COMMENTARY : Yes, Baseball Players Are Worth All That Money

Many fans are distressed by the astronomical salaries of professional athletes, particularly in baseball. While the working stiff shows up at the park on a Saturday afternoon on the bus, the team superstar arrives in a Porsche or a Rolls. Can these guys be worth this sort of money? The answer is yes, and here is why.

In the good old days, when players were subject to the reserve clause, a major leaguer played for the team that owned his contract or he didn’t play baseball. The owner was free to trade or play the major leaguer. Pay was negotiated between player and owner without the benefit of competition by other teams that might have valued that player’s services more highly.

Many star players were paid handsomely in the days of the reserve clause (first instituted in 1879). Ty Cobb, baseball’s famous holdout in 1912, was signed to play for $11,300 (about $140,000 at today’s prices). Babe Ruth was paid the handsome sum of $80,000 (worth about $750,000 today) in the depth of the Depression. In 1974, Reggie Jackson obtained through arbitration what Charles Finley denied him in negotiation--$135,000 (about $330,000 today).

Now owners have to compete for veteran players the way employers have to compete with each other for their workers. As a result, of the 624 regular season roster players, 152 will make $1 million or more for the 1990 season, and of these, 27 will make $2 million or more.

Despite the high salaries, players today receive a smaller share of their teams’ revenues than they did in the early 1980s. At that time, the market for free agents was unrestricted and competition was robust. Salary arbitration was available for players with two through five years of major league experience. In 1982, the average player salary was $241,000. Total baseball revenues were $432 million. The player salary share for the 624 players was 35%. By 1989, average player pay was $500,000 and total team revenues were $1.1 billion; the player salary share had slipped to 28%. Thus, while player salaries had doubled during the period, owner revenues were 2 1/2 times their 1982 level.

The decline in the player share during the 1980s is due partly to the players’ union giveaways during the 1985 collective bargaining negotiations and partly to owner collusion in the free-agent market. The players’ union agreed to a one-man reduction in the regular season roster size, the removal of arbitration for two-year players, and a significant reduction in the share of the television contract as the owners’ pension contribution (from 33 to 18%).

The players’ union made these concessions because it believed that the owners of teams in small markets were suffering financial losses, in part because of the rise in players’ salaries. The owners took the concessions and then proceeded to collude in the free-agent market, refusing to make offers to free-agent players and forcing them to negotiate with their own teams for their salaries. This removed competition in the market for free agents. Now that the owners are prospering, they want to lock the players into a share that reflects those years of collusion. The players want a return to the freer labor market that existed in the early 1980s.

There is no doubt that the owners successfully practiced collusion in the market for free agents during the mid-1980s. In a free market, players are paid a salary equal to the marginal revenue that their performance and their star status bring to the club: A superstar player of the caliber of an Andre Dawson, a Tim Raines, a Will Clark or a Jack Morris is worth an extra 20 games or more won during a season. An extra game won during the season is worth more than $250,000 in revenues to an average club. That translates into a marginal revenue to the clubs of $5 million or so for players of this caliber.

I calculated that during the height of collusion, in 1987, Andre Dawson contributed $3.87 million to club revenues; he was paid $700,000. Rich Gedman contributed $3.36 million to revenues and was paid $773,000. Tim Raines contributed $4 million and was paid $1.67 million.

On the whole, free agents got in salary about 30% of their marginal contribution to club revenues. Collusion pays handsomely.

These are the problems that need to be resolved during the current negotiations between owners and players. Fans, who have been left out of these negotiations, often question whether baseball players should be paid these huge sums. Many of us think we are underpaid for the work we do. We live in a free society. If we think we are underpaid, we shop around for other offers and change employers, if they offer a significantly higher salary. Neither we nor the employers are stupid. In a free labor market people are paid about what they are worth.

Baseball is no different. It is a business, and the sooner we give up the illusion that it is only a game, the quicker we will surrender the myth that high pay and quality baseball are incompatible. Team owners are businessmen.

Will Clark is being paid $15 million over four years not because San Francisco wanted to pay him that amount, but because that is what the free market demanded and that is what he is expected to contribute to team revenue.