Why paying minor leaguers more money is smart baseball business

[NorthSideSox72]

I've been working on this one for a few months. It has some potential to ruffle a few feathers, so I wanted to get it right.

 

For those unaware, there is a lawsuit (now class action) out there, claiming minor league baseball players are paid so little that labor laws are being violated. Instead of exploring the legal or moral implications, I took a different route - I made a case for how paying them more money is actually a smart investment decision. If a team was willing to lead on this, they could gain competitive advantage.

 

Read my business case here. I would love to hear what people think on this.

 

[Dick Allen]

I think they should be given a livable wage, and have it increase as you move up a level. As to college scholarships, this has been written into bonus contracts for a long time. Apparently the obligation is very rarely fulfilled. I think Shawon Dunston was suing the Cubs a couple of years ago to honor his contract and pay for him to go to college. I don't know how that turned out.

[NorthSideSox72]

I think they should be given a livable wage, and have it increase as you move up a level. As to college scholarships, this has been written into bonus contracts for a long time. Apparently the obligation is very rarely fulfilled. I think Shawon Dunston was suing the Cubs a couple of years ago to honor his contract and pay for him to go to college. I don't know how that turned out.

The increases do happen, but with a few exceptions, it never reaches a living wage by any standard I can think of.

 

The college money thing, I do know a number of current Sox minor leaguers are taking advantage of it. It's not new in concept, but what is new with that is that it is present in virtually every (non-graduate) pro contract signed nowadays. Still doesn't pay their living of course, but it is a nice step.

 

[knightni]

I worked for a single A team in concessions twenty years ago, and the visiting players would line up at the end of the games for leftover hot dogs, so they could eat something without having to spend their meal money on food.

 

Pretty sad that pro baseball players get fed worse than college guys.

[Dick Allen]

I worked for a single A team in concessions twenty years ago, and the visiting players would line up at the end of the games for leftover hot dogs, so they could eat something without having to spend their meal money on food.

 

Pretty sad that pro baseball players get fed worse than college guys.

Brings up another point. These guys are forced to eat leftover hot dogs. It's not going to max out their potential physically. If they do buy their own food, it probably is fast food. Maybe they should provide decent healthier meals. It would help them become better ballplayers.

[NorthSideSox72]

Brings up another point. These guys are forced to eat leftover hot dogs. It's not going to max out their potential physically. If they do buy their own food, it probably is fast food. Maybe they should provide decent healthier meals. It would help them become better ballplayers.

That's one of the key points in the article.

 

[oldsox]

Minor league players get financial help in a lot of ways not mentioned, plus many of the younger players are in the 18-21 year age group, and their parents should be able to help, just as many college students get help from their folks.

 

That said, I have long thought that not only should the teams make it better for the young minor leaguers, but also the existing players could help. Of course, it would have to go through the MLPA, which would happen only in fiction, but major league players as a group probably are paid something between $3-4 Billion per year. Tax them a fraction of a per cent per year, match it from the 30 owners, and presto, problem solved. It would be tax deductible. Exclude the players in the first 3 years of service.

 

 

[NorthSideSox72]

Minor league players get financial help in a lot of ways not mentioned, plus many of the younger players are in the 18-21 year age group, and their parents should be able to help, just as many college students get help from their folks.

 

That said, I have long thought that not only should the teams make it better for the young minor leaguers, but also the existing players could help. Of course, it would have to go through the MLPA, which would happen only in fiction, but major league players as a group probably are paid something between $3-4 Billion per year. Tax them a fraction of a per cent per year, match it from the 30 owners, and presto, problem solved. It would be tax deductible. Exclude the players in the first 3 years of service.

What financial help was not mentioned? I don't know of any that would actually help them with food or housing, but tell me what you are thinking of. Getting free shoes from Adiddas won't pay the bills.

 

And sure, parents could help, in some cases (but certainly nowhere near all). But that seems pretty ridiculous. You could make that argument about other professions, and would it be OK?

 

I'm also not sure why the players should be forced to help anyway. The teams are in a much better position to pay. Also, the business case being made isn't about rule changes or forcing anyone to do anything - it is about making a choice and trying to improve the model for the benefit of the team and the players.

 

[Chisoxfn]

Minor league players get financial help in a lot of ways not mentioned, plus many of the younger players are in the 18-21 year age group, and their parents should be able to help, just as many college students get help from their folks.

