Rob McMillian makes a point in a comment to this post that more free agency might lead to lower salaries:

Moving free agency to a younger age will probably have the side effect of reducing salary, too. Less time to show what a player can do, also foreshortening team control. I’m reminded of the proposal (by Bill Veeck?) to limit ALL player contracts to a single year as a way to put a lid on free agency salaries.

Rob McMillan

I believe it was Charlie Finley, not Veeck. I suspect it might lower the value of a free agent WAR, but likely overall increase the share of revenue received by the players.

Let’s look at 2019, the last normal season. MLB brought in revenue of $10.7 billion and and paid out $4.16 billion in player salaries. If you peg replacement level at 50 wins, then there are 1680 WAR in a full season. At $9 million per WAR, universal free agency would be worth $15.1 billion. Obviously, in universal free agency, the price of a single WAR would need to be much less.

The owners have some room for more money, however. In the past, salaries rose as high as 60% of revenue. Let’s say the owners are willing to contribute 55% of revenue to MLB player salaries. That would mean in 2019 owners would have paid about 5.9 billion in salary, or 3.5 million per free agent WAR. At that level, a 23 year-old who projects to be a two WAR player could sign a three year deal for $10 million and be set for life, rather than waiting a few years for an arbitration payday and maybe getting injured. If he turns out to be a better player than that projection, he signs a long-term deal for a whole lot of money.

No one is talking about universal free agency yet. The post was more about moving free agency to a younger age. I would argue scraping the expensive arbitration process and making players free agents instead. This would make most players free agents in their primes. Would that cause a drop in the value of a free agent WAR?

Now I get a little stuck, because I don’t have the data to calculate average WAR per age. I know that since the thirty team league was introduced in 1998, players at seasonal age 30 years or older represent about 33% of the players in the majors. Players at seasonal age 27 to 29 represent about 27.5% of players, but we would expect a lot more WAR produced from this group. Lets call it 150 WAR for the 30+ crowd, 450 WAR for the late prime group.

At $9 million per WAR, the thirty year olds should be getting about $1.8 billion of the $4.16 billion total salary. Due to arbitration the 27-29 year olds should be getting about $2.4 billion. Since those numbers are high, and about 220 million should go to the younger players, let’s adjust those numbers to $2.2 billion, and $1.7 billion.

Now, if we pay the late prime group $9 million per WAR, their total goes to $4 billion, an increase of $1.8 billion. That would have driving MLB salaries in 2019 to $5.9 billion, the 55% threshold.

So I believe that replacing arbitration with free agency will not hurt the WAR value of free agency, and would likely bring the share of revenue to a place the players like and a place where the owners are still comfortable. Remember, there is rather a high cost in time and money going through the arbitration process that could be more productively spent elsewhere.