Should the MLBPA just surrender to a salary cap?

It might force a solution to baseball's biggest issue

As Monday’s team owner imposed deadline looms, both sides of Major League Baseball’s collective bargaining teams will meet again today in an effort to form some kind of agreement that will prevent the team owners from following through on their threat of cancelling regular season games. As it stands today, the two sides seem incredibly far apart on the key issues relating to the economic issues in the game from team control to “Super Two” arbitration eligibility, and the big competitive balance tax thresholds. But this is nothing new.

Since the league took the step of locking out the players upon the conclusion of the previous collective bargaining agreement (CBA) on December 2nd, a move Commissioner Rob Manfred said was key to saving the 2022 season, that started a 43 day stretch where the sides did not meet to make progress on a new agreement. Since resuming talks earlier this month, the players seem to have offered some concessions, but it is still not giving enough for the owners, who aren’t considering their changes. Calling many of the “non starters.”

The players have made some efforts to find give-and-take opportunities, but the team owners don’t seem very interested in budging from their positions and opportunities for true negotiation have been small. Meanwhile, the threats have been large.

Take the team owners’ reiteration this week of the threat that regular season games would be cancelled if a deal is not struck by February 28th and that they would not be rescheduling games, nor allow players to recoup their missed game checks. Which is premature to say, because that would be negotiated in the new deal. The team owners do not get to unilaterally impose that. But it does make their stance clear: “Take our deal or no games.”

This would be concerning even if it wasn’t just a simple continuation of Major League Baseball’s negotiating style over the last couple years.

In 2019 when they began negotiations on a new agreement with Minor League Baseball, MLB provided a list of reasons why they wanted to eliminate some minor league teams. The problem was that those list of reasons didn’t match up with the decisions MLB was making as far as what teams to keep and which ones to close. When pushed on this, their response was to refuse to negotiate and push through. In many ways, we never got to see a full conclusion to this because COVID and a season without Minor League Baseball pushed MiLB towards taking the deal.

And then we saw it again in the summer of 2020 while the team owners were attempting to get further concessions out of players on economic issues to return to play. When you look at the offers made from the different parties, all of Major League Baseball’s offers are effectively the same amount of money for differing numbers of games. Meanwhile the Players Associations offers dropped nearly in half between their first and last offers. They ended up forcing a shortened 60 game season for the same amount as the team owners’ previous offers. Leading one to wonder if they ever actually wanted a deal or just wanted an excuse to shorten the season without looking like they just wanted the shorten the season.

The primary conflict in this collective bargaining cycle appears to be the competitive balance tax (CBT) thresholds in the new deal. The players want it moved higher to encourage high revenue teams like the Yankees and Dodgers to spend more without penalty, asking for a move from $210 million in 2021 to $245 million in 2022 with reduced penalties for exceeding it. Meanwhile the team owners want it lower to protect low revenue teams, wanting to move it only to $214 million and double the penalty rates compared to what the players are proposing.

The team owners are arguing that the CBT is necessary for competitive balance, hence the name. However, it has not had it’s eponymous effect. Since 2011, every World Series winner has started the season in the top-12 in payroll and payroll has had no correlation to wins over that span either.

The problem is that the CBT acts as a de facto salary cap, but without the controls that salary caps have to force teams to spend. The players oppose a salary cap and there is reason to believe that the owners would be against one as well, because they get the best of both worlds right now with the CBT. Team owners can use the CBT as an excuse not to spend, but also have no real incentive to spend.

For example, the NFL model is that they have a collectively bargaining revenue split that is 48% to the players and 52% to the owners. That 48% is then split up into two pools, player salaries and player benefits. The benefits portion is what you’d expect it to be: healthcare, pensions, etc. That amounts to roughly 25%. So 75% of that 48% is the portion for player salaries and that’s the base salary cap. They also require that each team spend 89% of the salary cap over a four-year span. So you can’t just stop spending to tank and rebuild.

The only way out of this situation for the players might be a salary cap because it would come along with a salary floor. A harsh CBT acting as a soft cap without requiring teams at the bottom to spend money doesn’t do that. Last season the biggest payroll in baseball was six times higher than the smallest payroll.

The teams spending isn’t the problem we see. It’s the teams not spending.

If you use the NFL model, which effectively sets the cap at 36% of league revenues and using the calculation for CBT payroll with an estimated $12 billion for league revenue, that would place a $144 million salary cap. Given that the average CBT payroll last year was $147 million, that doesn’t look like it would change the system too much for the players. However, if you look at the last four seasons, you see that we had 7 teams spend a combined $542 million under the 89% salary floor while we had 21 teams outspend the cap by a combined $3.5 billion. That would not work for baseball.

But what would the right number be? Looking over the past four seasons, the players would need a salary cap at 44% of league revenues to reach the point where the teams overspent and underspent the cap and floor, respectively, by the same amount.

A side note about that 44% number? In 2018, the salary cap under this system would have been $152 million while the league average CBT payroll was also $152 million. However four years later in 2021, the 44% salary cap would have been $177 million while league average CBT payroll actually fell to $151 million. That illustrates perfectly how little player salaries have moved in comparison to league revenues and why the players are so insistent on creating opportunities for players to gain a larger share of those revenues.

Is a cap the best option? I don’t know. It would simplify a lot of offseason discussions about how much teams will or won’t spend, but the reason the owners may not want it though is that it will require opening the books to the players and determining exactly how much revenue they bring in so that they can set the number correctly. They don’t want to do that because it would no longer allow them to play poor. Because if the books supported their position, they’d have already opened them.

In my opinion, a better approach than trying to increase the CBT, is to introduce a mechanism to incentivize spending among the lower revenue teams. If the league has backed you into a de facto salary cap, push for a de facto salary floor.

The players want the CBT thresholds increased so that the Yankees and Dodgers and Red Sox and Cubs can each spend $30 million more without paying a penalty. But there’s more money if you can get the lower revenue teams like the Rays and the Marlins to spend more money. And you might accidentally make the league better by increasing parity and preventing obvious tanking (another thing the players are fighting against), and those are wins for everyone.

My proposed math for this concept would be simple. Tell the owners they get to keep the $214 million CBT threshold that they want, with their harsher penalties, but you want to see a floor at 70% of the CBT threshold, which would put a floor at $150 million. That’s roughly the halfway point between the highest and the lowest payrolls and a $64 million window seems fair enough. Maybe not even make it a floor. Maybe you make it a requirement to receive revenue sharing. Each team already receives over $100 million a year in revenue sharing.

Now, nobody likes it when owners play poor, but the revenue disparities in Major League Baseball are real and what I consider to be the biggest problem in baseball. But also not something the players should be worried about solving. If the Yankees bring in $683 million and the Marlins bring in $222 million, that’s a problem for team owners to figure out how to put all 30 teams on equal financial footing. The problem with the CBA is that there are too many rules to protect the Marlins from the Yankees at the players’ expense.

But that’s just how I see it.