Salary Floor is not a Panacea
Some say a salary floor will be good for competitive balance. That's not exactly true.
Two weeks ago, I wrote about the unfair scorn that befell the Orioles during the midst of what turned out to be a 19-game losing streak.
The Orioles at this point have won two in a row, but one of the topics that has been discussed relating to the Orioles streak but also to the upcoming labor negotiations between players and owners is the idea of a salary floor:
In a face-to-face collective bargaining meeting in Denver on Monday, Major League Baseball made its first proposal covering core economics to the Players Association. The plan included a new tax on team spending, one that would both effectively lower the first luxury-tax threshold in the sport to $180 million, and charge teams who exceed that first mark a higher percentage than they pay today. One trade-off, people briefed on the league’s proposal said, would be a salary minimum of $100 million in the sport.
Money collected from teams paying tax would fund certain club payrolls to the minimum, but details about the mechanism are unclear, including what penalties teams might incur if they do not reach $100 million, or what year the minimum would take effect.
Technically baseball does have a salary floor: fielding a roster of 26 players all making the league minimum equals a payroll of $14,833,000. So a $100 million salary floor is a major concession to the players. That would set the average salary for a 26-man roster at a minimum of nearly $4 million per season. It would also, in the mind of some, stop tanking rebuilds such as the Orioles are doing and such as the Astros did by restoring “competitive balance” to the league.
However, a salary floor is not the silver bullet that its proponents think it is.
First off goes back to how you spend the money; as I wrote in my defense of the Orioles rebuild:
The Orioles have a bad history of overpaying for players when they were bad and trying to be less bad for a little bit. The 2000’s are littered with guys like Javy Lopez, Mike Gonzalez, Sidney Ponson when he came back, and others who were not that great but got paid. Even when the Orioles were competitive in the 2010s they wound up overpaying for guys. Looking at you Ubaldo Jimenez and Chris Davis.
Just because you throw a lot of money at a guy does not mean that your team is going to be any good. Nor does it mean that the player getting paid is going to continue to perform at a high caliber level. The league is littered with underperforming players with bad contracts the poster child of which is the Orioles own Chris Davis, a contract so bad that I think O’s fans wanted to throw a parade when he announced his retirement.
But secondarily, money does not exactly make you win in any logical sense. I took a look at Major League salaries for 2021 from Sportrac and compared them to the current Fangraphs projected records at the end of the season and calculated the estimated cost per win for each team. The results are interesting.
As you can see, the Orioles are relatively efficient in cost per win this year. Certainly more efficient than the Rangers, who are spending $40 million more for the privilege of being basically just as bad. It also shows how teams that don’t have massive payrolls can be consistently successful. The Tampa Bay Rays (you know, the defending American League Champions) have a payroll nearly $30 million under this proposed salary floor. What good is spending another $30 million going to do? Yes, it would allow them to keep some of the players that they have traded. But part of their success is trading affordable players for better prospects. It is possible that spending more would make the Rays a worse team, not a better one.
It also isn’t like the Washington Nationals, who are spending nearly $150 million to finish at or near last place in the NL East, are getting a lot of bang for their buck right now.
The NBA has a salary floor, and not a static one; the floor is 90% of the salary cap, so teams are required to spend a significant chunk of money. The cap for 2020-2021 was $109,140,000, so the floor was $98,226,000. Absurdly, the NBA cap isn’t really a salary cap, because there are luxury taxes and hard caps and soft-caps and a whole lot of other stuff that Sportrac explains better than I could.
Anyhow, I ran the numbers in the same way for the NBA that I did for baseball and got this.
Nothing displays the absurdity of the NBA tax cap like the fact that 27 of the league’s 30 teams are over the “cap.” But the lowest payroll team in the league won 41 games and went to the playoffs. The second and sixth most efficient teams in terms of dollars per win played in the NBA finals. The team with the fourth highest payroll in the league, the Timberwolves, finished 23-49.
The NBA salary situation is a little more complicated due to absurdities like the mid-level exceptions, bi-annual exceptions, Larry Bird exceptions, Early Bird exceptions, and a whole host of other gimmicks that both drive up salaries and circumvent the cap. It’s absurd how many loopholes this thing has, especially when you consider that the league has a “maximum salary” that is the most a player can make in a single season, unless there is one of these other exceptions at play.
NBA salaries are also absolutely absurd. Just look at this chart and you realize there are a lot of players that are getting overpaid thanks to things like the salary floor, guaranteed contracts, and the byzantine system of exceptions, Bird rights, etc. For example, Klay Thompson hasn’t played in two years and he still made $35,361,360 last year. And he wasn’t even the highest paid player on the Warriors because Steph Curry is (rightfully) the highest paid player in the league at $43,006,362.
And that’s what this really comes down to for the Player’s Associations and its supporters. This isn’t about competitive balance at all, it’s about paying the players more money. From the MLBPA outlook, that’s understandable. Only nine MLB players are making $30 million or more in salary this season; thirty-two NBA Players clear that number, with six of them making over $40 million.
And don’t get me wrong; there’s something to be said about the players trying to get as much salary leverage for their players as possible. That’s their job, to look after their players. However, call it for what it is and don’t wrap it up in some sort of fake concern for “competitive balance”. As both anecdotal reference and data show, just because you spend more money on players doesn’t mean that you are necessarily going to succeed. Let’s not fall into the trap of saying “it’s good for the game” and “it’s good for competitive balance” when those things are not exactly true.