Bargaining Power in Baseball
The life of a professional baseball player is not always as glamorous as one might think. For one, it is a long hard road to the big leagues, where players often spend years making nearly minimum wages while they chase their dream. Only a tiny fraction of professional ballplayers ever make it to the majors. Further, a career in baseball is often short-lived and may not always bring the enormous financial returns that many people assume. This article examines this issue, specifically relating it to the lack of bargaining power on players in their early years of service.
After a player is called up to the major leagues, they receive a minimum salary of $507,500. This salary is surely not small, but maybe not as eye popping as one might expect. During a player’s first six seasons, the club can maintain control over a player and essentially block them from reaching free agency if they choose to do so. As a result, clubs are able to get much more value from their young stars than they have to pay for. As discussed in class, young stars do not have any outside options to leverage during contract negotiations, which allows the clubs to benefit tremendously. For example, New York Mets’ star pitcher Matt Harvey made $614,125 in 2015. However, if Harvey were eligible to hit the open market, a pitcher of his caliber and age would likely land upwards of $20,000,000 per year. Add to that the injury risks pitchers face, it is reasonable to conclude that teams hold excessive power over their players’ contracts during their early years. Players should be able to explore outside options throughout their careers, which as would allow them to earn a fair market value for their talents. These exchange principles regarding the availability of outside options relate directly to what we discussed in class, as teams are strong nodes and players are weak during their first six years of service.