MLB Lockout: The Floor and Ceiling Farce

Negotiations between the players and owners seem to be going from bad to worse, and with little new information to digest—the league (who is ever so ready to negotiate) is not at this time offering any new proposals—I wanted to revisit a key component of their very first proposal.

Back in August 2021, the owners included a $100 million salary floor in their initial offering. They clearly found this to be a concession to the players, as Rob Manfred included the following in his letter to the fans after locking out the players in December:

We worked hard to find compromise while making the system even better for players, by addressing concerns raised by the Players Association. We offered to establish a minimum payroll for all clubs to meet for the first time in baseball history

The letter didn’t articulate it, so we can only guess why the league felt this was a concession. Players are concerned about increasing spending, and this would have led to an increase in spending at the bottom. Also, it can be argued that this could help curtail tanking, as the bottom feeders in terms of payroll would have to spend more on players.

What the letter failed to mention was the accompanying $30 million decrease in the Competitive Balance Tax threshold, disincentivizing teams from spending at the top even further, as the threshold is already treated like a cap by teams in that payroll range.

The players rightfully turned this offer down; however, there are many fans who act as if this is and was a foolish decision, claiming that one of the systems’ features would be even more money for the entire group. Of course, this makes little sense on its face, especially since the owners weren’t going to start right out of the gate with an offer that would cost them significantly more money. What I wanted to do was find the numbers to prove this was the right decision by the players. So, using the fantastic database available at Cot’s Contracts, I dug up the CBT payrolls for all 30 teams between 2017 and 2021, the years spanning the recently expired Collective Bargaining Agreement. Then, I used the Roster Resource feature at FanGraphs to see where current CBT estimates stand going into 2022 to see how the proposal would have affected the upcoming season.

For the prior years, while I know it’s not perfect, I simply applied the same $100 million floor and $180 million threshold that the owners suggested. This obviously doesn’t account for any kind of inflation over the years, annual raises to levels, teams still exceeding the ceiling, or anything like that. So, while it’s a fairly simplistic view, I think it’s at least a reasonable barometer to see how payrolls would have been affected if this system that so many fans want was in place already.

You can check my work here, but these were the total decreases in CBT payrolls I found from 2017 to 2021:

2017: $189,838,013

2018: $123,811,838

2019: $256,908,256

2020: $153,662,950

2021: $191,741,932

Total: $915,962,989

It would be pretty generous rounding, but that’s darn near a billion dollars in payroll savings realized by the owners over a five-year span. Of course, it must be mentioned that CBT totals are not the same as cash spent, as the calculations for the Annual Average Value of a contract are not the same as cash outlays in any given year—if you’re curious, I’ve covered this topic in this space before.

Either way, some accounting tricks aren’t making up for a billion dollars, and players aren’t going to benefit in this situation. They are right to adamantly fight against it.

What about 2022? There are still plenty of big-name free agents left to sign for a lot of money, so it’s likely that these savings would be even greater once all is said and done, but under current projections, owners could stand to save another $175,253,131 in payroll if these levels were instituted.

This is not a good thing, and fans who constantly decry ownership not spending money should think twice about wanting a system like this in place. And before you say, “well players would get a larger share of revenue in this system!”, be careful. There was never a mention in any of the reporting that this scenario would have included an increase in Revenue Sharing among teams or that $100 to $180 million was tied to revenue in any way, and that continues to be the word to this day, after this plan has long been ditched. Rather, it would be assumed that it simply would have led to owners keeping even more profit than they probably already are.

Digging deeper into the numbers, it’s possible you could say this is a solution in search of a problem. Among the 150 payrolls over the five-year span, there were 47 occurrences of 15 different teams exceeding $180 million, with only 20 occurrences of 10 different teams coming in below $100 million. With the San Diego Padres and (somewhat surprisingly) Kansas City Royals being the only two teams to fall on both ends of the spectrum, it could be argued that this rule would be targeting 13 perennial big spenders and 8 low spenders.

If the league’s real concern was to spur spending with this idea, it was obviously half-baked, as more teams are affected from going over the limit than would be from being under. With $1,215,371,562 in savings against $299,408,573 in additional spending, it’s clear who and what this proposal was really targeting spending wise.

Finally, this is an example of the league negotiating in bad faith. With several proposals, the league has claimed they are meeting the players where they are, making concessions to meet their asks and allow them to achieve their goals. However, their proposals either come with a catch (a lowered ceiling with a floor), don’t actually achieve what the players are asking, or end up being pulled back after rebuttal from the players, despite the claims they were made with the players in mind. This results in the owners back at the status quo (i.e. arbitration), ending with a proposal for a deal they are happy with already.

It’s not hard to make an argument that the league has been less than honest in their claims of “[commitment] to offering solutions at the table and reaching a fair agreement for both sides”, and this is an example of not only why this system is a bad one for players financially, but also why the owners are operating in bad faith by acting as if it was a reasonable offer in the first place.