What comes first, payroll or wins?

Bob DeChiara-USA TODAY Sports

Do higher payrolls translate into more wins, or is it the other way around?

The link between payroll and team performance is a very real one in baseball, and as the only major sport without a salary cap teams can theoretically "buy" their way to a championship. But is this the way payrolls operate in baseball? Do higher payrolls lead to more wins, or does winning lead to higher payrolls?

This chart shows Opening Day payroll from 2000 to 2013 using data from Cot's Baseball Contracts and shows the number of playoff teams by payroll rank:

Payroll_1

To explain, the team with the #1 payroll in the league made the playoffs in 12 of the 14 years. It just so happens this team was the New York Yankees. In those 12 playoff appearances they won the World Series twice, in 2000 and 2009. Teams with top 10 payrolls made the playoffs in 57 out of 140 opportunities (40.7 percent), the middle third 26.4 percent and the bottom third 15.7 percent. Maybe it does pay (see what I did there?) to have a higher payroll.

Not so fast. Payroll level and wins were weakly correlated at best, and another way to look at the data was to see if payrolls increased more after making the playoffs to see if making the playoffs created a payroll bump. On average, teams that made the playoffs increased their payrolls by around 11.3 percent, non-playoff teams by 6.4 percent:

Year Playoff Teams Non-Playoff Teams
2000 27.0% 19.7%
2001 5.4% 6.8%
2002 15.4% 2.9%
2003 6.7% -4.8%
2004 1.2% 11.2%
2005 8.1% 10.3%
2006 7.7% 9.7%
2007 15.3% 9.2%
2008 2.9% 4.0%
2009 17.8% 0.8%
2010 8.8% 0.8%
2011 20.7% 7.1%
2012 10.5% 5.4%
Average 11.3% 6.4%

The playoff teams from 2000 had Opening Day payrolls in 2001 an average of 27 percent higher, whereas non-playoff teams saw average payroll increases of only 19.7 percent.

There are plenty of reasons why this could be. The obvious is playoff teams have a tendency to have the better players. After letting this stunning revelation sink in, consider the ramifications--better players get paid more, and if they don't get paid more, they certainly at least demand more.

Another possibility depends on the makeup of the playoff teams, whether they're "manufactured," i.e., made up of free agents and trades, or homegrown. Manufactured teams already paid for the players as they signed them to free agent contracts or acquired them in trades, whereas homegrown teams could have higher payrolls as key players enter arbitration and free agent years.

Does it make sense to have a higher payroll? Like any question answered as forthrightly as possible, it depends. This table shows total payroll and wins for teams from 2000 to 2013 and is sorted by most total wins:

Team 2000-2013 Payroll Payroll Rank Wins Wins Rank Playoffs World Series
NY Yankees $2,544,194,034 1 1337 1 12 2
St. Louis $1,275,469,879 10 1274 2 10 2
Boston $1,830,351,067 2 1265 3 7 3
Atlanta $1,286,033,669 8 1262 4 9
Oakland $763,171,558 25 1235 5 7
LA Angels $1,439,718,939 5 1233 6 6 1
Philadelphia $1,430,849,847 6 1203 7 5 1
San Francisco $1,272,418,501 11 1203 8 5 2
LA Dodgers $1,546,410,266 3 1202 9 5
Chicago White Sox $1,221,415,332 13 1172 10 3 1
Minnesota $895,739,705 22 1152 11 6
Texas $1,154,385,627 14 1146 12 3
Arizona $1,024,142,397 18 1126 13 4 1
Cleveland $908,346,699 21 1125 14 3
NY Mets $1,544,523,905 4 1119 15 2
Toronto $1,031,773,322 16 1118 16
Seattle $1,236,318,417 12 1111 17 2
Cincinnati $935,250,451 19 1108 18 3
Miami $606,674,912 30 1094 19 1 1
Detroit $1,284,976,743 9 1086 20 4
San Diego $754,854,464 26 1082 21 2
Chicago Cubs $1,401,734,406 7 1080 22 3
Milwaukee $888,717,882 23 1071 23 2
Houston $1,028,678,515 17 1070 24 3
Colorado $934,450,089 20 1063 25 2
Tampa Bay $641,800,448 28 1063 26 4
Washington $810,243,537 24 1044 27 1
Baltimore $1,054,822,244 15 1011 28 1
Pittsburgh $637,348,479 29 983 29 1
Kansas City $733,047,493 27 977 30

The team spending the most in the past 14 seasons also won the most games, but they did it in different ways. The 2000 World Series champion Yankees had a solid core of homegrown talent in Derek Jeter, Bernie Williams, Jorge Posada, Mariano Rivera and Andy Pettitte, supplemented by key acquisitions like Roger Clemens and David Cone. The 2009 Yankees were different--by this time only Rivera and Jeter remained, joined by Alex Rodriguez, Mark Teixeira, CC Sabathia and others. The Yankees gradually transformed from a homegrown to manufactured team, having the highest payroll along the way.

Nothing is black and white when it comes to baseball payrolls, and to categorically state that winning leads to higher payrolls is beyond what I wish to communicate. Numerous other factors such as service time, age of roster and key free agent and international signings influence payroll as well. Does winning lead to higher payrolls? The data suggests this is the case but whether this is causation or correlation is often a team-by-team and year-by-year determination. Having written that, the notion that teams spend to win might very well be a chimera that doesn't reflect reality.

Payroll data from Cot's Baseball Contracts

Scott Lindholm is a web columnist for 670 The Score in Chicago. Follow him on Twitter at @ScottLindholm.

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