October 15, 2017
Should the MLB have Salary Caps?
As a young boy I would always dream of being a professional baseball player, and many of my friends shared this same dream. To be playing a sport we love and making unimaginable amounts of money doing it - it didn’t seem possible. However, for only few, this unimaginable pay became very much a reality. But these salaries came at a cost; a cost payed for by American citizens and any other that visit one of these baseball stadiums. Ticket prices, concessions, taxes, and parking are all increased to support the unbounded increasing salaries of players in the MLB. Without salary caps, there is no telling the extent to which these salaries will reach bringing other costs in baseball up with it, and allowing some teams to get ahead with far greater payroll. Imposing strict salary caps would allow America’s favorite pastime to be maintained as an affordable source of entertainment with far more amusing matchups.
Of the 4 major sports, Major League Baseball is the only one with no salary caps. Salary caps prevent teams from spending too much money on the salaries of players. The MLB technically does have salary caps but they are so high and forgiving, that they are rendered useless. Without these salary caps in the MLB, players have reached salaries as high as 34 million dollars per year (“Here Are the 25 Highest Paid MLB Players of 2016.”), which is about ⅔ of the payroll of my home team, the Brewers, who have the lowest payroll in the MLB of 51.2 million dollars (“2016 MLB Team Payrolls.”). The salary caps of MLB range from the lowest, held by the Milwaukee Brewers of 51.2 million dollars, to the LA Dodgers with the highest of over 248 million dollars (“2016 MLB Team Payrolls.”). This grandiose payroll is about $50,000 above the salary cap of the MLB showing its leniency and insignificance. These big-market teams have greatly increased ticket prices to support their enlarged payrolls. For instance, the average ticket price to a game of the Boston Red Sox, who have the 3rd highest payroll in the MLB, is $53.98, while the 22nd ranked payroll in the MLB, the Arizona Diamondbacks, sell tickets at an average of $15.67 (“Why The Prices Of Sports Tickets Vary So Much.”). There is a direct correlation between the payroll of teams and the price of their tickets because the revenue earned in selling tickets is a major source of funding for the team and the salaries they pay (“Major League Baseball's Business Model & Strategy (NKE, ERA).”). As the pay to these players increases, the price to attend baseball games will increase and the according to the law of demand, the demand will decrease due to the raised price. Baseball games will likely prove to be fairly elastic as they are not a necessity but within marginal costs, they are desirable. The elasticity comes with opportunity costs that may outweigh the cost of going to these expensive, unnecessary games, such as a tank of gas or a nice meal. With salary caps, and thus lowered payroll, the price of tickets would be decreased and baseball games would become more affordable causing the demand to increase and the ticket prices to become consistent throughout the league. However, ticket price is not the only inconsistency caused by these big-market teams. They cause uneven skill as with more money, better players may be acquired. For example, the Dodgers, with the highest payroll, had a regular season record of 104-58, while the Brewers, with the lowest payroll, ended the 2017 regular season 86-76 falling just short of the playoffs. With strict, salary caps, teams would have to strategically budget their money to present the best offer to players so they may be acquired. This would allow for more even distribution of elite players throughout the league. The only possible negative externality would be increased traffic due to increased attendance from the high demand caused by the low prices.
The bottom-line is that more strict salary caps would improve the affordability and fairness throughout the league. Ticket prices would be lowered, increasing the demand to attend these games. In addition to the affordability, the teams would be more evenly matched and the players more evenly spread. The MLB would be made into a more affordable and entertaining sport with the implementation of strict salary caps. With this change, America’s favorite pastime would be maintained and more available than ever.
“2016 MLB Team Payrolls.” Online Payroll Service for Small Business - SurePayroll, www.surepayroll.com/resources/blog/mlb-team-payrolls.
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“Brewers Year-By-Year Results.” Milwaukee Brewers, milwaukee.brewers.mlb.com/mil/history/year_by_year_results.jsp.
Dorn, John. “Here Are the 25 Highest Paid MLB Players of 2016.” AOL.com, AOL, 2016, www.aol.com/article/2016/04/19/here-are-the-25-highest-paid-mlb-players-of-2016/21346726/.
Fontinelle, Amy. “Major League Baseball's Business Model & Strategy (NKE, ERA).” Investopedia, 2015, www.investopedia.com/articles/personal-finance/062415/major-league-baseballs-business-model-strategy.asp.
Parker, Tim. “Why The Prices Of Sports Tickets Vary So Much.” Investopedia, Apr. 2012, www.investopedia.com/financial-edge/1012/why-the-prices-of-sports-tickets-vary-so-much-.aspx.
Review, NU Business. “Why Certain MLB Teams Can Afford Star Players and Others Cannot.” The Northwestern Business Review, The Northwestern Business Review, Mar. 2012, northwesternbusinessreview.org/why-certain-mlb-teams-can-afford-star-players-and-others-cannot-bb5d9fca0524.“Year-By-Year Results.” Los Angeles Dodgers, losangeles.dodgers.mlb.com/la/history/year_by_year_results.jsp.