based free agency system that would shorten team control in many instances, which was similarly unpopular with the league. Each side dropped those long-shot ideas in this round of bargaining. Now, on to what was proposed yesterday.

First, both sides proposed instituting new salary minimums. The MLBPA suggested a new minimum salary of $775,000. The league countered with a tiered structure – $615,000 for players with less than one year of service time, $650,000 for players with between one and two years of time, and $700,000 for everyone else on a minimum salary.

“Players on a minimum salary” might not sound like a key part of the structure of baseball, but they absolutely are, as FanGraphs alum Travis Sawchik has covered. These players aren’t a huge part of the money, of course – “minimum” is a helpful word there. In 2021, teams spent roughly $3.842 billion on player salaries, per Spotrac. Minimum salaries accounted for roughly $289 million of that, or 7.5% of the total outlay.

On the other hand, those players accounted for roughly 47% of the service time accrued in 2021. That’s not quite the same as games played – you accrue service time while on the injured list or while on the 26-man roster but not appearing in games – but the player pool skews heavily towards pre-arbitration players no matter how you slice it. 58% of all players to appear on a 26-man roster in 2021 haven’t yet reached arbitration.

When you consider the composition of the major league player pool, these small-sounding changes in pre-arbitration salaries take on increased importance. The union’s proposal would move that outlay for minimum-salary players from roughly $289 million to roughly $386 million, a $97 million increase. That’s small potatoes in the business of baseball, of course – the league reportedly saw $10.7 billion in revenue in 2019, and even if you just compare it to the overall player salary pool, it’s only a 2.5% increase in the total salary pool. The league’s proposal is for an even smaller increase – it would have paid minimum-salary players roughly $319 million in 2021, a 0.7% increase in total player salaries.

While these are small numbers for baseball writ large, it’s a significant change for players making those salaries, particularly players making those salaries who are unlikely to score significant raises in arbitration. More than half the league gets paid the pro-rated minimum. For those players, having their salary keep up with inflation is a greater concern than it would be for, say, Mookie Betts. In 2017, the last time the CBA was re-negotiated, the minimum salary was set to $570,000. Since then, the CPI-U, the most commonly used measure of consumer price inflation in the US, has increased by 14.8%. If the minimum salary kept up with consumer inflation, it would be $654,000 today.

Wage growth has actually increased at a slightly faster clip than that, per the Atlanta Fed’s Wage Growth Tracker. And while it would be strange to expect the baseball economy to track the broader economy, the player cohort receiving the minimum salary seems like a much better proxy. In the 2016 season, 779 players accrued at least one day of service time while ending the season eligible to receive the minimum salary. 51% of those players still haven’t reached arbitration, which means they’re unlikely to – those are essentially players who got a cup of coffee but didn’t have a significant major league career. Of that group of 779, only 112 have reached free agency. Minimum-salary players are the biggest part of the MLBPA – and most of those players will never get the kind of gob-smacking payouts associated with premium players in free agency. In addition, most of them don’t play the full season in the majors, which makes their take-home pay significantly lower than the quoted minimum.

Speaking of premium players, the league reportedly also agreed to accept in principle the creation of a bonus pool that would reward pre-arbitration players for reaching various as-yet-undefined milestones. These have been connected to awards voting and a top-30 WAR finish among pre-arb players, though neither has been fleshed out.

It’s safe to assume that the players receiving these bonuses will mostly be of the group that eventually gains the most in arbitration and free agency, which will make this bonus pool function like an extra arbitration system that kicks in sooner. I like the concept of that quite a bit, though it’s actually a very difficult system to enforce in practice. How are the award votes taken into account? Which version of WAR would be used? What happens if park factors, or defensive valuation systems, or even positional adjustments change? What if the 30th and 31st most valuable players by WAR are only separated by a fraction of a win? We don’t want to imply that WAR is more precise than it is, but a hard cutoff suggests just that.

It also hasn’t yet been reported how the bonus pool would be split. It would likely be tiered in some way, but at this early stage in the negotiation, there have been no public discussions of how that would work in practice. In addition, it’s unclear how these bonuses would affect competitive balance tax calculations, as the money would be paid from central revenues, not by individual teams. There’s time to work out those finer points, but there’s still quite a bit of uncertainty on the specifics of the proposal.

