Still a Few Bugs in the System

Players continue to realize that the financial system they helped put in place through iterations of collective bargaining agreements has flaws. The latest is Jack Flaherty, who had his contract renewed by the Cardinals.

“It’s nothing on the Cardinals. They play within what the system is,” Flaherty said. “Their process is great and it makes sense, but in the grand scheme of things the system itself that everybody plays under just isn’t — it’s not a great system for everybody.

“The system as a whole is not great.”

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The system was set up to limit the number of free agents, which should drive up the price of the ones available (limited supply). Rising values of free agents would then drive up arbitration awards. In return, players were subject to relatively low salaries for their first three years. Now, not only are the low service time players taking a low salary, but free-agency isn’t working well either.

The MLBPA clearly needs to shift money to younger players. While I think universal free agency is the way to go, a much higher minimum salary, rules against manipulation of service time, and a shorter time frame to free agency would be a good start.

One thing I have not seen discussed is how the minimum salary has not kept up with the rising value of one free agent WAR. In 2003, the minimum salary stood at $300,000. Jim Thome was one of the top free agents before that season. I estimate that the Phillies paid him for 16 rWAR on his three year deal (he produced eight), or $2.25 million per WAR. So a two-WAR rookie was saving his team $4.2 million.

This off-season, Manny Machado signed for about $10 million per expected WAR.* So a two-WAR rookie is saving his team $19.6 million.

*Over the years teams appeared to pay for WAR on a linear scale. So if one WAR was valued at $5 million, a two WAR player got $10 million and a six WAR player got $30 million. Seeing the contracts signed this season make me think that teams might have decided a better scale is not linear, but curved upward. So better players get a higher dollar/WAR. This might be another reason the free agent market appears to be broken.

One reason for the three-year period with no player leverage was to pay for the cost of developing talent. I don’t know how much that is, but it strikes me that it’s somewhere south of $19 million dollars. MLB has also saved development money since 2003 by limiting the money allowed to draft choice and international signings. They haven’t exactly been paying top dollar to minor league players, either.

The upshot is that good, young players pay off their development costs very quickly today. That’s what Flaherty and others sense. We shall see if the union fights for these players, instead of the rich veterans.

from baseballmusings.com https://ift.tt/2H8oGEJ