A Losing Equation For Baseball

New analytics are throwing America’s national pastime into economic upheaval.

- Eben Novy-Williams, Ira Boudway, and David Ingold

Imagine a business in which the worst performers are among the highest-paid employees. And imagine that top performers’ talents start to fade soon after their salaries soar.

This is what it’s like for Major League Baseball owners who are trying to profit, or at least not bleed money, in a labor market that makes little sense in any other context. In the past 15 years, no group of players has seen a bigger increase in salary share than the league’s worst, while no group has seen its share decline faster than the best.

Before shedding tears for team owners, consider the situation players face. The league’s labor agreement is built around a rigid seniority system: In their first six years, players can negotiate only with the team they’re on. After that, they can test free agency. The upshot is that players are generally underpaid while they’re young but, if they’re good enough, can make up the losses later in their career. It’s an arrangement that’s kept the $10 billion enterprise stable for decades.

But this winter the system shows serious signs of strain. Owners are increasingly reluctant to pay for past performance, and players aren’t happy about that.