Lockout: New Salary Structure Proposals Revealed

As we’ve already established here, no new core economic talk between the players and owners will be happening until at least after the New Year.

However, that doesn’t mean all news has come to a halt.

The Associated Press had an update with quite a bit of new information regarding salary structures in recent proposals that was previously unreported, so I wanted to recap it here briefly.

First, the minimum salary structure is laid out in more detail than what was previously covered; however, it leads to at least some confusion when compared to previous reports.

Originally, Jeff Passan reported that owners proposed a revamped minimum salary structure that would pay “$600,000 for first-year players, $700,000 in their second seasons and $825,000 for their third”. I took this to mean players under one year of service would earn $600,000, the next level for one to two years, and the third for two to three; however, this is not the picture the AP is painting.

“MLB has proposed raising the major league minimum salary from $570,500 to a series of tiers: $600,000 for players with less than a year of big league service, $650,000 for at least one but less than two and $700,000 for at least two,” writes Ronald Blum, who also adds that the levels “would rise $10,000 annually, to $640,000, $690,000 and $740,000 in 2026.” The increases are a new detail that had previously been left out. While these raises result in large first year gains (5.2, 13.9, and 22.7% respectively from the one major league minimum in 2021), they drop greatly in subsequent years (1.6, 1.5, and 1.4% respectively over the life of the five-year proposal). While slightly higher, these more closely reflect the 1.2% increase from 2020 to 2021.

The confusion obviously results from Passan’s inclusion of a level for a player’s third season at $825,000. As I stated, I thought this meant two to three years of service, but now I’m not so sure. Referencing an explanation on how the league would plan to pay for arbitration salaries seems to contradict this:

Players with less than six years of service would be paid based on a formula agreed upon by both sides….A player with more than three years would multiply his career fWAR by $580,000, and the resulting number would be his salary for that season

Passan is clearly stating here that a player with more than three years of service would fall under this new “arbitration” calculation, meaning his definition of “third-year player” is between two and three years of service, which directly conflicts with the AP report. Unless Passan is insinuating that $825,000 would be a minimum for the arbitration calculation—when using the formula, I calculated Kevin Newman’s salary as under the minimum and Michael Perez’s as negative, so it would certainly be necessary—my guess would be that the AP is more correct than Passan in this case.

It’s entirely possible something simply changed between proposals, but I at least wanted to point out the differences to try and provide clarification, along with the most up-to-date information.

As for the player’s side, figures were reported as to where their thinking lies, something that wasn’t available before.

They are proposing a minimum of $775,000 starting in 2022, ending with $875,000 by the end of the agreement. Assuming flat $25,000 raises every year, this represents an initial 35.8% jump, with roughly 3.0% raises on a yearly basis. This is much less than what I anticipated—I was expecting at least $1 million, if not more—but it’s still unknown whether the owners would go for this modest increase or not.

An interesting aspect is no additional levels were mentioned, which presumably means the players are proposing one minimum, opposed to multiple levels by the owners. An extremely simplistic breakdown actually comes out in the player’s favor, as adding one theoretical player from each bucket under the owner’s proposal ($1,950,000) is less than three theoretical players under the players ($2,325,000).

Moving on from minimum salaries, more details on the pre-arbitration pool were revealed as well.

The union is suggesting using a pool of revenue from possible expanded playoffs and luxury tax proceeds that were being used elsewhere to fund bonuses for players who receive certain benchmarks, and apparently that pool is being valued at $105 million. The AP insinuates that these benchmarks could be “based on WAR, appearances on an all-MLB team and recognition such as best position player, best pitcher and best rookie.” Despite this list, no further details are revealed, as in what it exactly means to be best pitcher or rookie.

Further, no monetary amounts were attached to these different benchmarks. One would guess that the more prestigious the achievement, the higher the bonus—but just how much are we talking? $1 million? $3 million? More?

On top of that question is how would the rest of this pool be divided? Would it be evenly dispersed, or weighted based on salary or measurements like at-bats or innings pitched? The NFL has a system that would be similar to the latter, but it may be difficult to compare position players to pitchers in that scenario. If it were weighted based on salary—say reflecting a percentage of a player’s salary versus the entire salary amount of pre-arbitration players—that would make some sense.

In their article, the AP stated that of the 1,670 players to appear on a roster in 2021, 1,145 made less than $1 million (remember, despite the common refrain, this is not actually millionaires versus billionaires). It’s likely most, but not all, of these players were pre-arbitration, but for the sake of simplicity, let’s say they all were. That’s $91,703 per player, at most, with the final total being less due to the larger sums coming off the top. However, as 241 of those players made less than $100,000 and 530 made between $100,000 and $500,000, it would make sense if the proposed system ended up paying players in that range less than those who made more.

While we already knew the range in which owners were proposing to raise the Competitive Balance Tax threshold, the actual yearly amounts were reported. The amount wouldn’t rise from the previously reported $214 million starting level until 2025, when it would go up to $216 million, finally increasing to $220 million in 2026, the final year covered in the proposal.

These modest raises (1.9, 0, 0, .9, 1.9%) are akin to the levels of the previous two agreements that have rankled players, so it would certainly be considered a loss if these are where the final totals came in.

Finally, while the floor/lowered ceiling proposal originally suggested by the owners no longer even seems to be on the table, the increased penalties also came to light. Overages would be taxed at 25%, which is 5% higher—a 25% increase—than the first penalty assessed in the previous agreement. The report says nothing about any penalties above this presumed lowest level, which in theory would represent teams that are going over the $180 million that did not pay tax in prior years.