In the league’s version, that work hardly seems worth it. They proposed to set aside $10 million out of central revenues to pay players who hit those bonuses. That’s, well … not enough. Using the top-30 WAR benchmark and assuming the pool is distributed evenly, that’s $333,333 per player using the league’s numbers, and while that’s nice, it’s just not enough money to move the needle when it comes to rewarding impactful early-career performances. The union proposed a $105 million pool, which feels like it goes too far the other way. The players who would receive these bonuses are likely to get large payouts eventually anyway, and having nearly a quarter of the pre-arb salary pool league-wide payable as bonuses (if both player proposals were applied to the 2021 season, minimum-salary players would make roughly $490 million in salary plus bonus) strikes me as a poor way to allocate money to minimum-salary players.

Both of these bargaining points focus on what I consider to be the most important part of the negotiation: salary structure for pre-arbitration players. The current structure has let salaries at the top rise – though perhaps not as fast or as high as the union would like – while minimum-salary players have mostly stayed the same, even as they’ve become a bigger part of teams’ plans.

Whatever form the final deal on minimum salaries and the pre-arb bonus pool takes, don’t think of this as a one-for-one increase in the players’ share of the pie. The competitive balance tax continues to act like a de facto salary cap at the top of the league – if a team near the tax adds money on minimum-salary players, they’re unlikely to simply accept it and push through the tax thresholds. Instead, they’ll probably cut costs elsewhere, which means this will trickle down into spending in arbitration and free agency.

Still, it will definitely act as an overall increase. At the moment, we project the Pirates for the lowest salary in baseball in 2022, at $39 million. They have seven players on their roster who are either free agents or qualify for arbitration. That leaves 19 pre-arb players. Under the union’s proposal, that’s an additional $3.8 million in payroll; under the league’s proposal, it’s closer to $1 million. Either would be a meaningful increase for Pittsburgh compared to their current payroll – and still leave the Pirates with the lowest salary in baseball, even if the minimum-salary change only affected them. The change won’t be earthshaking, is the point I’m trying to make here, even as it means a lot to individual players. Instead, it will be an incremental change, as those players get paid more without suddenly becoming better, which might actually make better players with higher salaries relatively more attractive.

While the specifics of the numbers being discussed remain far apart, I believe that the proposals exchanged yesterday demonstrate significant common ground. The league has room to give here, because minimum salaries have become relatively cheap to them as revenues and overall inflation have risen. The players want a minimum salary increase as well, because it helps a huge swath of the union. Meanwhile, owners can convince themselves – and they may even be right – that making concessions here won’t cost them all that much in actual dollar outlay, and certainly less than 100% of the sticker price they’re conceding, as teams bumping up against the luxury tax, for example, will reduce costs elsewhere to offset increased minimum salaries. At the same time, veteran players can convince themselves that they’re getting something for the younger generation without explicitly sacrificing anything for themselves – even though owners might penny pinch elsewhere to make room for higher minimums, it’s not as though the union is trading those salaries for a hard salary cap or anything of that nature, and it obviously wouldn’t affect existing contracts.

What will the final structure of pre-arb player compensation look like? I’m not sure, and yesterday’s proposals didn’t suggest an obvious end state. The bonus pool concept might reach a happy medium, or it might stay at the league’s ornamental level while the union exerts more pressure on increasing minimum salaries. The owners’ proposed $615,000 minimum strikes me as the most egregious number exchanged yesterday, but the players’ proposed $105 million bonus pool looks unrealistic to me as well.

But now that the two sides have common ground on how they’ll address this part of compensation, a solution strikes me as likely. This part of the argument is over how much more money pre-arb players should get — and the disagreement is roughly $150 million, or a bit over 1% of league revenues. That sounds like a bridgeable gap. It’s not totally bridged yet, not by a long shot. Some parties in the discussions questioned how much movement the league made, and Jeff Passan described the talks as “contentious” even as the two sides at least agreed on the broad strokes of what they were bargaining on.

