Mr. Reuter
Economics
22 October 2014
Salary Caps Unnecessary in the MLB
The debate about whether Major League Baseball needs a salary cap can finally end. For its entire history, salary caps have not hindered baseball’s top spenders. The leading argument to why baseball should have a salary cap is that it would increase competition between small market teams and the large market teams. Although this argument is logical for any other sport, competition in the MLB is equal across the board.
First, the MLB has made a halfhearted attempt at regulating spending through luxury taxes. All teams are required to pay a luxury tax if they exceed the league threshold of $189 million, however the percentage taxed depends on how much a team exceeds this threshold and how many consecutive years they have exceeded it. A first offense will result in a 17.5% tax, however, if a team has exceed the threshold by at least 40% over a span of a couple years, the team will face luxury taxes of 50%. The purpose for luxury taxes is to discourage large market teams from spending too much as it will cost them a lot more money, however, this has not discourage teams like the New York Yankees from exceeding the threshold. In other words, luxury taxes are ineffective because teams like the Yankees believe the marginal benefit of signing expensive star players outweighs the marginal cost of hefty luxury taxes and salaries.
Looking at the team spendings of MLB teams, there is a gigantic gap between baseball’s top and bottom spenders. While the Los Angeles Dodgers spent a league leading $235,295,219 last year, the Houston Astros only spent $44,544,174 on their players, a league low. While it is true the Dodgers were a significantly better team than the Astros last year, teams such as the Oakland Athletics, ranked 25th in spending, and the Pittsburgh Pirates, ranked 27th, saw similar success as the highest paid Dodgers. In addition to small market teams having success, large market teams also struggled in finding success. The Philadelphia Phillies, ranked 3rd in spending, tied for second worst record in the National league (73-89) and the Boston Red Sox, ranked 4th in spending, finished with the third worst record in the American League (71-91); thus, proving that a salary cap is unnecessary to improve competitiveness in the MLB.
To further support that Major League Baseball does not need to implement a salary cap, competitiveness in the MLB is much higher compared to the NBA, a sport with a salary cap, or price ceiling, between 2003 and 2013. In this ten year period, the MLB has had fourteen different World Series teams and nine different World Series champions. Also in this time frame, only five teams did not reach the playoffs, four of which made it this year. On the other hand, basketball is much less diversified. There have been ten different NBA Finals teams and only five different Finals champions. In this ten year period, the Los Angeles Lakers and San Antonio Spurs have accounted for seven out of the ten championships in this time frame. The NBA suffers from drastic competitive woes despite the utilization of “government regulations” on team spendings. In conclusion, the MLB does not need to implement a salary cap as the competition is equal across the league.
Works Cited
Delgado, Luis. "Explaining the Luxury Tax in Major League Baseball." SportingCharts.com. N.p.,n.d. Web. 21 Oct. 2014.
Huppke, Rex. "Pros and Cons of Raising the Federal Minimum Wage." Chicago Tribune. N.p., 24
Feb. 2014. Web. 18 Oct. 2014.
"Minimum Wage or Maximum Hassle? NSCA." NSCA. N.p., n.d. Web. 19 Oct. 2014.
"MLB Playoffs Bracket." MLB Playof s Bracket. N.p., n.d. Web. 22 Oct. 2014.
"On Baseball & The Reds: Reds Payroll, Now and in the Future." On Baseball & The Reds: Reds
Payroll, Now and in the Future. N.p., n.d. Web. 22 Oct. 2014.
Perry, Dayn. "No, Baseball (still) Doesn't Need a Salary Cap." CBSSports.com. N.p., n.d. Web. 19
Oct. 2014.
"Regular Season Standings." Major League Baseball. N.p., n.d. Web. 22 Oct. 2014
Jackson, this post was an excellent one indeed as it does review one of the most common debates in baseball. Before reading this, I had some personal opinions, but your essay did a really good job going over why we don't need a salary cap in the MLB. Mainly because of the diversification within the World Series teams and World Series Champions, and the fact that the Dodgers who spent the most in all the MLB last year, saw relatively the same success as a team like the Pirates, who spent way less, but still had a relatively similar records and distance into the playoffs.
