How Hall of Famers rank for salary in 2012 dollars

When Babe Ruth signed for $80,000 prior to the 1930 baseball season, as the apocryphal story goes, someone admonished him that he was making more than President Herbert Hoover. “I know,” the Bambino is said to have replied, “But I had a better year than Hoover.”

What’s shocking now, more than 80 years on, is not what Ruth may have said—granted, it was a valid assertion in those early days of the Great Depression—or how much the Colossus of Clout commanded. It’s that Ruth’s $80,000 1930 salary adjusts with inflation to $1,086,882 in 2012 dollars. That’s about a third of the current average major league baseball salary, which rose to a record of $3.2 million last year.

This isn’t to say the Sultan of Swat was underpaid historically. In fact, before the advent of free agency in the mid-1970s, no player ever received a higher salary in 2012 dollars than what Ruth got in 1933: $1,436,298. Willie Mays came close in 1959, his $160,000 salary that season good for $1,275,616 in 2012 dollars. The $80,000 that Ruth received in 1933, when the average laborer earned $20 a week and 24.9 percent of Americans were unemployed, simply had more purchasing power.

This is just one thing I learned through a recent long evening on Baseball-Reference.com. The website added salary information as well as a drop down inflation calculator to player pages not long ago. Culled largely from research by University of Wisconsin professor Michael Haupert, the salary info is a work in progress, with some long-ago players having it for only one or two years. But it offers an interesting glimpse into baseball’s history.

Using the information, I ranked every Hall of Fame player for his top salary in 2012 dollars—not necessarily his top actual salary, just whatever adjusted highest with inflation. What I found confirmed how good ballplayers have it today. It also showed the degree to which nearly every other generation of players has been exploited by its clubs.

In the interest of readability, I’ll split the following list into three parts. We’ll start with the 39 Hall of Famers who have received at least $1 million in a season in 2012 dollars:

Rank Player Actual salary Salary in 2012 dollars
1 Barry Larkin $9,000,000 in 2001 $11,812,817
2 Kirby Puckett $7,200,000 in 1997 $10,423,881
3 Roberto Alomar $7,939,664 in 2002 $10,259,133
4 Cal Ripken $6,700,000 in 1995 $10,219,000
5 Ryne Sandberg $5,975,000 in 1993 $9,612,854
6 Tony Gwynn $6,300,000 in 2000 $8,502,261
7 Andre Dawson $4,875,000 in 1993 $7,843,124
8 Rickey Henderson $4,800,000 in 1994 $7,526,538
9 Wade Boggs $4,724,316 in 1995 $7,205,639
10 Nolan Ryan $4,200,000 in 1992 $6,955,845
11 Paul Molitor $4,500,000 in 1995 $6,863,507
12 Eddie Murray $4,125,000 in 1992 $6,831,634
13 Dennis Eckersley $3,800,000 in 1993 $6,113,614
14 Robin Yount $3,200,000 in 1990 $5,692,511
15 Dave Winfield $3,300,000 in 1991 $5,630,882
16 George Brett $3,105,000 in 1991 $5,298,148
17 Ozzie Smith $3,500,000 in 1996 $5,186,505
18 Mike Schmidt $2,130,300 in 1985 $4,603,346
19 Gary Carter $2,160,714 in 1986 $4,581,186
20 Jim Rice $2,354,748 in 1989 $4,414,915
21 Goose Gossage $1,713,333 in 1985 $3,702,326
22 Bruce Sutter $1,729,167 in 1986 $3,666,212
23 Bert Blyleven $2,000,000 in 1991 $3,412,656
24 Phil Niekro $1,325,367 in 1981 $3,388,127
25 Carlton Fisk $1,750,000 in 1990 $3,113,092
26 Catfish Hunter $640,000 in 1975 $2,764,230
27 Reggie Jackson $1,103,000 in 1982 $2,656,328
28 Steve Carlton $1,125,000 in 1983 $2,625,125
29 Rod Carew $800,000 in 1979 $2,561,761
30 Tom Seaver $1,136,262 in 1985 $2,455,338
31 Rollie Fingers $1,065,000 in 1985 $2,301,349
32 Don Sutton $875,000 in 1981 $2,236,823
33 Joe Morgan $400,000 in 1977 $1,534,102
34 Babe Ruth $80,000 in 1933 $1,436,298
35 Johnny Bench $400,000 in 1978 $1,425,306
36 Willie Mays $160,000 in 1959 $1,275,616
37 Carl Yastrzemski $375,000 in 1979 $1,200,825
38 Hank Aaron $200,000 in 1972 $1,111,217
39 Tony Perez $391,666 in 1980 $1,104,764

