It is well known that a boom in local TV money has made the game of baseball flush with cash over the past few years.  The sports industry as a whole has also bloomed, so it is safe to assume that salaries will only continue to rise.  For MLB players who have guaranteed contracts (something athletes in other sports are sure to be jealous of), it is a good time to be playing the national pastime.

 

Minimum Salaries:

One of the first things I was surprised to learn was that MLB doesn’t have a minimum salary scale like the NFL and NBA.  In those two leagues, the minimum a player earns is based on how many years he has been in the league, with more years equaling a higher minimum.  Also, both of those leagues have mechanisms built in to defray the cost of a veteran’s salary, so teams don’t pass them over in favor of the cheaper, younger player at the minimum.  This wouldn’t be as big an issue for MLB, as it doesn’t have a salary cap.  Still, I wouldn’t be surprised to hear at some point that the union is trying to push for a similar scale.

 

Below is a graph of minimum salaries over the past 10 years with a trend line projecting the next five years:

min-salary

 Source: http://www.statista.com/statistics/256187/minimum-salary-of-players-in-major-league-baseball/

 

The players have to be happy about the increase of $200,000 over 10 short years.  While this is mostly because of the increases due to the 2006 and 2011 CBAs, salaries have not gone down at any point during the last 10 years, with 2009 and 2010 the only years where the salary remained flat.  The average growth rate of 4.7% looks good, remember the spikes due to new CBAs; players who weren’t lucky to have their first three years of service time (those players make up the majority of players who make the minimum) fall during a CBA negotiation received nominal raises until arbitration.  It is also interesting to note what points fall below or above the trend line.  Typically, years in the first half of a CBA tend to be above the line, and years in the second half are below.  That’s why I expect the next two years to be below the line, with another spike between 2016 and 2017.  This spike is why I think the players have a decent shot of getting to the projected $600,000 in 2019 or fall only a bit short.

 

Average Salaries:

Average salaries have also seen a large bump over the past 10 years, with the average-paid player getting $1.25 million more in 2014 than in 2005.  The ratio of minimum to average salary has stayed roughly constant; it was 12% in 2005 and 13.3% in 2014.  Even with the minimum salary gaining a bit more than the average over the past 10 years, the players have to be happy that such a large percentage increase (even though the dollar amount is small), hasn’t drastically affected the amount going to veterans.  This is helped by the large influx of cash into the game over the past 10 years, so all players are sharing the wealth.

 

Here’s the graph for average salaries:

avg-salary

Source: http://www.statista.com/statistics/236213/mean-salaray-of-players-in-majpr-league-baseball/

 

The growth is much more consistent than the minimum, with no large spikes in CBA years, due to the fact that the CBA doesn’t set the average.  The average growth of 4.05% is a pretty good one that looks better when considering that 2009-2010 saw a $10,000 increase.  It is interesting to note than most of the dots below the line are in the 2nd five years of the data set, showing that the growth has slowed down in recent years.  Players can take joy in the large spike in 2014, hoping that the trend continues into 2015 and beyond.  Seeing how the growth is consistent, I would guess that the average has a decent shot to hit $4,000,000 by a projected target date of 2018.  This is a significant number because then a roster’s total salary–with all 25 players making the average–would be $100,000,000.

Players have to be happy as the pay for all players, not just the stars, is rising.  $200,000,000 deals are starting to become more common for stars who reach free agency, while the lower-level players are better off than they were 10 years ago.  The financial state of the game is in a very good place, and players can look for that to continue to translate into better compensation.

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