Over the last few weeks, I've discussed the best young players in the American League and National League, highlighting those who are making a major impact at minimum salaries. The way compensation is set up in Major League Baseball, players generally play their first three years at the league minimum ($490,000 in 2013), then enter the arbitration process for an additional three years, where they earn raises based upon performance, before becoming a free agent. A handful of players making their debut each year and, depending on service time, obtain Super Two status where they essentially get to trade one of their years at the league minimum for an extra year of arbitration, resulting in more money earned over their first six years while they're under team control. You can read more about this from the MLB Players Association if you're unclear.
The simple truth of this is that major league production at $490,000 is the best bargain in the game. Economically speaking, there's no better use of financial resources than to get wins above replacement from guys making less than $500,000. You don't have to be the Angels with Mike Trout to take advantage of this. Even guys like Tyler Chatwood are projected to out-produce veteran free agents like Bronson Arroyo. Chatwood will make less than half a million while someone will give Arroyo several million to be, likely, less good. You can see where this is going; it's a much better use of resources to pay young, talented players than aging, declining ones.
So if paying the minimum for productive players is the best use of resources, why isn't everyone doing it? It turns out, that's a complicated question. Different teams have different financial resources as can be evidenced by teams like the Dodgers ($216M payroll in 2013) and Astros ($22M payroll in 2013). While the Astros simply can't afford to pay much over the minimum for any player, the Dodgers' limitation are seemingly nonexistent. Clayton Kershaw just signed a contract who's AAV is nearly 30% higher than the entire 2013 Astros payroll. If that doesn't paint the picture of stark differences, I don't know what does.
So perhaps the above question needs to be re-framed: which teams have the most incentive to utilize players at the league minimum? It turns out that this question is also complicated, but definitely worth our time in answering. There are thirty teams in Major League Baseball, but as noted above, they're not all under the same financial constraints. Teams with massive payrolls don't have to worry about finding producers at the minimum when they can afford to pay premium prices. This excludes the Yankees, Dodgers, Phillies, Red Sox and Tigers. On the low end, teams like the Astros and Marlins should also be left out because they don't have a choice when it comes to employing minimum salary talent. There's no decision making on this end, they have to use young, cheap players.
This leaves us with a cluster of teams that make up the bulk of the league. For purposes of simplification, let's say that these teams have a maximum salary of $140 million and a minimum salary of $60 million. Within this range, there are teams that are rebuilding, teams that are overburdened with dead weight and teams that are legitimately trying to contend. It's those legitimately trying to contend that I'm most fascinated about, so we'll cut out the rest. Although these labels are highly subjective, let's be as inclusive as possible and say that we're left with the Rays, Athletics, Rockies, Mariners, Indians, Pirates, Royals, Diamondbacks, Braves, Orioles, Reds, Nationals, Rangers, Cardinals, Blue Jays, Angels and Giants.
Below is each team's 2013 payroll and win-loss record:
|Team||Win-Loss||Payroll in Millions|
Several of the high-salary teams rely on minimum cost guys to offset the salaries that they pay their star players. Look at the Angels: if they weren't getting eight or nine wins out of Trout, they'd be floundering by paying Josh Hamilton, Albert Pujols and C.J. Wilson nearly $45 million for less than six wins. Players like Trout and others at the minimum keep the team competitive while essentially subsidizing the cost of the big money guys. Rather than looking at the large discrepancy between Trout and Pujols' salaries as a preposterous inequality, it can instead be viewed as Trout and his fellow $500,000 brothers allowing the Angels to keep the average roster salary at around $5 million, a manageable number for the organization.
On the other end of the competitive spectrum, the Rays are extremely reliant on minimum salary players because they simply can't afford buy wins on the open market. In an environment where free agent wins are going for nearly $6 million a piece, Tampa Bay knows that it can't spend with the big boys that they compete with annually in the AL East. Instead, they rely on minimum salary talent, most of which they develop in-house or trade for, to keep them competitive while paying an average of roughly $2 million per player. It's no wonder they've been ahead of the curve when it comes to extending All Star-caliber players early on in their service time as this is really the only feasible way they can keep them beyond three or four years. They were able to work a deal out with Evan Longoria that bought out several minimum and arbitration years at a price that the organization could afford. They weren't able to do this with David Price and now his days in a Tampa Bay uniform are numbered.