It’s a wonder the list above doesn’t have more names. I shouldn’t be surprised. The minimum MLB salary was $7,000 in 1966 when Marvin Miller became executive director of the Major League Baseball Players Association. The average American household income that year was $6,900. By and large, baseball’s top salaries rose at a rate slightly higher than inflation for decades. But it wasn’t until arbiter Peter Seitz abrogated the Reserve Clause in 1975 that players began regularly topping $1 million in today’s dollars. The rest is history.

The Atlantic suggested in April 2012 that ballplayers remain underpaid, given the slim percentage of MLB revenue they receive. Players still have it about as good as they’ve ever had it. (Most teams do, too. Forbes reported March 27 that MLB revenues are at record levels, with the most valuable franchise, the Yankees, worth $2.3 billion.)

Cooperstown is typically slow, by design, to reflect changes in baseball, with the names on the list above primarily the early beneficiaries of free agency. That said, I suspect within 15 or 20 years, there could be twice as many Hall of Famers who will have earned the equivalent of $1 million in a season. Inflation alone will push the historic salaries of some men already in the Hall above seven figures. And there’s a slew of millionaire players awaiting enshrinement.

Ballplayers finally have economic clout and precedent, after so many baseball generations where the opposite was true. As Jim Bouton wrote in a postscript to Ball Four, 10 years after its original publication:

The irony is that if the owners hadn’t abused the players so badly, we wouldn’t have gone out and hired Marvin Miller and the players wouldn’t be free agents today. If the owners had just doubled the minimum salary, say to $14,000, and given us some extra meal money, we would have been more content to let things ride. Most ballplayers had no idea what kind of money they could be making. I remember sitting in the Yankee clubhouse while the player representative asked each of us what we thought the minimum salary should be. This was when it was $7,000. The players were all saying numbers like $8,000, $9,000, or $10,000. When it came to me I said $25,000 and everybody just laughed.

In the years before Miller, Seitz and others revolutionized labor relations in baseball, few players were compensated anywhere close to Ruth and Mays. Even adjusting for inflation, over half the players enshrined in Cooperstown never earned the current major league minimum salary of $490,000. Also telling to me is the attitude of a baseball immortal like Hank Greenberg, publicly doubting in The Glory of Their Times that he really earned his $75,000 salary from 1947 on the field.

It makes me wonder how systematically teams pushed players to devalue their services so as to maximize profits. This isn’t unique to baseball, of course. It’s kind of a core tenet of capitalism.

Greenberg and 43 other Hall of Famers topped out, in 2012 dollars, between $500,000 and $1 million during their playing careers:

A Hardball Times Update
Goodbye for now.

