Baseball is heading towards a work stoppage in 2022 and I’m positive it will happen.

As we see the players and commissioner in Major League Baseball starting to lob verbal bombs at each other it is easy to see that the sides are not watching the same movie. This article will look at some player quotes and look at where the truth may be, as the rhetoric is already getting ugly already.

Words From Kershaw and Turner

Our Clint Evans wrote about what Clayton Kershaw and Justin Turner said regarding the current free agents that have not signed yet.

From Kershaw:

“It’s not great for the game by any means,” Kershaw said on Tuesday. “We got two guys that are 26-year-old superstars in the game. Obviously, I don’t know either side. I don’t know what’s going on on their side, what kind of offers they’ve been given. But you’d like to see them signed as well as the other 100 or so guys that deserve a spot.” – Jorge Castillo, L.A. Times

From Turner:

“The way baseball works is the people before you sign deals and they set the market. And if you come along and you’re better than those guys, on paper, then in theory you should get the years and the money they got,” Turner said. “So for owners to start pointing fingers and saying players are greedy, whether they think those (past) deals were bad or not, they’re the ones who gave those deals so they dropped the ball.

Now they’re punishing us for giving out these long deals, which is not how the game works historically. You give out these deals and someone is always going to come along and be better than that guy and someone is going to come along and be better than that guy.

“With the way the money in this game is going and growing and growing every year, revenue is going up ever year – I think it’s fairly easy for players to be confused that the free-agent market isn’t growing along with the revenue.” – Bill Plunkett, Orange County Register

I believe the players have been given some talking points from the union to help their public relations. However, it is important that those talking points be accurate.

The 100 Player Myth

From various players we’ve heard about the 100 or so players that are deserving of jobs but have not received a valid Major League contract. Jeff Passan blew the doors off of that claim.

I broke out a list of all the players that might fall into “deserves a major league contract.” You can see for yourself that there are still some good to great players available and they will get paid. However, when you hear of demands such as Craig Kimbrel wanting a 6 year contract for $100M, at the age of 30, those are not attainable. No GM, who wants to keep his job, will sign Kimbrel to a contract near that amount.

I’m sorry, but a player who has a WAR of under 1 is not worth much on the open market as he is easily replaced by a minimum wage 0-2 year player. Spending $250-$350M is a huge decision for any team, especially after so many of those have not worked out well (Albert Pujols, Prince Fielder, Miguel Cabrera). Even a contract like Zack Greinke signed with the Diamondbacks has basically caused them to trade their franchise player, Paul Goldschmidt.

The Luxury Tax

No matter what anybody says, the luxury tax threshold is an issue as it contains “real inside baseball economic stuff” . From JP Hoornstra’s excellent newsletter we are able to learn some of the details about the luxury tax than previously known.

Q: Regarding [Stan] Kasten’s comments at Fanfest, are there really “insidebaseball” advantages that fans aren’t aware of to staying below the luxury tax threshold? I’ve seen stories mention draft pick loss & escalating penalties, but is there anything else you are aware of?

A: Yes, but the basic principle is still the most important one: It’s a business tax. It’s money spent that does nothing to enhance your product. You can find the essential details of the tax, including the escalating penalties, in Section VI of this press release.

Since you asked, there are some underreported aspects to the competitive balance tax (CBT).

Start with where that tax money goes. If a team pays a tax, the first $13 million goes back to the players. Specifically, per the Collective Bargaining Agreement, it “shall be used to defray the Clubs’ funding obligations arising from the Major League Baseball Players Benefit Plan Agreements.” If a team pays more than $13 million in taxes in a single year, half of the remainder goes toward revenue sharing. Only teams that did not exceed the CBT threshold are eligible to receive these funds (the language of the CBA doesn’t specify how that money is to be distributed, though I assume it’s in writing somewhere). The other half goes into the players’ individual retirement accounts. Maybe the thought underlying Kasten’s sentiment was that, in a way, paying a luxury tax actually adds to your rivals’ internal budgets.

When I spoke to J.C. Bradbury, an expert in the economics of sports, for a recent column, he told me the rate of return on every dollar a team spends on players has diminished over the last 20-plus years. Simultaneously, Bradbury noted in a recent paper that the “returns to non-player inputs increased relative to MLB talent inputs.” Those “non-player inputs” include coaches, trainers, scouts, research and development folks, executives and other analysts. That doesn’t offer a direct comment on the luxury tax, but it’s a general endorsement for spending more on team employees whose salaries can’t be taxed. Knowing that the Dodgers have increased the size of their front office dramatically under Andrew Friedman, who was hired in Oct. 2014, this seems to be precisely what Kasten is doing. Maybe this is the “inside baseball economic stuff” he was referring to.