 

That said, I have long thought that not only should the teams make it better for the young minor leaguers, but also the existing players could help. Of course, it would have to go through the MLPA, which would happen only in fiction, but major league players as a group probably are paid something between $3-4 Billion per year. Tax them a fraction of a per cent per year, match it from the 30 owners, and presto, problem solved. It would be tax deductible. Exclude the players in the first 3 years of service.

I disagree that parents should be expected to help. You are a working professional at this point (I'll caveat this by saying when I got my first professional job, I still lived at home, but I was cheap) but providing free rent to a family member and actually paying for one's rent are two very different concepts...one involves you just keeping your kid at your house more, along with some incremental costs (extra food & energy costs) while the other involves you paying for a 2nd place and said minor leaguer has no option but to go to whatever affiliate the big league club wants to send him).

 

To me, it is pretty clearly, it is in the clubs best interest to ensure you are at a minimum, able to sleep in a clean room and get quality food and nutrients in your system. Personally, if I ran a franchise, I'd have state of the art dorm rooms at my minor league facilities, which would include specifically catered meals with organic food and produce to ensure my athletes (if they so choose to) can eat right and put the absolute best stuff in their body. I'd also ensure that the dorm had great work out facilities, etc, again to make it as easy on these young kids as possible to take the next steps in their career (if they so choose).

 

While that doesn't mean you are paying them more (and to be frank, I'm not certain that an organization could actually choose to play players more...not sure what is contractually stipulated as part of the overall collective bargaining agreement(s). But I presume their is absolutely nothing against providing top notch training facilities and health and resources. It is a small price to pay given the overall payroll and I'm truly amazed it hasn't caught on. Just think about what Chip Kelly instituted at Oregon (and again Philly) in terms of the food in the cafeteria's and the training technology. Again, not talking about Chip the personel man, rather Chip the health / science freak (as one makes sense and the other doesn't). But you do that at all your levels and you should have people who appreciate being part of your organization (at a young age) and also get the absolute most out of your players because you are giving them the best chances at succeeding.

 

And if I applied this to real life business, if I were a company hiring a top notch finance MBA from Harvard, would I hire him and say, here's this computer with Windows 98, no, I'd invest in him to ensure he'd succeed. Giving this players appropriate living conditions and ensuring they have a proper diet are just complete no-brainers to me. Stuns me that an owner hasn't thought out of the box to do this.

 

Really, other then being cheap, the only other thing I can think of which could impact things is the distinct seperation between minor league affiliates and the major league team...meaning if the White Sox invested $2.5M in a facility at Winston Salem, the affiliate could walk (when contract ends) and now you have a sunk cost of building the facility. That said, I'm sure if you negotiated a longer term contract with the affiliates (no reason not to), you could still make things work. Plus, cost of land / doing this is much cheaper for a minor league team, given that you normally play in small markets where overall cost of living are less then that of most major league cities.

[NorthSideSox72]

I disagree that parents should be expected to help. You are a working professional at this point (I'll caveat this by saying when I got my first professional job, I still lived at home, but I was cheap...but providing free rent to a family member and actually paying for one's rent are two very different concepts...one involves you just keeping your kid at your house more, along with some incremental costs while the other involves you paying for a 2nd place or helping and said minor league has no option but to go to whatever affiliate the big league club wants to send him).

 

To me, it is pretty clearly, it is in the clubs best interest to ensure you are at a minimum, able to sleep in a clean room and get quality food and nutrients in your system. Personally, if I ran a franchise, I'd have state of the art dorm rooms at my minor league facilities, which would include specifically catered meals with organic food and produce to ensure my athletes (if they so choose to) can eat right and put the absolute best stuff in their body. I'd also ensure that the dorm had great work out facilities, etc, again to make it as easy on these young kids as possible to take the next steps in their career (if they so choose).

 

While that doesn't mean you are paying them more (and to be frank, I'm not certain that an organization could actually choose to play players more...not sure what is contractually stipulated as part of the overall collective bargaining agreement(s). But I presume their is absolutely nothing against providing top notch training facilities and health and resources. It is a small price to pay given the overall payroll and I'm truly amazed it hasn't caught on. Just think about what Chip Kelly instituted at Oregon (and again Philly) in terms of the food in the cafeteria's and the training technology. Again, not talking about Chip the personel man, rather Chip the health / science freak (as one makes sense and the other doesn't). But you do that at all your levels and you should have people who appreciate being part of your organization (at a young age) and also get the absolute most out of your players because you are giving them the best chances at succeeding.