Rank Player Actual salary Salary in 2012 dollars
40 Joe DiMaggio $100,000 in 1949 $976,783
41 Jim Palmer $250,000 in 1977 $958,814
42 Herb Pennock $55,000 in 1934 $955,522
43 Sandy Koufax $125,000 in 1966 895,385
44 Hank Greenberg $85,000 in 1947 $884,709
45 Ted Williams $90,000 in 1950 $869,378
46 Bob Gibson $150,000 in 1971 $860,805
47 Frank Robinson $160,000 in 1973 $837,661
48 Roberto Clemente $150,000 in 1972 $833,413
49 Fergie Jenkins $190,000 in 1975 $820,631
50 Don Drysdale $110,000 in 1966 $787,938
51 Ralph Kiner $90,000 in 1952 $787,669
52 Billy Williams $150,000 in 1973 $785,307
53 Lefty Grove $45,000 in 1934 $781,791
54 Juan Marichal $140,000 in 1972 $777,852
55 Willie Stargell $165,000 in 1974 $777,571
56 Lou Brock $180,000 in 1975 $777,440
57 Gaylord Perry $300,000 in 1981 $766,911
58 Mickey Mantle $100,000 in 1963 $759,130
59 Hal Newhouser $70,000 in 1947 $728,584
60 Bill Terry $42,500 in 1936 $711,799
61 Willie McCovey $125,000 in 1972 $694,511
62 Rogers Hornsby $40,000 in 1932 $681,366
63 Stan Musial $75,000 in 1951 $671,538
64 Ty Cobb $50,000 in 1927 $668,966
65 Harmon Killebrew $115,000 in 1971 $659,951
66 Lou Gehrig $39,000 in 1940 $646,974
67 Brooks Robinson $110,000 in 1972 $611,169
68 Mickey Cochrane $36,000 in 1936 $602,935
69 Al Simmons $33,333 in 1933 $598,458
70 Frank Chance $25,000 in 1913 $587,879
71 Lou Boudreau $60,000 in 1949 $586,070
72 Phil Rizzuto $65,000 in 1951 $582,000
73 Ron Santo $110,000 in 1973 $575,892
74 Al Kaline $88,000 in 1969 $557,706
75 Luis Aparicio $100,000 in 1972 $555,609
76 Orlando Cepeda $83,000 in 1968 $554,710
77 Warren Spahn $73,500 in 1965 $542,053
78 Dave Bancroft $40,000 in 1928 $541,395
79 Yogi Berra $65,000 in 1957 $537,867
80 Eddie Mathews $67,500 in 1961 $524,967
81 Chuck Klein $30,000 in 1934 $521,194
82 Bob Feller $32,500 in 1941 $513,529
83 Hack Wilson $33,000 in 1931 $504,315

Notice all the Yankee legends listed above: Joe DiMaggio, Mickey Mantle, Lou Gehrig, Phil Rizzuto, Yogi Berra. Contemporary fans may know the Bronx Bombers as the best team money can buy. It’s been this way since George Steinbrenner became the first owner to turn a baseball franchise around through free agency. Historically, the Yankees owe just as much if not more of their success to frugality, to shrewd negotiation tactics like leveraging the promise of frequent World Series bonuses. David Halberstam wrote in Summer of ’49 of Yankee right fielder Tommy Henrich telling Red Sox Hall of Famer Bobby Doerr at an old-timers game, “We needed the extra money from the World Series check. That was our extra salary.”

Granted, New York paid better than many franchises. The lower echelons of this list is a who’s who of Hall of Famers from the St. Louis Cardinals, Philadelphia Phillies and other small market clubs that could not or would not pay more. There was of course less money in baseball in the days before television contracts, revenue sharing and regular ticket sellouts. (The late Doug Pappas of SABR’s Business of Baseball Committee posted historic MLB financial data.)

Even the Yankees weren’t immune to harsh economic realities. In his club history, Pinstripe Empire, Marty Appel includes attendance figures for every year in team history. They peak around 1.3 million spectators during Ruth’s career, 2.3 million during DiMaggio’s and 1.7 million during Mantle’s. It’s a far cry from the 3,542,406 the Yankees drew in 2012.

Mostly, though, I suspect that teams threw scraps at players because they could. Players had pitifully low bargaining power in the years before free agency, the Reserve Clause making them the property of their clubs for perpetuity. Players were disposable commodities, with legendary pinch pennies like Branch Rickey telling Ralph Kiner upon trading him from the Pirates to the Cubs in 1953, “We finished last with you. We can finish last without you.”

