How to fix Major League Baseball’s CBA

The current Collective Bargaining (CBA) between owners and Major League Baseball Players Association (MLBPA) is set to expire after 2021 season. There’s a sense in the baseball world that we’re headed towards a work stoppage. The recent off seasons where many players entered the season without guaranteed jobs speaks loudly of a broken system where owners have suppressed salaries, manipulated service time and are actively tanking rebuilding – to a point where despite record revenues, the players as free agents, after years of organizational control, are not seeing the monetary value that many believe they deserve.

I wrote this article a few months ago and shelved it. However, a few days ago, during the all-star activities, Tony Clark, executive director of the MLB Players Association chatted with the media. There were a few comments he made which I want to highlight, so I dusted off this old rant of mine to address Clark’s comments as well as broader CBA discussion that needs attention.

Another important statement he made was: “We are interested in restoring meaningful free agency.”

The first of the two statements want me to jump with joy. Although I’m convinced it’s a non-starter with the owners. The MLBPA needs to continue to push to abolish the draft, or at least settle for a major reform, in light of so many teams becoming members of tank-nation.

The second statement kind-off, sort-off makes me cringe. The idea that MLBPA wants to “restore” meaningful free agency from some “golden” era in the days of the modern front office armed with cutting edge methods to value players, right from their skills, valuing marginal values of players wins to predictive modelling of a player’s career is downright naive. The idea that the MLBPA wants to restore the old-order is wishful thinking and if they want some level of control back during free agency, they need to look at the entire CBA and their membership in a whole different light.

It is obvious that current economics of baseball is broken and needs a serious overhaul —its not just about free agency. The entire model needs to be reevaluated, free agency cannot be improved in isolation, and this is where I believe that its not just the owners, but also the players who should be held responsible for the mess that is the current CBA, after all, they’re signatories on it as well.

I’m no expert in labor relationships but what I see from outside as a fan is the PA’s inability to either foresee the unintended consequences of their arrangement along with a bias towards veterans, so they get adequately compensated during free agency, or a willingness to go along with that consequence because it’s generally veterans who have the most say in the union.

For a successful CBA, the PA needs to set a clear framework on what their desired outcomes are, and strategist on how to enact them. We all assume they know what they would like to see as their end goal, however, they should set expectations based on items most important to them but also keeping an open mind towards players who aren’t necessarily current union members but are part of an important feeder system of expected members. They must also have the foresight to see what unintended outcomes each decision may have. These unintended outcomes can have a major impact, for example in baseball is attaching draft pick compensation to free agents. Although a noble goal to provide compensation to teams who lost out on a player in free agency, this has come back to haunt a lot of free agents in a way PA did not seemingly foresee.

If I were to create a list of all things that I thought are the PA’s fault, I’d start off with the draft. Up until the previous draft, the slot values for the draft were recommendations but teams would consistently go above and beyond to land top talent.

Here’s the breakdown for what MLB teams spent on drafts over the past few years.

2011 – $234 million

2012 – $223 million

2013 – $221 million

2014 – $224 million

2015 – $249 million

2016 – $269 million

2017 – $289 million (record)

Data: USA Today

Since changes were first implemented, teams spent less in the draft in the following three years than they did in 2011. Since then, creative teams have found ways to go above recommended slot value and spent a record $289 million in 2017, incurring penalties in the process. Teams realized it is a worthwhile investment given the number of years of cheap control they acquire should an impact-player make it to majors.

An argument could be made that the teams have gone back to spending more than they were in 2011, but it’s a year-over-year increase of 3.58 percent of spending compared to revenue increase of 6.84 percent year-over-year.

During this time, MLB’s aggregate payroll has gone up by 7.63 percent year-over-year. This paints a rosy picture and in fact makes a strong argument in favor of the owners that salaries have grown faster than revenues. However, if we break it down, it is because of 2013 which serves as an anomaly where payroll went up by 19 percent and consequently skews the data.

Since 2013, we’ve seen a downward trend in payroll as a percentage of MLB’s revenues year-over-year:

https://www.forbes.com/sites/maurybrown/2018/12/17/final-mlb-payrolls-for-all-30-teams-show-second-largest-decline-since-2004/#539295c4e474

Additional data courtesy of Statista

The second issue on my list links with the first issue.

For the longest time, the PA’s approach has been to reward veterans who “deserve” to be paid after years of being under control. Of course, most of the PA reps are existing players and they identify free agency as a core issue. However, the PA has always preferred to rewards veterans at the expense of upcoming rookies, most of whom are not paying union members yet.

