The other day Major League Baseball proposed paying players based on Wins Above Replacement (WAR). While compensation based entirely on WAR should be a non-starter, some kind of statistical based compensation could be used to the advantage of all parties.
The union makes legitimate complaints about salary growth. My preferred solution would be a free market one, where all players at all levels would be free agents from the beginning. In this scenario, baseball ends the draft, the reserve clause, and arbitration. Players and owners are free to sign long-term or short-term, depending on what each sides desires. This would save both sides the cost of the arbitration process. Time and money spent on the draft would rather be spent signing amateur players.
I also realize that we are a long way from the above happening.
Using WAR, or some other way of rating players, could give both sides a better outcome.
Here is an outline of the plan:
- The sides would agree on a minimum level of league revenue devoted to salary, say 50%. MLB could exceed that level, but they could not go under it.
- Arbitration disappears.
- The sides would agree on the number of WAR available in a season say 900. (That would be an average of 30 WAR per team, setting replacement level at 51 wins.)
- Dollars per WAR would be set at .5 league revenue divided by WAR available. In a year MLB brought in $10 billion in revenue, a single WAR would be worth a little over $5.5 million.
- Based on that number, there will be players who were overcompensated and players who were undercompensated based on their performance. For example, the Angels paid Mike Trout $35.5 million in 2021 for 2.3 fWAR. That WAR was worth $12.7 million, so Trout would not be eligible for any extra money. Bryce Harper, on the other hand, received $26 million from the Phillies in 2021 for 6.6 fWAR. That WAR would be valued at $36.6 million, so Harper would be eligible for extra compensation. More importantly, Wander Franco, who produced 2.5 fWAR in 5/9th of a season while making the league minimum might receive a nice bonus.
- An additional compensation pool would be calculated based on the difference between the percentage of revenue to the league actually paid to players and the minimum level set. So if the league paid 42% of revenue to the players, an additional 8% would be available in these WAR bonuses. In our $10 billion league, an additional $800 million would be available to the players.
- There would be some formula for distributing these funds among the under compensated players.
- Most importantly, this money would not come from the league, but from the individual teams.
I want to address two of these points first, as the objection to any new thoughts on this will be, “Why would the owners agree to such a system?” Getting rid of arbitration helps both sides, as it is a huge waste of time and money. All the research that goes into preparing cases could be used to simply improve the game. Players could compensate their agents less, and teams might be able to downsize a bit, or at least have their staffs concentrate on productive work.
The very last point, about the compensation from the teams, addresses a complaint on both sides of the aisle, having to do the the competitive balance tax. The MLBPA brought grievances against teams that they feel are not using the money received from this tax to improve their major league clubs. The teams that pay the tax actually feel the same way. If the Rays receive money, the Rays should be spending it at the major league level.
The upsides to this type of arrangement would be that both players and owners should have an incentive to grow revenue. Right now, as the players piece of the pie shrinks, there isn’t much incentive to actively work for that.
Younger players, who are mostly the under compensated, should make more money early. Note that when a young player signs a long-term deal, they don’t get the big money until they get into what would have been their arbitration years. In the context of the proposed plan, teams should spread out the money evenly over the life of the contract to avoid big bonuses at the end of the year.
Free agent compensation would likely be tied to performance as well. Bryce Harper is unlikely to be worth $26 million near the end of this thirteen year contract. Teams would be better off paying free agents more money early, and having them earn less during their decline.
In addition, every low paid, and even some highly paid players, would have an incentive to perform their best every year.
A downside would be that the league hits the percent of revenue target, and young players get no bonuses. To compensate for that, a higher minimum salary could be implemented, there could be a shorter window to free agency, and/or a contract renewal under the reserve clause can be no less than 1/2 the total value earned by the player the previous season. So let’s say that Wander Franco ended up with a $10 million salary for 2021, due to his league minimum plus his performance bonus. The Rays would need to renew him for no less than $5 million for 2022.
I have plenty of reasons not to like the plan. Complicated systems, as we have seen with previous CBAs, can be gamed. There is the issue of how MLB reports revenue. There is the real probability that young players might end up with very little from this system.
Overall, however, I would love to see it in action.