If the sides can reach an agreement here — not a given, but something I’m optimistic about — that’s one item crossed off the list. All that remains is the competitive balance tax, changes to the draft, restrictions on tanking, a new playoff structure, a proposed international draft… well, lots of things remain. But at least a little bit, Tuesday’s meeting moved one thing to the “likely to be resolved” side of the ledger.

Appendix: Minimum Salary Calculations

I thought it would be worthwhile to show my work here, or at least explain it. To work out how many players received pre-arbitration salaries in 2021, I took each player’s service time at the conclusion of 2020 and the conclusion of 2021 and compared them. I considered each player who finished 2020 without being eligible for arbitration (and hadn’t signed a pre-arbitration extension, like Evan White) and accrued service time in 2021 to be a minimum-salary player.

Where salaries were reported (Cot’s Contracts lists opening day salaries), I pro-rated those based on service days accrued in 2021 to work out each player’s yearly salary. If a salary wasn’t available, I assumed they made the minimum. I pro-rated salaries based on a 172-day league year, the minimum number of days to qualify for a year of service time.

To calculate the share of league days that were accrued by players making the league minimum (or near the minimum), I used the same calculations, but for the entire league rather than the cohort of pre-arbitration players. To calculate the proposed economic impact of the changes, I used the same pro-rating calculation, but substituted in either the league’s proposal (a sliding number based on a player’s service time as of the end of 2020) or the union’s proposal (a flat $775,000).





Ben is a writer at FanGraphs. He can be found on Twitter @_Ben_Clemens.

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Billsaints
6 months ago

Many of these guys have toiled for years basically earning nothing in the minors/college to get to this point and will only get 1 or 2 paydays for all this work.
I’m sure there are a few owners who would happily give them the min payrise without blinking. I’d love to know which of them are the mean old men who REALLY push to squeeze every penny out of the Union as they sit on the Scrooge McDuck pile of gold. There has to be a pretty wide scale amongst them…surely, they can’t all be that tight fisted.

joe_schlabotnik
6 months ago
Reply to  Billsaints

nobody makes a billion dollars not being ludicrously tight fisted. were talking about literal sociopaths brother

Billsaints
6 months ago

I don’t believe that. I’m sure there are some that differ in opinion quite vastly, but part of owning a team and joining a club means a United front. You certainly have to be cut throat to get where they are, but can be understanding of the value of your employees.

joe_schlabotnik
6 months ago
Reply to  Billsaints

not really. they have an incredibly uniform ideology. the owners have the public pay for their ballparks, then use the labor of their athletes to make themselves richer without any work of their own. they then work together to make sure the players get as little of that as possible and that fans pay as much as possible. they are literally robber barons

cowdisciplemember
6 months ago

I mean, except that everyone involved is participating in a voluntary exchange transaction…

joe_schlabotnik
6 months ago
Reply to  cowdisciple

which is why the union is “volunteering” to halt the exchange, because its absurdly unequal.

cowdisciplemember
6 months ago

As is their right. Are the owners profit focused to the exclusion of anything else? Sure. Are they squeezing every cent out of all their business partners? Sure. Are they robbing anyone? That’s taking the rhetoric too far.

I wouldn’t characterize the relationship between players and owners as “absurdly” unequal. I’d like to see the players get more, but (major league) players aren’t exactly scrounging for change in the couch cushions to make rent.

joe_schlabotnik
6 months ago
Reply to  cowdisciple

if they are in a publicly built stadium, they are robbing the people of that town, yes, 100%. If they price out entire communities in order to enrich themselves, yes they are robbing those people of whats essentially the commons, given how engrained it is in our zeitgeist,

how are the minor leaugers not included in your assessment? They are on the same payroll and have the same “owner”. they could with the stroke of the pen fundamentally change the lives of everyone in their system (whos labor they profit of off), with no detriment to their quality of life, and they decide not to.

cowdisciplemember
6 months ago

The owners don’t force cities to build stadiums. You’re being ridiculous. The vast majority of them pass by public referendum. Baseball is not a public resource. I’m done with this debate.

bjsguessmember
6 months ago

Come on now. That is just absurd.