It makes sense for the union to not pay too much attention to the younger players, in fact if I were to speculate, the reason they agreed to harder limits on slot values for the draft is because they felt more money would flow their way, a case of misplaced naivety or selfishness, or both!

This is a short-sighted approach, even though majority of the players drafted will never see an inning in the major league or even make it to the 40-man roster (who the union represents), it’s a critical feeder system for MLB teams. In the age of analytics where teams are doing a better job of identifying aging curves of players and not paying them for past performance but for future performance (in some cases, rightly so) its important that the PA reviews the compensation structure holistically instead of its misplaced preference for veterans.

My third issue with the PA has been its lack of support for minor league players. Again, just like the draft minor league players are a feeder system and it needs to be protected. Higher compensation or better safety nets would allow players to continue playing for longer, hence maintaining quality at the lower levels.

In order to have the impact the PA has argued for, this is what the union should focus on for their next CBA:

1. Early Arbitration

Players need to get to arbitration sooner than two full years of service. Given that players are now being compensation on projected future production, it makes sense to go to arbitration right after their rookie year, considering those early years are where players are most valuable to teams. This will also help players who have no leverage early on and may be tempted to sign team-friendly deals like Ronald Acuna and Ozzie Albies did early on.

2. Reconfiguring free agency

The entirety of free agency needs to be reevaluated and changed. Its not just pure compensation but also the age at which a player hits free agency as well. Again, if players are being compensated on future production, they should be able to hit free agency when they’re in their prime, not in their post-peak 30s. The PA was against restricted free agency in the 1990s, but I see it as a benefit where other teams offering players an offer sheet can be a good competitive tool.

3. Reworking the draft altogether

Reworking the draft will provide many talented players on the fringe to commit more years to baseball and possibly help them develop with baseball as their sole focus. Improving the quality of input is vital to ensure the output quality remains sustainable. This goes beyond representation, it’s an issue at the very heart of the CBA discussions. Any economist with tell you incentives matter, and if you want to convince the likes of Kyler Murray to pick baseball over other sports, then you have to align your incentives accordingly.

Firstly, the PA should push to remove draft compensation picks attached to free agents. Too many players have been impacted and have signed a lot later in the offseason for a lot less than they would have if those picks were not attached to them. We can still compensate teams for losing a player in free agency without costing him approx. two months of baseball.

Secondly, removing hard slots and penalties for going over the recommended amounts will have positive effects as well. If the MLBPA is serious about retaining players in the farm system for the length that’s historically been required, multi sport athletes will rarely choose baseball over other sports. Let’s face it, the path to majors for athletes is already harder in baseball than other sports, so allowing players to have the financial security to pick baseball would help.

4. Provide greater protection of minor leaguers and players not on the 40-man roster

The PA needs to fight for minor leaguers despite them not being paid union members. The minor league baseball players are probably the most ill-treated professional athletes in North America, and its time the PA pays attention to them.

Fair wages would allow players to continue playing baseball longer, which will help teams have stronger quality depth in their systems. The Blue Jays recently made news by increasing minor league pay by 50 percent. Although this is a laudable step, fair wages should not be a competitive advantage. The next CBA provides an opportunity to address this issue.

5. Higher league minimum

Given baseball’s revenue, it’s arguable that the league minimum should be higher as well.

6. Discourage Tanking

Far too many teams are in a rebuild mode. For far too long, teams have awarded mediocrity by giving the worst teams higher draft picks. Although this won’t change anytime soon, maybe the MLBPA can push for a draft lottery system akin to the NBA or NHL, where the worst team isn’t guaranteed first pick.

Another area that may discourage tanking is expanding the number of playoff teams. Although I would hate to see more teams in playoffs, given the number of games in baseball and the length of the season already going six months, the regular season should mean something. The number of teams not actively contending is too high.

Given that consumers have multiple areas of interest and thus greater choice when it comes to parting with their disposable income, they don’t necessarily have to suffer through a bad season spending money at the ballpark. Its important that to keep interest alive in a casual fan, team ought to do more to increase competitiveness. This is also directly linked to free agency. According to FanGraphs, 13 teams are expected to finish under .500 this year. This takes them out of equation for bidding on free agents which means many players find their market is limited which impacts their compensation.

This CBA has the potential to be a watershed moment for Major League Baseball. Both the owners and the players need to realize that a strike or a lockout is not in anyone’s interest.

The PA need to realize that for the sake of baseball’s health its not only veterans who need their protection but also draftees who shouldn’t be thrown under the bus because they’re not paying members yet and many wouldn’t ever be. The money to be up front to players in the current environment. Restoring meaningful free agency may sound like a noble idea, but without comprehensively looking at desired outcomes and how free agency may fit in that picture, we’ll continue to see more of the same.