The off season has just begun, but we’re already seeing a new phenomena: a big jump the the salaries offered to players. Jason Werth earned 7 years, 126 million. Adam Dunn, in a crowded market for his services, earned 4 years, 56 million. Cliff Lee is bound to earn at least 6 years, 150 million, and could earn even more. Troy Tulowitzki earned his 157 million dollar extension. The list goes on – John Buck, Jorge De La Rosa, Hiroki Kuroda, Ted Lilly, Bronson Arroyo – all received or will receive huge deals. Going back a little further, we can look at Joe Mauer and Ryan Howard.
We’ve been waiting for the next round of real baseball inflation to come for awhile now. It looked like it was coming in 2006 when Alfonso Soriano, Vernon Wells, Barry Zito, and Johan Santana earned big extensions. This round probably began after the 2008 season when the Yankees paid 23 million per year to Sabathia and Teixeira, and an absurd 18.5 per year for Burnett. The market corrected itself after 2006, but I don’t think that we’re going to see that again. Baseball has long waited for the AAV of major free agent contracts to balloon upwards again after most flat-lining through the 2000s. Baseball made something like $6.8 billion last year, more than double what MLB made in 2000, but the average player salaries has only increased from about $2,000,000 to $3,000,000. In graph form:
[image title="Mean player salary" size="full" id="23554" align="center" linkto="full" ]
We’ve been waiting for real growth for awhile now, but haven’t seen it. I sense that it is because of a combination of teams locking up their young stars through their late-20s today, combined with an unbalanced talent base – the 2000s just didn’t have that many particularly awesome players hitting free agent age. However, teams are not awash with money, and looking for places to spend it. While there aren’t any Alex Rodriguez’s or Manny Ramirez’s out there, there are some reasonably attractive options, and the market prices are skyrocketing. Also, I think that MLB is increasingly confident in its market position once the economy gets back into full swing.
This is a mixed blessing for the Yankees. If prices correct themselves, that means other teams are spending more money. The Yankees will lose much of their financial advantage unless the Steinbrenners choose to raise Cashman’s budget. On the other hand, major baseball inflation (late-90s style) would make a lot of their long term contracts seem like dire, especially the Alex Rodriguez deal. If the Yankees do maintain their budgetary edge over other teams, they’ll be able to take advantage and reduce some of the pain from past mistakes.
This is kinda-sorta an argument for signing Cliff Lee, even though I still have some of the reservations that I expressed earlier. If the Yankees really believe that a) major baseball inflation is coming and b) they want to increase their payroll significantly, then they should sign Lee. However, we’ve seen no indication that the Steinbrenners are willing to go into the 250+ million dollar range that this scenario would suggest.
On a side note, that graph just screams to me, “Painful CBA negotiations after this season” when the next round of labor talks begin. MLB players really are due for a big raise.
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