There were generally no other competing professional circuits, since baseball has informally received an exemption from antitrust laws since 1922 and has always moved quickly to crush rival leagues. Players who did jump, such as Sal Maglie and Mickey Owen who went to the Mexican League in 1946, faced severe repercussions, even lifetime bans.

Players found different ways to make the best of their situations. Some successfully held out like Sandy Koufax and Don Drysdale, who negotiated together in 1966 for a combined $235,000, roughly $1.68 million in 2012 dollars. Ty Cobb ate for free at Joe DiMaggio’s family restaurant after instructing the Yankee Clipper early in his career on how to properly haggle with Ed Barrow for a higher salary. And Jim Brosnan wrote in The Long Season of teammate Stan Musial advising, “The first principle of contract negotiation is: don’t remind ’em of what you did in the past; tell them what you’re going to do for them in the future. They know what you’re selling; they’ve bought it before. Now promise greater things to come.”

For the most part, teams dictated contract terms, extending generosity as they saw fit. Some players like Hack Wilson in 1931 secured windfalls following big seasons. Others were rewarded for loyalty, Cobb, Honus Wagner and others receiving temporary raises while the rival Federal League operated from 1914-15. Beyond this, many of the players on this list got their best salaries at the ends of their careers. I take this to have been token gestures from clubs. It certainly did little to set these players up for retirement. It’s why when the original pension system was set up, it had to be amended for Hall of Famers like Carl Hubbell who initially weren’t covered.

Many baseball greats had to play in the minors for years after they left the majors. It’s unheard of today for Hall of Famers, but players did it regularly in the first half of the 20th century whether it was 42-year-old Nap Lajoie hitting .380 in the International League in 1917 or Iron Man Joe McGinnity (who earned his nickname working in a steel foundry) pitching in the bushes until age 54. Others like Chief Bender and Wagner needed coaching jobs in retirement to escape the realities of the Depression. Grover Cleveland Alexander died alone in a rented room in 1950. While surely his alcoholism impoverished and isolated him, his top salary of $236,860 in 2012 dollars couldn’t have helped matters much.

Adjusting for inflation, 118 Hall of Fame players never earned the current MLB minimum of $490,000 in a season. Due to technical space constraints, I’ll list some of them here and the remainder in the References section:

