Is There a Labor Dispute Brewing in Baseball?
Starting with the issue of unsigned free agents, this is a problem with two root causes. The first is the way baseball's economic and salary rules operate. The second is how teams currently value players.
From the point of view of the ball player, if he shows his abilities and talents on the field, he expects to be rewarded. In particular, baseball's rules can keep a player tied to one team for up to six years after being drafted. Initially, the player has three years to earn a spot on the team's forty man roster. After being added to the forty man roster, the team has three more years to control the player. If the same team exercises that control, by keeping the player under contract, the player only becomes eligible for free agency at the end of that three year period. Thus, early in a player's career, the team that drafted him has somewhat greater leverage when it comes to salary negotiation.
Free agency, that is being free to negotiate with any team on the open market, provides a player with the opportunity to earn a high salary by allowing him to play for the team willing to pay the most for his services. If the player has had an excellent track record, say a low career ERA and maybe a Cy Young Award, then the expectation is that his services would be valued highly and thus his salary offers would be high. Seeking security, the player would seek a long-term deal at a high salary.
During the off-season, it was rumored that star pitchers Yu Darvish and Jake Arrieta were seeking deals of six years for a total of $200 million. Both having shown that they were among the elite pitchers in the league, this is what they believe they were worth.
But no teams were biting at that price. One main reason is because of the way teams currently value players. There was a time when teams would spend freely on the free agency market to build a team of players with a proven track record in an effort to be competitive. That time seems to have passed. Baseball is seen as a game of the young; a game for players in their 20s. A proven track record could only be a sign that the player's best years are behind him. The older a player gets, the more prone that player is to injuries. Thus, a team, like the Phillies, may have experienced the situation where they agreed to a long-term, high priced contract with a player who had a proven track record, but who suffered an injury. The player then lingers on the team's payroll, but unable to perform at the expected level. This is the perception of what happened in the cases of Ryan Howard and Cliff Lee. Having learned from such a perceived mistake, the Phillies are less inclined to sign a big name fee agent in his thirties for a long-term contract. Other teams have learned similar lessons.
Complicating matters is baseball's luxury tax. Essentially, baseball sets a level. If a team's total salary commitment goes above that level for any given year, that team must pay a penalty. The penalty ranges from 22.5% to 50% of every dollar over the limit, depending on whether the team is a first-time offender, or a repeat offender in consecutive years. A team would have to go one year under the luxury tax level in order to have the penalties re-set.
Big market teams, earning more money in revenue, such as the Yankees and Dodgers, would be expected to be more willing to spend big on free agency. However, both the Yankees and Dodgers have a history of being repeat offenders in violation the luxury tax cap. They have each paid in excess of $100 million in penalties. Those two teams do not appear eager to violate the luxury tax cap again, and thus are not seen as serious players in the free agency market. This acts to depress the market.
Moreover, the success of teams such as the Houston Astros has demonstrated that there is a cheaper way to build a competitive team. Houston endured several seasons in last place, all the while using baseball's rules to draft and sign many young, talented players. While it was painful for a few years, Houston concentrated on developing its own talent through the minor leagues, and forgo high priced free agents. The result was a highly competitive team that won the 2017 World Series. To the chagrin of sports agents, many teams have followed this path. It is a strategy sport agents and sports writers pejoratively call "tanking." The effect has been to further depress the free agency market.
Indeed, the problem of unsigned free agents had reached such a level, that the players' union established a separate camp for Spring Training for unsigned free agents.
With the value of older players, even with a good track record, falling, the only way to address it may be to change baseball's economic rules to allow players to become free agents sooner. This is certainly an issue that will meet with resistance from the owners, who feel they have invested in the training of a young player and thus deserve to benefit from that investment as long as possible. The recent experience of free agents, therefore, could set up a contentious issue when the collective bargaining agreement (CBA) expires in 2021.
The second contentious issue concerns the proposed rule changes to enhance the pace of play and shorten baseball games. Baseball Commissioner Paul Manfred has made no secret his view that games are taking too long, and thus losing potential audiences. His goal is to find ways to speed up the games. His latest proposals involve pitch clocks, and limits of how many trips a team can make to the pitching mound. The union has been vehemently opposed to these proposals.
Baseball has experienced relative peace on the labor front for over two decades. The question now is whether these two issues will threaten that peace, either when the current CBA expires on December 1, 2021, or before. Indeed, the pressure may be subsiding, as Darvish signed with the Cubs after Spring Training started at $126 million over six years, and Eric Hosmer signed with the Padres for $144 million over eight years. Rumors are also circulated that the Phillies are showing interest in Arrieta, although for a shorter period of time. The real test may be next year, when Manny Machado and Bryce Harper could both test the free agency market.
By: William J. Kovatch, Jr.
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