 

And if I applied this to real life business, if I were a company hiring a top notch finance MBA from Harvard, would I hire him and say, here's this computer with Windows 98, no, I'd invest in him to ensure he'd succeed. Giving this players appropriate living conditions and ensuring they have a proper diet are just complete no-brainers to me. Stuns me that an owner hasn't thought out of the box to do this.

 

Really, other then being cheap, the only other thing I can think of which could impact things is the distinct seperation between minor league affiliates and the major league team...meaning if the White Sox invested $2.5M in a facility at Winston Salem, the affiliate could walk (when contract ends) and now you have a sunk cost of building the facility. That said, I'm sure if you negotiated a longer term contract with the affiliates (no reason not to), you could still make things work. Plus, cost of land / doing this is much cheaper for a minor league team, given that you normally play in small markets where overall cost of living are less then that of most major league cities.

 

As we were discussing offline, I agree that doing this spending as in-kind instead of salary adjustment is another way to go. The dorms wouldn't necessarily need to be new either - heck you could probably rent blocks of rooms in extended stay places to do this. And if you did have to build it, you could do so in a way that it could be sold later, as an extended-stay hotel or dorm or apartment complex.

 

Also FYI, the White Sox already own not only the AZL affiliate, but now, are majority owners of the Winston-Salem Dash as well. That may be a growing trend.

 

Finally, as for the rules, I think you could uses bonuses and other "tricks" to work around that without running afoul.

 

[caulfield12]

But it's the classic case of supply and demand.

 

It's not like there aren't hundreds of basketball players laboring away for 360 positions in the world when the odds are twice as stacked against them. The difference is that baseball isn't as popular as basketball in many countries around the globe that can afford to pay foreign players more. It's just that opportunities are more lucrative in Europe or China now. Baseball players only have Japan, Korea and Taiwan...and, to be fair, those countries do have limited opportunities for fringe players and certainly anyone below AA level neednot apply.

 

Going back to the the day, the CBA didn't pay anyone but their former NBAers more than a pittance.

 

It's like buying a lottery ticket. The typical MLB draft provides 3-5 players that ever see the majors. But, compared to the NFL, those players do have much longer careers and earn more money in MLB. We don't hear about subsidizing golf and tennis because the parents are often rich, but the odds are equally against those players on the second and third tier tours.

 

I actually believe part of the reason is because of the proliferation of Latin American players. If it was 100% an American player (mostly white and African American) issue or problem you'd have more outrage about conditions and pay in the low minors. In those Latin American countries, and that's roughly 40% of baseball now...with the buscone system and despite constant kidnappings/threats in their home countries, none of those players would give up that lottery ticket because of the relative poverty they often come from. Read the story of Sal Perez and why he was elated to sign a deal for $7 million and five years. The cost/benefit is worth it despite the odds being stacked.

 

If anything, there should be subsidies provided by Venezuela and the DR to provide extra assistance to their most important exports culturally, if you want to look at players as commodities.

 

At any rate, the perception is 1) most white and Asian baseball players come from (relatively) priviledged backgrounds and 2) there's not the political will in America to protect essentially foreign/migrant workers who are victims of racism and in some cases disdain for pushing out more "domestic" or white workers.

 

Of course, there's also the issue of baseball being a non revenue sport at the collegiate level, except for the Pac Ten, SEC and parts of the ACC.

 

The flip side of this argument is Scott Carroll, who has a generous lifetime pension for barely making a dent in the majors. Plus, there's a lot more sympathy for veteran football players these days because of all the suicides, concussions and PtSD like symptoms. If someone working for Wal-Mart at minimum wage with no health care benefits couldn't even unionize or gain protection for most of their working career...and the government never intervened, why would MLB feel compelled to do so when they're a corporation whose goal is maximizing profits? Just because they're covered by anti trust laws and the uniquely American support doesn't mean there will be sympathy, because for every Carroll, Rios, Dunn, Beckham, Viciedo, LaRoche, whose families are set for life financially etc., there are millions who will never have the opportunity to earn the pension money that Carroll will be getting for basically one year of service time. Social Security doesn't come close, and many government run plans like Illinois are risking insolvency...hence, not much sympathy for a game where white players are now technically a minority.

