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Team Control and Arbitration: A Growing Problem

Written by , Posted in General

Each and every offseason, those interested in what their team might look at the following year at least keep an eye on the happenings with arbitration: who is eligible, who is getting how much, who actually gets to a hearing, and who signs a contract that gives up a portion of their arbitration years to get some financial security (but still have a chance at the big-money free agent deal a bit later on).  The whole system is designed in a way to give teams and players security early in a player’s career–teams ensure that the time and money they’ve put into developing a player doesn’t end up benefitting another team before they can make good use of them, and players are assured of some sort of pay increase through their first 6 (or 7) years in the big leagues, the period where a team essentially has complete control of that player.  However, the design of this system seemingly creates (or exacerbates) a salary escalation problem, particularly the length of time that teams control a player’s rights.

Admittedly, for the most part this will only be an issue when looking at the top-tier players–the Mike Trouts and Bryce Harpers of MLB.  Lesser players probably benefit, but on a much lower magnitude; those guys are never going to be the primary cause of a team running headlong into the luxury tax year over year.

For most players, their MLB career is going to start completely under team control, and the ability of the team to ship them back and forth between the big league team and AAA (mostly) whenever they like.  During that time, they’ll be making the league minimum salary, or something near it (though, if a team wants to be nice–like the Cubs did with Kris Bryant in tendering him a $1.05 million contract this year–they can pick whatever they want), and it’s take it or leave it (and get the league minimum).  Given that the league average age for rookies (according to a 2012 Fangraphs post–the most recent data I could find) is 24, and that superstar talent more often comes up a little early–let’s say, 1 year age-wise–this would cover the Age 23, 24, and 25 seasons.

After that season, for their Age 26 season, comes the arbitration process, where big increases are going to start coming about.  Take Jacob deGrom out in New York, eligible for arbitration for the first time coming in to 2017 (albeit, as a Super Two), who saw his salary increase from $607,000 to $4.05 Million–a significant increase, and for a player who repeats solid performance, big increases can continue to happen, and wind up with salary figures upwards of $13-15 million during players’ final arbitration years (for example, the aforementioned Bryce Harper got $13.625M for 2017–he’s also already agreed to a $21.625M deal for 2018, so he will not be back to arbitration).  Using our assumptions above, this takes us to the end of the Age 28 season for a given player as they enter free agency.

Hitting free agency–free to talk to all 30 teams, and let their agents do their thing (especially $cott Boras’ clients), and ideally get the best combination of time and money that they can.  Keeping in mind that everyone–fans, players, front office wonks–knows that for ANY player, performance is going to decline at some point in a player’s 30s (which will be fairly early on in that first free agent contract in most cases), any contract of more than 2-3 years will probably the biggest deal they’ll ever sign, their only chance to really get into the well that a team’s pocketbook is–a direct result of the length of time their first team(s) had control in the first place.  At the top end, players will tend to want to get at least as much than those that came before–and certainly no less per year than they had been earning to start, with increases over time–meaning that quarter-billion contracts are likely to become more common possibly within the next couple of years.  Then $400 million.  Then $500M.  And on, and on, and on.

As new media rights deals get inked, and ticket prices go up, teams in larger markets will always be able to afford some of these contracts (though few would be impulsive enough to take on multiple of them at once), and the fact that the money is guaranteed to the players, nothing will ever knock those numbers down once they’re posted–in contrast to the NFL where renegotiating contracts takes place all the time–and players with little guaranteed money on their deals occasionally find themselves cut loose if they don’t play ball–there’s no reason to give it up.   Unfortunately, it’s unlikely there’s any easy way to remedy this contract arms race.  Reducing team control, or arbitration periods, or anything like that would more likely lead to younger players getting those contracts, and doubling down when they reach free agency the second time around, which would wind up compounding it all.

So, next offseason, when Kris Bryant and his arb-eligible cohorts on the Cubs start that journey with ‘Won World Series in 2016) on the resume, just keep in mind we’ll be seeing yet another step in along that spiral.

  • Dork

    Perfect article for today – nicely done – did anyone else see swarbs go 2-3 with a walk one of those hits an oppo HR

    • Bryzzo1744

      I did. With my brand new Amazon Fire TV Stick. I finally caved and bought MLB TV, and then I bought the stick to watch them on the TV

    • Doc Raker

      Both of his hits were oppo. As Smoltz pointed out in the broadcast, seeing Schwarbs go the other way with a pitch is a great sign.

    • Eddie Von White

      Did anyone get a traffic ticket?

  • Bryzzo1744

    You’re right the Cubs are going to be paying big money to a lot of players at once.Good thing is, they planned this perfectly. They will have the money in 2020 when the renovations are over and a new TV contract is in place. A double barrel revenue increase at the perfect time.

  • Doc Raker PHD de Grammar

    Each and every offseason, those interested in what their team might look at the following year at least keep an eye on the happenings with arbitration: who is eligible, who is getting how much, who actually gets to a hearing, and who signs a contract that gives up a portion of their arbitration years to get some financial security (but still have a chance at the big-money free agent deal a bit later on).

    You guys want to give me a hard time about my grammar. That isn’t even a sentence to start this post.

    In the offseason those interested in what their team might look at for the following season must keep an eye on the arbitration process. To follow arbitration you need to know the players that are arbitration eligible. You need to know who is getting how much, who is getting a hearing and who signs a contract giving up a portion of their arbitration eligible years in order to get extra financial security while not giving up a bigger pay day in the future when the player becomes eligible for free agency.

    Is that what you meant Steven Michaels?

    Someone else can decipher the rest, I want my 20 minutes back.

    • Not it.

    • Psssst. Doc. Michael’s first sentence is grammatically correct as written. Yours are too, but there’s nothing wrong with his. They “at least keep an eye on the happenings.” They may also do more, but at a minimum they at least keep an eye on them. Perfectly fine.

      • Doc Raker

        As we all know I am no grammar PHD but that sentence doesn’t read well. It might be a run on sentence. Can someone break this sentence down? Did you ever do that in high school? Noun verb noun and so on.

    • Michael S.

      Sorry, no refunds!

  • This game isn’t too fun.

    • Doug S.

      11:20 Pacific start, I’d thought. Turn on WGN at 11:00 to catch the lame leadoff man. Game must be rain delayed, they’re showing a replay of a horrifying loss. Wait…..they’re not? This shit’s real?

    • Doug S.

      I know I replied to this, but it’s a no show – like the Cubs today.

      OK – I want to see all 13 pitchers and maybe a couple others on the hill today. https://uploads.disquscdn.com/images/9ea498172ab194ce7b43c778da894038d4571f5043c845a3ee8d3b21e90cce23.png

      • Sherm

        They’re saving Jhay for when it matters

  • CubbieBlue023

    I went to church this morning to regain the religion that I lost during the first half of this season. I should have waited to attend until next weekend.

    ESPN just had a notification on top of my phone that just said Lester was the 4th pitcher to allow 10+ runs in…..

    I’m not clicking on the banner to read the rest.

    • You can guess the rest. Then go find something fun to do this afternoon! Watching the Cubs wouldn’t qualify today.

    • Eddie Von White

      I just got home from church. Didn’t even turn the radio on coming home. I was proud of Raker then Lizzie brought me back to reality. (I’m still proud of him, though).