The bottom line with the luxury tax is that there isn’t a good business case for exceeding it. The hope that fans have is that a team feels close and is willing to go over the luxury tax to help win as the Red Sox did in 2018. If you recall, the Dodgers had a $241M payroll in 2017, before the new rules kicked in, then ran below the tax in 2018 and stayed under it. Of course, all these luxury tax rules were agreed to by the Players Association after the 2016 season.

Is There Collusion

I don’t know if there is collusion, and if there is, it is nothing like the late 1980’s:

Then there is this information from reliever Brad Brach, who signed with the Cubs:

So, yes, there are algorithms. Everyone should know this as there are plenty of public sites that give values to players such as Baseball Reference, FanGraphs and Baseball Prospectus. The real problem is that players and their union are way behind the times. All teams have ways of valuing players and it is no surprise they are similar. Brad Brach had a WAR of 0.3 so a contract of $4.35M seems to even be a bit above value if 1 WAR is worth $10M. Unless the Players Union hires someone like Andrew Friedman, they will continue to be about 5 years behind the owners, who rely on GMs that have changed the game. It is mind-boggling that the union does not understand these issues.

Teams Tanking

We know that teams are tanking in the hopes of acquiring better draft picks. Again, the union is partially to blame as they’ve collectively bargained away the bigger pool of bonuses. Teams don’t have to pay an unlimited bonus to draftees so there really is a lack of leverage for the player except to go back to school. The union also allowed the owners to limit spending on international players. It’s amazing that there are tanking teams that get revenue sharing. What is the incentive for teams to try and contend who aren’t close? Why pay Josh Harrison $5M for under 1 WAR when they can pay a rookie the minimum.

Service Time Manipulation

There have been instances of service time manipulation such as Kris Bryant and, currently, Vladimir Guerrero, Jr. This allows teams to keep a player an extra year before free agency. Keeping players away from free agency or arbitration keeps their salaries down. Cody Bellinger and Walker Buehler will combine for almost $1.2M in salary in 2019 because they are not eligible for arbitration. Some players are playing at a lower salary during their prime and when they hit free agency, they are almost 30. Jacob deGrom, the reigning NL Cy Young Award winner, will not hit free agency until he’s 32. Good luck to him on cashing in after 2020.

Solutions

The solutions I have are high level but try to get to the root of the problems. The owners want to make money and the players need to maximize their earnings. Here are my high level suggestions for avoiding a stoppage in play after the 2021 season:

  • New Union Leadership
    • The current Players Association leadership is responsible for the awful CBA
    • Someone that understands the way the game has evolved needs a prominent role to negotiate with the owners and to educate the players
  • Pay Players Earlier
    • The current GMs have figured out that paying players over 30 is risky
    • Current GMs have figured out they can get most of a player’s best years at a relatively cheap price
    • Some players aren’t free agents until after they turn 30
    • A team can hold onto a player for over 12 years before they are a free agent
      • 3-4 years before they have to be on the 40 man roster
      • 3 years of options to the minors where they may gain little service time
      • 6 years of service time required to gain free agency
    • Shorten the years before someone needs to be on the 40 man roster
    • Reduce options to the minors from 3 to 2
    • Arbitration after 2 years service time
    • Raise the minimum wage significantly so that the cheap alternative option is reduced
  • Fix The Luxury Tax Penalties
    • Get rid of the “real inside baseball economic stuff” regarding the luxury tax penalties
    • Get rid of teams losing draft picks for signing free agents given qualifying offers
    • Get rid of the international signing penalties
  • Penalize Tanking Teams
    • If there is a luxury tax for spending too much, shouldn’t there be a penalty for spending too little?

Final Thoughts

I see a huge gap between the players and the owners. The current CBA is upside down for the players, as not many of them are not getting paid for their prime years. By the time they are in their prime they might hit free agency, yet teams do not want to pay for their post-prime years. Machado and Harper are exceptions as they enter free agency at the age of 26 and will cash in. For players on the Dodgers, they seem to do fine, as players like Kershaw, Turner, Kenley Jansen and Rich Hill got nice contracts to come back to the Dodgers despite being closer to 30 or older.

With an impending work stoppage, I do see a three year window for the Dodgers to win the World Series. After 2021 we have no idea when baseball will be played again. Once the stoppage finishes we have no idea what baseball will even look like. Sorry for the pessimism but I saw this coming quite a while back.

DODGERS: LOOKING AT THE 2019 OUTFIELD DEFENSE