These examples, the Rays and Angels, may be even too extreme to compare, however. There's no way the Rays would have entered the bidding for Josh Hamilton and Anaheim is clearly able to afford more proven talent than Tampa Bay. In between these teams and near the median payroll, we find the most intriguing cases. Let's re-adjust our payroll limitations to $90 million on the low end and $110 million on the high end, encompassing the 2013 Diamondbacks, Braves, Orioles, and Reds (I excluded the Cubs because they have more payroll to spend should they wish to do so). How much do these teams need to rely on minimum salary talent to make ends meet while remaining competitive?
Let's look at these four teams more closely and how much talent they accrued from players at the minimum in 2013:
|Team||Players at Minimum||Combined WAR||Percent of Team WAR|
The answer is: it depends on how the team has built its median-payroll roster.
There's increased risk for teams, in this type of payroll situation, when they allocated a large portion of their cash to veterans, including a couple expensive players. If their stars perform, then the team will need little help from the young, cheap guys. If not, they're in big trouble. The Orioles got help from Machado and no one else, leaving them just short of the playoffs. The Reds got strong production from Todd Frazier and nice contributions form Tony Cingrani and Zack Cozart to pair with their stars, just barely getting into the playoffs. In this instance, the talent generated from young, cheap assets may be the difference in making it to October or not.
Alternatively, teams can choose to spread their median payroll throughout their roster. By signing a bulk of mid-level players, these teams don't have to lean as heavily on minimum salary talent to remain competitive. Since minimum salary players are generally riskier, less-skilled propositions, this is a great way to mitigate risk. With that said, it also can leave the team without a nucleus of star power as the organization opts to be good at many spots rather than great at just a few. The Diamondbacks fit this to a T, as they have Paul Goldshmidt (who's on a team-friendly deal) surrounded by a bunch of two to three-win players. They have a reduced need for minimum production, but if they get it, even better for Arizona.
A third option is to build your own roster with an emphasis on homegrown talent. The Braves were different in that they had a ton of production from minimum salary guys. This helped them survive horrid performances from Dan Uggla, BJ Upton and others. To get to the postseason, they needed youngsters to pick up the slack from some disappointing, expensive veterans. The core of the roster, though, was developed in-house, making it very affordable. Take some ugly contracts and performances off the books and the Braves all of a sudden look a lot like the Rays.
Of these three strategies, neither is necessarily better than another in a vacuum. Instead, teams should opt to choose the approach that best fits their ability to develop useful, productive young players. If a team has a farm system capable of cranking out productive players year after year, then signing a handful of stars and augmenting with minimum guys makes sense. If a team has a tough time getting reliable production from it's homegrown talent, then securing several positions at reasonable salaries might be the way to go, hoping that a young star or two pans out and can complete the roster. Teams have to know their own strengths to choose the correct path.
All of this, of course, relies most heavily on a franchise's ability to evaluate and develop talent. Some teams have a sound understanding of where they are and what they need (Athletics), while others struggle to see reality (Phillies). Teams that cannot generate talent and do not have the payroll to buy it can find themselves in a sort of "death spin" of perpetual losing. Teams that can develop that talent find themselves in perennial state of contending. If a team has confidence to develop useful players year in and year out, it can lock up some high-priced guys and use the young talent to fill in. If a team cannot develop young talent consistently, then spreading the wealth and limiting the chance for black holes on the roster may be the way to go.
There's a lot of internet ink spilled on ways to make low-payroll teams competitive. There's also a lot of talk about how teams with unlimited resources always win the bidding for the players they covet. Often left out of the discussion are teams trying to contend on a budget that big enough to either get the team into trouble or be used wisely to compete with the big boys. Utilizing league-minimum talent is a must for these teams, even though the scale they need it on can vary. Developing your own talent creates stability and allows an organization to take other risks as young, cheap talent is the best bargain in the game.
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Jeff Wiser is a contributor to Beyond the Box Score and co-author of Inside the 'Zona, an analytical look at the Arizona Diamondbacks. He occasionally blogs about craft beer at BeerGraphs and you can follow him on Twitter @OutfieldGrass24.