ReplyDeleteA lot of athletes I think are way over paid. I mean millions of dollars just to play a sport it sounds pretty unfair. Football is partly justifiable because they risk major injures every play. Putting that luxury tax sounded like a good idea because it would limit teams salary payout, but clearly as you described did not work. As competition remains fairly even.
ReplyDeleteI really liked the post because I understand it and can relate to it! It is amazing how the sport of baseball can have such a competitive sport even if some teams are spending more money than others. It just goes to show how great of a sport it is and that anyone on any given day can beat anyone. This closely relates to the movie Moneyball which proved that you can spend very little money on players and still put a playoff team on the field who will compete. The tax just makes the teams decide if it is truly worth it to put more money on the table yet still allowing them to have the freedom to do what they want in which some clubs feel that the opportunity cost is worth it.
ReplyDeleteJackson, this post was an excellent one indeed as it does review one of the most common debates in baseball. Before reading this, I had some personal opinions, but your essay did a really good job going over why we don't need a salary cap in the MLB. Mainly because of the diversification within the World Series teams and World Series Champions, and the fact that the Dodgers who spent the most in all the MLB last year, saw relatively the same success as a team like the Pirates, who spent way less, but still had a relatively similar records and distance into the playoffs.
ReplyDeleteI would have to agree with you that the MLB does not need a salary cap. There are many different things that can happen in the game of baseball. A team could bring in a player that they believe is very good but he might not do anything good for the team. There should not be a salary cap on the MLB because the team should be able to pay the player what they believe they could bring to the team.
ReplyDeleteTo be honest, I am surprised by the significant competition in the MLB despite the vast disparity in spending between the richest and the “poorest” teams. I think it would be interesting to see how much the disparity would increase if the salary cap was removed. Although it seems that it is not effective, I bet teams would spend more money if there was none, and perhaps this difference would push the competitiveness of the MLB off the edge. Obviously, this is all hypothetical and the removal of the salary cap could very well be a good thing, but I definitely think it would interesting to see.
ReplyDeleteI thought you did a good job explaining why salary caps weren't needed in the MLB. The visuals really helped in showing the difference in team payrolls. One thing I thought you could do is go more into depth on the effect salary caps would have on the league is they were heavily enforced. It would be interesting to see if the bigger teams still succeeded.
ReplyDeleteJackson,
ReplyDeleteI thought you presented both sides of the arguments well and your argument made a lot of sense as to why we don't need salary caps in the MLB. However, I personally believe that a salary cap is necessary in the MLB. This is because not every team is an Oakland or a Pittsburgh and the overwhelming majority of playoff teams in the past 5 years have been in the top half of the league when it comes to yearly spending. Money isn't the only way to win the game, but it certainly helps, and being a fan of a small market team that has been routinely burned by larger market teams whether in games or in free agency reinforces my opinion. I think that competition is not grossly dependent on money but I think that a salary cap would level the playing field.
As a big fan of baseball i liked your paper a lot. The way you explained salary caps that weren't needed was very well done. Also the way you chose teams was very well done from the high spenders to the low spenders. I think you did a very good job on this piece.
ReplyDeleteThis is very interesting that even with this tax, some teams still have enough money to benefit from these star players. The MLB is trying to at least regulate the spending of teams so that teams with small budgets still have a chance to sign star players. However it was proven to not help at all, because big budget teams still feel it's worth it to be taxed and sign the star players. Unfortunately even with these taxes high budget MLB teams can still sign players for much more than their rivals.