Edited October 26, 2015 by caulfield12

[Chisoxfn]

It's not like there aren't hundreds of basketball players laboring away for 360 positions in the world when the odds are twice as stacked against them. The difference is that baseball isn't as popular as basketball in many countries around the globe that can afford to pay foreign players more. It's just that opportunities are more lucrative in Europe or China now. Baseball players only have Japan, Korea and Taiwan...and, to be fair, those countries do have limited opportunities for fringe players and certainly anyone below AA level neednot apply.

It isn't supply and demand. It isn't about another 10,000 people who would want to be baseball players, it is the fact that their are almost none, so you should do everything possible to maximize the odds of the limited supply of players you have. Baseball isn't interested in expanding its minors and adding another 10,000 people, because so few can actually play the game and they want to focus on the group who might have a shot and should maximize those odds.

 

Going back to the the day, the CBA didn't pay anyone but their former NBAers more than a pittance.

So...african american's used to be slaves. I don't care what other leagues did and just like slavery, the fact that other people did it, didn't make it right.

 

It's like buying a lottery ticket. The typical MLB draft provides 3-5 players that ever see the majors. But, compared to the NFL, those players do have much longer careers and earn more money in MLB. We don't hear about subsidizing golf and tennis because the parents are often rich, but the odds are equally against those players on the second and third tier tours.

And if I bought a ticket and someone said their was a cost-effective way to improve those odds...I'd be all over it. And I don't care about subsidizing golf and tennis players because their are their own organizations. Plain and simple...they are their own franchise. They aren't working for another franchise like a MLB player. Golf / Tennis players have nothing to do with this debate.

 

I actually believe part of the reason is because of the proliferation of Latin American players. If it was 100% an American player (mostly white and African American) issue or problem you'd have more outrage about conditions and pay in the low minors. In those Latin American countries, and that's roughly 40% of baseball now...with the buscone system and despite constant kidnappings/threats in their home countries, none of those players would give up that lottery ticket because of the relative poverty they often come from. Read the story of Sal Perez and why he was elated to sign a deal for $7 million and five years. The cost/benefit is worth it despite the odds being stacked.

Could be true...I don't know, but I can think of all the big time college programs and I can't think of many who haven't invested in state of the art athletic facilities (not just because it is a good recruiting tool but to help maximize what you get out of the athletes).

 

If anything, there should be subsidies provided by Venezuela and the DR to provide extra assistance to their most important exports culturally, if you want to look at players as commodities.

Now you are getting into foriegn policy and either way that is absurd...this are billionaires running professional businesses who are highly profitable...assistance does not need to be paid by the government...hell no.

 

At any rate, the perception is 1) most white and Asian baseball players come from (relatively) priviledged backgrounds and 2) there's not the political will in America to protect essentially foreign/migrant workers who are victims of racism and in some cases disdain for pushing out more "domestic" or white workers.

No one is asking for the government to do anything. Baseball teams should be doing what they can to maximize potential market inefficiencies.

 

Of course, there's also the issue of baseball being a non revenue sport at the collegiate level, except for the Pac Ten, SEC and parts of the ACC.

What the hell does the college arena have to do with anything? Them being non revenue has no implications on what is going on at the minor league level.

 

The flip side of this argument is Scott Carroll, who has a generous lifetime pension for barely making a dent in the majors. Plus, there's a lot more sympathy for veteran football players these days because of all the suicides, concussions and PtSD like symptoms. If someone working for Wal-Mart at minimum wage with no health care benefits couldn't even unionize or gain protection for most of their working career...and the government never intervened, why would MLB feel compelled to do so when they're a corporation whose goal is maximizing profits? Just because they're covered by anti trust laws and the uniquely American support doesn't mean there will be sympathy, because for every Carroll, Rios, Dunn, Beckham, Viciedo, LaRoche, whose families are set for life financially etc., there are millions who will never have the opportunity to earn the pension money that Carroll will be getting for basically one year of service time. Social Security doesn't come close, and many government run plans like Illinois are risking insolvency...hence, not much sympathy for a game where white players are now technically a minority.