1. Teams that have publicly funded (or partially funded) ballparks are not robbing anyone. The community made a choice about where to spend their dollars. I also can’t speak for every situation but for the ones that I’m closer to, stadium expenses were shared between the club and the team in a mutually beneficial way. Teams get a subsidized stadium. Cities often revitalize a part of the community that is struggling while also increasing their tax base as new businesses are stood up around this major attraction. If structured properly, both community and teams can win.

2. Your earlier gripe about players making peanuts for years in the minors – true statement but wrong way to look at it. The major league teams are subsidizing a sophisticated and expensive training program for their employees. They invest millions and millions into developing talent. Most of which will not result in any return on their investment. We see similar approaches at investment banks, accounting, and law firms. You get ground up and beaten during training in exchange for a relative pittance of a salary. The firm’s hope is that through the process they can identify the very best talent and promote. Once you are on the partner track you begin to reap the rewards of your sacrifice. Those that don’t make the cut move on and do something else. Any sort of apprenticeship/training program operates on a similar model. The biggest difference is the potential end result that a person may see if they make it to the bigs.

andgilbertmember
6 months ago
Reply to  bjsguess

In major investment banks, consultancies and law firms, compensation starts at $100K+. Working for these firms, while exhausting, makes employees incredibly attractive to external employers going forward. The minors nets players ~$20-30K (a barely livable wage) and most of these players leave without a clear path to economic success…not a good comp. We can do better by minor leaguers.

The Hammerermember
6 months ago

Oh the “profiting off the labor of others” nonsense repeated doesn’t make it true. give it a break … The players have a workers union, that union is negotiating with owners for what they see as fair slice of the pie. It is exactly what socialists want – yet because the owners dont go and randomly say – here have all my money, they are somehow evil. Go profess your nonsense somewhere else.

As for minor leaguers- the system is called an opportunity based model. Typical minor leaguers take low pay because they have the opportunity for a big payday down the road. If there was a market for minor league baseball which made money the players would have leverage, they dont. They are replaceable because they arent good enough to be in majors, those who are likely to be there get a signing bonus which makes many multi- millionaires, and long term minor leaguers on free agency make six figure income. the only ones getting hosed are the players which only are allowed to play ball to create a competitive system for the top 100-200 prospects and the non major leaguers on the 40 man roster.

richwp01member
6 months ago
Reply to  The Hammerer

This is a major factor to me. The MLBPA is supposed to represent everyone on the 40-man roster. The 40-man roster players not in the majors should get 1/3 minimum salary and 1/3 service time.

Dan B
6 months ago
Reply to  cowdisciple

I just don’t see the relevance of Major Leaguers being paid a lot of money at the moment. Ownership provides very little value to the arrangement and take more than 50% of revenues.

cowdisciplemember
6 months ago
Reply to  Dan B

I’m not really one to defend ownership, but they provide the stadium (yes, often in partnership with a city), operate it, negotiate television contracts, market the franchise, build the schedule, develop and manage streaming platforms… they provide some value.

JohnHavok
6 months ago
Reply to  cowdisciple

All true. And when revenues and profits go up, and they don’t increase the wages of the people they employ to provide the product they are selling….that’s the problem from the PAs point of view. The owners are reaping the benefits of the increased value of the player’s work, while the player’s salaries overall have gone down.

Jaymember
6 months ago
Reply to  JohnHavok

It’s reductive and misleading to call it “increased value of the player’s work.” When MLB revenues go up, how much does the players’ labor actually make that happen, as opposed to marketing and business development labor for example?

The Hammerermember
6 months ago

Ha cool story bro-
Negotiating to divvy up the financial pie with a union now makes people sociopaths because they dont say- here take my wallet I have enough.

give me a break with your otherism and working class hero nonsense.

Jason Bmember
6 months ago
Reply to  The Hammerer

Nice supplication to the ruling class, edgelord

Jaymember
6 months ago
Reply to  Jason B

You think HE’s the one being an edgelord here? Seriously? Self-awareness, look into it.

yaro
6 months ago
Reply to  Billsaints

It’s a negotiating tactic to fight small issues like this so they can be offered later in exchange for larger issues.

marchandman34member
6 months ago
Reply to  Billsaints

This is the only group of folks I could give two hoots about in the negotiations, the quad-A baselifers that could earn a million or two in life with some changes to the salary structure, a reward for a life of dedication to the greatest sport of all-time!