No, baseball (still) doesn't need a salary cap
The dollars are flying in baseball once again, but that doesn't mean something's wrong with the system.
It’s the heart of the heart of the offseason, and the discretionary income is flying around with seemingly little … discretion. And so comes an annual refrain that’s perhaps a bit louder this time around, what with the New York Yankees ’ return to spendthrift status. Yes, baseball, some observers tell us, still needs a salary cap.
First, the reality is that MLB is never going to have a salary cap because the MLBPA, unlike, say, the NFLPA, is an actual functioning union and not a curtseying valet to ownership. Second, the current run of unprecedented labor peace in MLB is largely because of the fact that owners have finally realized they’re never going to get the hard cap they once pursued with a self-immolating sense of mission.
Beyond all of that, though, is this: Baseball absolutely does not need a salary cap. This can be said for a number of reasons.
Most notably, the putative purpose of a salary cap is to improve or maintain competitive balance. This is the call-to-action that team owners across leagues parrot ad nauseam. They do so because the argument appeals to our innate sense of fairness -- this is a cooperative arrangement, after all, and not a sector in which one firm seeks to put the others out of business. They also do it because fans and observers too often buy into their arguments without evidence. That’s a good thing for owners because the evidence doesn’t back them up.
The only thing hard salary caps do with any certainty is increase the profits of ownership by tamping down labor costs, which -- spoiler alert -- is precisely why owners agitate for those caps. It has nothing to do with improving competitive balance in large part because caps don’t, you know, improve competitive balance (see: reams of evidence).
Underlying all this is a premise worthy of full-throated denial. That is, MLB doesn't have a competitive balance problem in any sense of phrase. These data, current as of 2011 and covering the prior 10 years, come courtesy of Gwen Knapp of the San Francisco Chronicle:
Hard cap on payroll, franchise tag for roster stability
Champions (7): Patriots (3), Steelers (2), Buccaneers, San Francisco Giants , Saints, Colts, Packers
Super Bowl teams (14): Seven champs plus Bears, Raiders, St. Louis Cardinals , Panthers, Eagles, Rams, Seahawks
Non-playoff teams (3): Bills, Lions, Texans
No salary cap, only luxury tax on high payrolls
Champions (9): Boston Red Sox (2), Giants, Yankees, Philadelphia Phillies , Cardinals, Chicago White Sox , Miami Marlins , Los Angeles Angels , Arizona Diamondbacks
World Series teams (14): Nine champs plus Houston Astros , Texas Rangers , Tampa Bay Rays , Colorado Rockies , Detroit Tigers
Non-playoff teams (5): Washington Nationals /Expos, Kansas City Royals , Pittsburgh Pirates , Toronto Blue Jays , Baltimore Orioles
Hard cap on individual salaries, soft cap on payroll, exceptions allowed, luxury tax on teams over payroll cap
Champions (5): Lakers (4), Spurs (3), Celtics, Heat, Pistons
Finals teams (10): Five champs plus Mavericks, 76ers, Nets, Magic, Cavaliers.
Non-playoff teams (0): Knicks and Timberwolves have longest droughts, since 2004
As you can see, MLB by these measures has enjoyed more parity than the capped NBA and roughly equal parity to the capped NFL.
What about competitive balance as gauged by, say, the spread between best and worst winning percentages in a particular league in a particular year? Do salary caps make a difference on that front? Here are Evan S. Totty and Mark F. Owens writing in the Journal for Economic Educators:
We find no evidence in our data to suggest that salary caps have helped competitive balance, measured as the variation in wins between the best and worst teams in a league in a given year, in professional sports. Further, there is some indication that the introduction of the salary cap in the NBA is associated with a significant decrease in competitive balance.
Once more, with feeling: Salary caps do not improve competitive balance, no matter what our stern and fatherly sports commissioners tell our credulous press.
To the extent that there are any meaningful differences in parity in MLB and the NFL (which is occasionally the case over carefully tailored spans of time), they're owing not to the salary cap or lack thereof. Rather, those differences are a function of the fact that the NFL plays 10 percent of MLB's schedule (the vastly smaller sample size lends itself to more fluke-ish outcomes), generally allows a full week between games for scouting and game-planning, has a one-and-done playoff format, features more equitably shared local revenues and for years rigged the schedule to benefit weaker teams. There are apples-to-oranges comparisons, and then there are apples-to-carburetors comparisons. This is an instance of the latter.
To pre-empt another populist argument in favor of salary caps, no, increased player salaries don't lead to increased ticket prices. There's no meaningful relationship between the two, as study upon study has proved. Ticket prices are determined by consumer demand. If teams could raise prices every time they needed to pad their revenues, then let's just say the cost of game tickets would be a lot higher. Ticket prices increase when there's a willingness -- or perceived willingness -- on the part of fans to pay more for them.
Beyond all that, accounting estimates credibly suggest that MLB is wildly profitable at the league level and in terms of individual franchises. Owners already enjoy the luxury tax on major-league payrolls and hard slotting in the draft. Thanks to the structural checks in the collective bargaining agreement, they also get to retain their players for six full major-league seasons at below-market rates if they choose to do so.
Once they hit the market, those players make a lot of money because the market has decided that's what they're worth. Just as the deep-coffered Yankees set the market for Brian McCann and Jacoby Ellsbury , so did the otherwise miserly Minnesota Twins set the market for Phil Hughes and Ricky Nolasco . Even if we did cap salaries, talent that cares about such things will still generally flow in the direction of the large media markets because that's where the off-the-field business opportunities are concentrated (local endorsements and whatnot).
You see, the only reason to support a salary cap in MLB is if, for reasons sufficient unto yourself, you think ballplayers should be paid below market rates and want to see owners further enriched. Otherwise, salary caps don't do anything else.
Oh, and there’s also this …
Remember this day next time you hear MLB needs a salary cap. Nothing like today happens in a sport with a cap.— Bill Shaikin (@BillShaikin) December 4, 2013
He's talking about this day of glorious transactional madness, and most observers of the sport don't want to fritter away that kind of offseason intrigue for no good reason.
Come to think of it, maybe that's the best reason of all.
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