With salary arbitration hearings beginning on February 1st
let’s take a look at the winners and losers of this process.
Before we look at winners and losers it is first
important to understand the process.
A player becomes arbitration eligible twice under his entry-level
contract: Once in his 3rd
or 4th year, depending on when he is called up during a season, and
then two years after that. So a
team essentially holds the rights to a player for six years after he is
drafted. If a player becomes
arbitration eligible and does not come to an agreement with his club, then both
the club and player submit a salary number that they feel is fair and a panel
will hear the case. The panel then
decides which salary number best reflects the player’s worth and that is the
amount he will earn in the upcoming season. A player can also be offered arbitration if he is a free
agent and the club and player do not come to an agreement before the
arbitration period.
Salary arbitration in Major League Baseball started in 1974
with the purpose of adjusting player’s salaries to better represent their play
on the field while still under an entry-level contract. This offseason, 142 players filesd for
arbitration. Most of these players
reach agreements with their teams before the process reaches the point of
having a hearing, but since 1974 there have been 495 cases heard by arbitration
panels. The process has clearly
become a big part of the MLB offseason so who are the real beneficiaries of it:
the players or the owners?
When looking at the process from a numbers standpoint alone
the players obviously benefit. In
2010, the 128 players that filed for arbitration had an average salary increase
of 107 percent, meaning that on average players were making over double what they
were in the previous season. However
this number is very skewed by players who have seemingly reached the primes of
their careers early. Take the
Giant’s Tim Lincecum for instance who received the biggest raise during the
arbitration period of any player in 2010.
Lincecum’s salary increased from $650,000 to a two-year, $23 million
dollar contract. Lincecum was
seeking $13 million in arbitration while the Giants offered $8 million, but
like most cases there was an agreement before a hearing. This increase in salary was 1,131
percent. This is a huge number
that may come off as unfair to the owners because of his age at the time, but
Lincecum’s case is unique because of his two Cy Young awards. Because Lincecum only signed a two-year
deal, he is again arbitration eligible in 2012. He is asking $21.5 million which is just short of Roger
Clemens record request of $22 million in 2005, while the Giants have offered
$17 million. The $17 million the Giants
offered broke the previous record of the $14.25 million the Yankees offered
Derek Jeter in 2001. The
arbitration benefits players who have enjoyed early success greatly because
they could still be making a salary around the league minimum ($480,000) and
consequently hurts the owners for the same reason.
As steep a price the owners may have to pay, they
are still the main beneficiaries of the process. There is no better system for owners in professional sports
than the MLB’s arbitration process.
In the NFL first round picks have previously been guaranteed north of
$50 million dollars and fizzled out before doing anything productive in the
league. The MLB arbitration
process allows for six years of evaluation of a player before a team has to
commit to him long term. And if
during those six years there has not been major progress in a player’s
development, his annual salary will hover right around the league minimum. Every once in a while there is a player
who develops into a stud long before he is supposed to, which makes owners
cringe at the process. But in reality they are the party with all the leverage.