I'm not going to touch on a lot of this...but MLB, up until 2007 or so, was actually a not for profit. Should McDonalds just not pay minimum wage because it would maximize their profits?

 

[southsider2k5]

Taking the other side of the argument, why would teams really want to push through the financial part of the changes? In baseball, once you draft a guy, you pretty effectively own him for a long period of time. There isn't a big recruiting process where you need to differentiate yourself to stand out and attract talent. The players aren't free agents (unless they are undrafted, but that isn't exactly a booming market)

 

I can get improving things related to performance, such as food and facilities, but as to pay, I see no good reason for it to change without a broader push from MLB to do so. As an organization, you'd be adding a big cost to your bottom line with literally no change in productivity or play.

[Chisoxfn]

Taking the other side of the argument, why would teams really want to push through the financial part of the changes? In baseball, once you draft a guy, you pretty effectively own him for a long period of time. There isn't a big recruiting process where you need to differentiate yourself to stand out and attract talent. The players aren't free agents (unless they are undrafted, but that isn't exactly a booming market)

 

I can get improving things related to performance, such as food and facilities, but as to pay, I see no good reason for it to change without a broader push from MLB to do so. As an organization, you'd be adding a big cost to your bottom line with literally no change in productivity or play.

The one reason I could see changing the actual pay is your ability to sign more of those $100K flyer guys who wouldn't normally sign. Why can you sign more of them then the other team, because over a 3 year run in the minors, you are effectively doubling what they get paid (by paying more). Now to the player, is that enough to get you to forgo college (or an international guy to pick you vs. another team offering a similar amount) and sign with X team...I don't know (not involved in the negotiations to understand how much that amount could change). The downside is you would have to pay everyone else the same, so to give that extra little bit to a few select guys, you are essentially going to have to pay that additional cash to everyone else (but that is the cost to get that competitive advantage so you'd have to evaluate if it is worth it from a marketing ploy). If they aren't going to get a competitive advantage, then I really don't see why any owner would do it as it would just piss off the rest of the bunch.

 

Note: This is also assuming you can actually change what you pay minor league players, which none of us actually know.

 

The second scenario, which involves investing in facilities so your player is well rested (and to be frank, better monitored) and well fed, well that just seems like a no-brainer to me. I would be hard pressed to presume that the cost wouldn't be worth it (and couldn't be done effectively). Just think about the fact that you could have your young prospects watching film, working out, eating right, all in a top notch facility. Not saying all of them take advantage of it, but it would seem that the upside would be their. Given teams spend $300M on payroll, I'd think you'd at least some of these big market teams going down this path (although in reality, it is the small market teams who don't have access to unlimited resources who would best benefit from minor changes like this...problem is, once they work, everyone else will jump in and you lose that competitive advantage, but hey, take whatever advantage you can create while you can.

[southsider2k5]

The one reason I could see changing the actual pay is your ability to sign more of those $100K flyer guys who wouldn't normally sign. Why can you sign more of them then the other team, because over a 3 year run in the minors, you are effectively doubling what they get paid (by paying more). Now to the player, is that enough to get you to forgo college (or an international guy to pick you vs. another team offering a similar amount) and sign with X team...I don't know (not involved in the negotiations to understand how much that amount could change). The downside is you would have to pay everyone else the same, so to give that extra little bit to a few select guys, you are essentially going to have to pay that additional cash to everyone else (but that is the cost to get that competitive advantage so you'd have to evaluate if it is worth it from a marketing ploy). If they aren't going to get a competitive advantage, then I really don't see why any owner would do it as it would just piss off the rest of the bunch.

 

Note: This is also assuming you can actually change what you pay minor league players, which none of us actually know.

 

The second scenario, which involves investing in facilities so your player is well rested (and to be frank, better monitored) and well fed, well that just seems like a no-brainer to me. I would be hard pressed to presume that the cost wouldn't be worth it (and couldn't be done effectively). Just think about the fact that you could have your young prospects watching film, working out, eating right, all in a top notch facility. Not saying all of them take advantage of it, but it would seem that the upside would be their. Given teams spend $300M on payroll, I'd think you'd at least some of these big market teams going down this path (although in reality, it is the small market teams who don't have access to unlimited resources who would best benefit from minor changes like this...problem is, once they work, everyone else will jump in and you lose that competitive advantage, but hey, take whatever advantage you can create while you can.