ReplyDeleteI think that your information is good, but I think that I would come to a different conclusion than you did. I think that the use of salary caps is supported throughout because the taxes that, say, the Yankees are spending would just go back to benefit the community rather than some managers fat wallet. I say, if these teams are willing to pay so much for their players regardless of the tax, then why not charge extra for their extravagance? Sure, the initial purpose of the price ceiling might have failed, but there are other positive externalities resulting because of the decision to pass this tax, which I think more than supports the notion of the price cap.
ReplyDeleteJackson, I personally love this topic you have touched on because this debate has run rampant not only in the MLB but also in the NFL and NBA on weather or not major sports should have salary caps. If you remember when Lebron James signed back to the Cleveland Cavilers, he did so with only a 2 year deal with an opt out after the first year. Many people found this surprising because he could have signed a 4 year max contract yet only took half of the available money. Lebron made this move because he and Chris Paul head the Players union which is pushing for a non-capped league when the CBA expires in 2 years. Although the loss of a salary cap could help players like Lebron and Kevin Durant make more money without becoming a financial burden on their respective teams, it will most certainly create an even bigger disparity between small and large market teams in the NBA. I would love to get your thoughts on this matter and congratulate you on writing this fantastic thought provoking article.
ReplyDeleteThis was a very well done post Jackson. In sports like basketball and football money can buy you championships. If you look at the Miami Heat for example, who essentially bought their championship by signing LeBron James, Chris Bosh, Ray Allen, and others. A great example of how baseball is totally different than those sports is the world series right now. Nobody thought that a small town team like the Kansas City Royals would be competing for a World Series right now. But baseball is a sport that many teams that are not the Dodgers, Yankees, or Red Sox build through the draft. But I do think that there should be a salary cap in the MLB. Even though once in a great while you get a team like the Royals who are able to click at the right time and make a deep run in the playoffs, a salary cap would bring more of the small market teams into play. It would make things more exciting and spread the talent out throughout the league.
ReplyDeleteEven though you made some very good points I believe that there still might need to be a salary cap enforced in the future. Yes there have been thirteen different teams winning the World Series but there have also been some dominant teams that happen to be towards the top of the spending graph. Teams like the Houston Astros aren't going to be able to compete with teams like the New York Yankees who are able to spend millions more. However, you made some good points and the MLB has done a nice job by having the luxury taxes but in order to level the playing field I feel the a salary cap still needs to be enforced.
ReplyDeleteValid points. The MLB has always been fun to watch because it is every changing like you pointed out. This may be because of the popularity of the sport, and causing no real shortage of players allowing for many teams to be able to get high caliber players and pose themselves as viable opponents to any other team in the league. Some teams may be able to get more money and blow it all on certain players, but doesn't mean they will win every year, and the MLB track record supports just that
ReplyDeleteYour piece was insightful and interesting, this is the first time I've seen anybody opposed to the salary cap. Not only do you bring up a creative idea, it is well backed up and defined by your data. It also, in a sense, keeps the leagues more interesting as it roots out the smaller teams and makes it truly survival of the financially intelligent and fittest.
ReplyDeleteI disagree thoroughly with what you have said. You mention that both the Oakland Athletics and Pittsburgh Pirates were successful compared to their big spending counterparts, which is true. But how successful have these teams been over the years? Before last year, the Pirates hadn’t even made a playoff series since 1992, if you want to find the last time they actually won a series, you need to go to 1979. You see a similar trend when looking at the Astros, who haven’t been to the playoffs since 1980. If you look at the Red Sox and Phillies they won the world series in 2013 and 2008, respectively. You also compared basketball to baseball, which just can’t be done easily. In basketball there are five players on a court at any given time, this means that if a team gets one or two good players they can be dominant, and if they stay healthy they can win titles for years and years. Baseball takes nine players all working together, even a dominant pitcher who can take control of a game will only play every fifth game and this isn’t conducive to winning for years on end. Plus there are teams like the oklahoma city Thunder, who have been successful in a small market. If baseball had a salary cap it would definitely even out the talent and allow more of the small market teams to win for years on end, instead of just being a flash in the pan.
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