After talks of contract negotiations between the Boston Red Sox and elite pitcher David Price, sources have been confirmed on December 1st that David Price had signed a 217 million dollar, 7 year contract. With the signing of Price, this contract marks the highest payed baseball pitcher in history. Three days later, Zack Greinke signed a 206.5 million, 6 year contract with the Arizona Diamondbacks. With these massive deals during the current MLB offseason, a question can be knocked around. Should MLB get a salary cap like the NBA and NLF?
Many people believe that since baseball does not have a salary cap, only the richest teams can have success. Some believe a salary cap would make the majors more competitive, but this isn’t necessarily true. Take this past season into consideration and look at some of the teams that made it to the playoffs. The Houston Astros made a solid postseason run, and were ranked 29th in the MLB payrolls with just over 70 million dollars. The Pittsburgh Pirates made another playoff appearance ranked 25th in payroll this season. The New York Mets made it all the way to the World Series this year ranked in at 21st this year. All these low payroll teams making it to the playoffs over the high payroll teams right away shows the competitiveness of the MLB already.
Many people say since baseball has no salary cap, the competitiveness of the league is affected. By looking at data from cbs sports, it shows the amount of champion teams, final appearance teams, and non playoff teams, from 2001 to 2011 in the NBA, NFL, and MLB. It shows that even though the NBA, and NLF have salary caps while MLB doesn’t, MLB is just as competitive as the other leagues. But how are these small budget teams keeping up with the financial powerhouses?
According to the Providence Journal, “Ten years ago, by correlation calculations, a team’s payroll accounted for around 25 percent of its success — and would stay at or around that mark for five of the next six years.” 25 percent is a big chunk of your teams success, and it was just solely based on a team’s payroll. This shows the reason for the Yankees, and Red Sox success in the early 2000’s. Times have changed however and the Providence Journal shows that with a great example, “The correlation coefficient between payroll and wins this season (0.202) is even smaller than the correlation between the standings and the first letters of the cities in which teams play (0.24).” This shows you that know payroll has nothing to do with the success of teams, and this is an example of recent small budget team success.
Another reason for small budget team success, is the importance of a good farm system. At the beginning of the 2015 MLB season, the top ten ranked farm system teams were evaluated. Five of the ten teams were below the half way mark in highest pay rolled teams in the MLB. Those five teams were the Minnesota Twins (finished second in division behind the World Series champs), New York Mets (World series runner ups), Atlanta Braves, Pittsburgh Pirates (wildcard appearance), and the Houston Astros (Solid postseason run).
Of course you could look at this argument in a different perspective. Some people believe the MLB should adapt the salary cap. If you are a small budget team, of course you would agree with that. Without the salary cap, it is harder for the small budget teams to be a top contender in getting the top free agents to strengthen their rosters. The teams with higher payrolls in the league have more money to spend throughout the year. That being said, the teams on the bottom half of the payrolls in the league would have a tough time competing with teams like the Red Sox, Yankees, or Dodgers.
The MLB does have some sort of system regarding spending, and that is the luxury tax. The luxury tax is a punishment or penalty a team receives for spending to much money. Looking at the specific rules of the luxury tax, sportingcharts.com writes, “What it does is imposing a penalty on the teams whose total payroll exceeds a certain amount previously defined on the Collective Bargaining Agreement (CBA).” The CBA decides on a specific number each year that the teams can not exceed without paying the luxury tax. Throughout the years, the luxury tax limit continues to become a larger and larger number, with the number staying at 189 million dollars from 2014 to now the current offseason.
With this current system, the small budget teams would still have trouble competing with the larger budget teams. The larger budget teams continue to go over the luxury tax limit year after year. Even going over the limit they still are capable of buying the big named free agents over the small budget teams simply because they have more money to offer. Of course nowadays the times have changed and professional sports is purely based on which team pays you the most money compared to what it used to be, who am I going to win a championship with?
So with hearing how the luxury tax works, this is why many people believe their should be a set salary cap for every team in the MLB. If that were the case and every team had the same amount to spend, it would be a battle of which teams had the better manager and coaching staff in the league to build a legacy team. Also by picking up a salary cap, it might bring baseball back to the way it used to be, which team will I win championships with? That seems to be one of the biggest concerns for professional sports in the modern era, but is the answer a salary cap?
Now comes the question, should the MLB adapt a salary cap? Based on evidence with how competitive the league is, and how interesting it is to see the smaller budget teams rise to the challenge of competing with the larger budget teams, I believe the system MLB has right now is the right system. The numbers prove that the league is already competitive. Going back to previous examples, times have changed. The correlation coefficient between payroll and wins used to be around 1/4 of your teams success. If that was still the case today, I believe the salary cap would be the right way to turn. But that isn’t the case. The fact is that Providence Journal states, “you’d have a slightly better chance of predicting playoff participants simply by using alphabetical order by than using payroll numbers.”
Think about it this way, with the current system, smaller budget teams are holding their own, if not doing better than larger budget teams. If you added a salary budget into the league today, it may create an unbalance in competitiveness in the league leaning towards the smaller budget teams. With the success they are having with less money, giving them an equal amount of money would actually be unfair to the lager budget teams. With strong farm systems for the smaller budget teams, and the current correlation coefficient between wins and payroll, and the
recent success of smaller budget teams in the league in the recent years, the luxury tax in the MLB is a perfectly fine working system.