 

Mathematically, you'd be looking at a few million dollars, to bring in an extra guy or two a year. Even then, for the kid in that situation, I don't think an extra 20 to 30k a year would make the difference. Most of those guys are looking for hundreds of thousands more, if not a million. An extra $30k a year isn't much for guys looking for a big bonus payday.

[Quin]

Great piece Matt and I agree, it is a problem.

 

I also agree that Jason's dormitory/cafeteria/team campus idea seems like a no-brainer.

 

If I'm a high school prospect that drops (say, Mike Hickman) and one team is offering free living, nutritious meals, a workout facility, etc. and a college scholarship? I sign with them in a heartbeat, especially if they're one of few teams to do that.

[NorthSideSox72]

Taking the other side of the argument, why would teams really want to push through the financial part of the changes? In baseball, once you draft a guy, you pretty effectively own him for a long period of time. There isn't a big recruiting process where you need to differentiate yourself to stand out and attract talent. The players aren't free agents (unless they are undrafted, but that isn't exactly a booming market)

 

I can get improving things related to performance, such as food and facilities, but as to pay, I see no good reason for it to change without a broader push from MLB to do so. As an organization, you'd be adding a big cost to your bottom line with literally no change in productivity or play.

 

Doing it before MLB forces it is exactly where the value lies. For the performance aspect, as you said... but the recruiting angle too. To wit...

 

Mathematically, you'd be looking at a few million dollars, to bring in an extra guy or two a year. Even then, for the kid in that situation, I don't think an extra 20 to 30k a year would make the difference. Most of those guys are looking for hundreds of thousands more, if not a million. An extra $30k a year isn't much for guys looking for a big bonus payday.

 

It could be many more than one or two guys. A team drafts about 30 guys a year for bonuses in the low 5 figures or 4 figure bonuses - and you give yourself an advantage on ALL those slots, to get the better available player. You are also not taking into account the Intl guys, most of which are getting 4 or 5 figure bonuses, or low 6. Plus other UDFA signees. The great majority of your signings are getting low enough bonuses that an extra 20k or more per year for 4-5 years even if they don't make the majors is a big deal.

 

[kitekrazy]

At one time baseball players had jobs in the off season.

[southsider2k5]

Doing it before MLB forces it is exactly where the value lies. For the performance aspect, as you said... but the recruiting angle too. To wit...

 

 

 

It could be many more than one or two guys. A team drafts about 30 guys a year for bonuses in the low 5 figures or 4 figure bonuses - and you give yourself an advantage on ALL those slots, to get the better available player. You are also not taking into account the Intl guys, most of which are getting 4 or 5 figure bonuses, or low 6. Plus other UDFA signees. The great majority of your signings are getting low enough bonuses that an extra 20k or more per year for 4-5 years even if they don't make the majors is a big deal.

 

That is a whole lot money for an extreme niche market, and a pretty small pool at that. Guys who are getting small bonuses are getting them for a reason.

[LittleHurt05]

At one time baseball players had jobs in the off season.

 

And tickets cost a nickel and a pack of bubble gum

[knightni]

And tickets cost a nickel and a pack of bubble gum

 

There was also ownership collusion and a reserve clause.

 

 

 

 

[Chisoxfn]

That is a whole lot money for an extreme niche market, and a pretty small pool at that. Guys who are getting small bonuses are getting them for a reason.

Teams already spend it going over the international pool allotment and this would be away to give you a little more excess without circumnavigating the rules.

[Quin]

At one time baseball players had jobs in the off season.

 

And then we had the Black Sox scandal!

[southsider2k5]

Teams already spend it going over the international pool allotment and this would be away to give you a little more excess without circumnavigating the rules.

 

The guys in the international pool are the top talents. It makes sense to go over for them. If we were talking about those kinds of players, it would make a lot more sense.

 

But we are talking about guys who are WAY down the lists. This isn't even guys who slipped due to draft demands, because if they are looking for big money, an extra $20k a year isn't what they are looking for.

[Dick Allen]

What would be interesting to see is a college scholarship clause in a contract. Does it pay for 4 years of Yale or community college?