Rank Player Actual salary Salary in 2012 dollars
84 Jim Bunning $75,000 in 1969 $475,318
85 Eddie Collins $35,000 in 1926 $459,474
86 Jimmie Foxx $27,500 in 1939 $459,474
87 Joe Cronin $27,000 in 1935 $457,689
88 Ernie Banks $57,500 in 1961 $447,194
89 Whitey Ford $60,000 in 1966 $429,785
90 Mel Ott $35,000 in 1946 $417,133
91 Dizzy Dean $25,500 in 1937 $412,250
92 Tris Speaker $30,000 in 1923 $409,219
93 Bob Lemon $45,000 in 1951 $402,923
94 Roy Campanella $50,000 in 1958 $402,768
95-tie Red Ruffing $24,000 in 1940 $398,138
95-tie Bill Dickey $24,000 in 1940 $398,138
97 Red Schoendienst $45,000 in 1955 $390,410
98 Duke Snider $44,000 in 1956 $376,127
99 George Kell $42,000 in 1951 $376,062
100 Nellie Fox $47,000 in 1960 $369,233
101 Carl Hubbell $22,500 in 1937 $363,234
102 Billy Herman $21,361 in 1936 $357,758
103 Early Wynn $45,000 in 1960 $353,521
104 Dazzy Vance $23,000 in 1931 $351,492
105 Jackie Robinson $39,750 in 1952 $347,887
106 Robin Roberts $40,000 in 1955 $347,031
107 Johnny Mize $35,000 in 1949 $341,874
108 Walter Johnson $16,000 in 1916 $341,725
109 Lefty Gomez $20,000 in 1935 $339,029
110 Ray Schalk $25,000 in 1928 $338,372
111 Pee Wee Reese $35,000 in 1950 $338,091
112-tie Charlie Gehringer $20,000 in 1939 $334,163
112-tie Gabby Hartnett $20,000 in 1939 $334,163
112-tie Bill Mazeroski $50,000 in 1968 $334,163
115 Joe Medwick $20,000 in 1938 $330,213
116 George Davis $12,600 in 1903 $325,920
117 Frankie Frisch $18,500 in 1934 $321,403
118 Edd Roush $23,333 in 1928 $315,809
119-tie Nap Lajoie $12,000 in 1908 $310,400
119-tie Fred Clarke $12,000 in 1909 $310,400
121 Richie Ashburn $38,439 in 1959 $306,459
122 Burleigh Grimes $20,000 in 1931 $305,646
123 Luke Appling $18,500 in 1939 $299,083
124 Larry Doby $36,000 in 1957 $297,896
125 Waite Hoyt $16,000 in 1933 $287,260
126 Ernie Lombardi $18,000 in 1941 $284,416
127 Pie Traynor $16,500 in 1935 $279,699
128 Joe Tinker $12,000 in 1914 $278,432
129 Paul Waner $16,500 in 1938 $272,426
130-tie Joe Gordon $20,000 in 1943 $268,615
130-tie Bobby Doerr $27,500 in 1949 $268,615
132 George Sisler $20,000 in 1925 $265,047
133 Earl Averill $14,500 in 1933 $260,329
134-tie Willie Keeler $10,000 in 1903 $258,667
134-tie Honus Wagner $10,000 in 1908 258,667
134-tie Christy Mathewson $10,000 in 1909 $258,667
137 Johnny Evers $11,000 in 1914 $255,229
138 Harry Heilmann $18,750 in 1928 $253,779
139 Tony Lazzeri $16,000 in 1931 $244,516
140 Enos Slaughter $25,000 in 1950 $241,494
141 Grover Cleveland Alexander $17,500 in 1928 $236,860
142 Kiki Cuyler $17,000 in 1930 $236,510
143 Hoyt Wilhelm $37,000 in 1969 $234,490
144 Mordecai Brown $10,000 in 1914 $232,027
145 Lloyd Waner $12,500 in 1933 $224,422
146 Heinie Manush $14,500 in 1931 $221,593
147 Jimmy Collins $8,500 in 1908 $219,867
148 Ross Youngs $16,000 in 1924 $216,979
149 Max Carey $16,500 in 1926 $216,609
150 Goose Goslin $16,000 in 1929 $216,558
151 Earle Combs $12,500 in 1932 $212,927
152 Ted Lyons $12,500 in 1932 $212,927
153 Zack Wheat $16,000 in 1926 $210,045
154 Jack Chesbro $8,000 in 1905 $206,933
155 Arky Vaughan $12,500 in 1937 $202,083
156 Joe Sewell $14,500 in 1930 $201,729
157 Harry Hooper $14,250 in 1922 $197,857
158 Home Run Baker $9,167 in 1916 $195,780
159 Rick Ferrell $12,000 in 1937 $194,000
160 Ed Walsh $8,000 in 1912 $192,662
161 Roger Bresnahan $8,000 in 1913 188,121
162 Rube Marquard $8,000 in 1915 $183,789
163 Rabbit Maranville $8,500 in 1916 $181,541
164 Monte Ward $7,000 in 1891 $181,067
165 Bobby Wallace $6,500 in 1902 $174,600
166 Sam Crawford $7,500 in 1915 $172,303
167 Red Faber $10,000 in 1932 $170,341
168 Eppa Rixey $12,000 in 1924 162,734
169 Buck Ewing $5,000 in 1891 $142,267
170 Joe Kelley $5,200 in 1902 $139,680
171 Stan Coveleski $10,000 in 1928 $135,349

This isn’t to suggest the average baseball player was embittered or had good reason to be. A few years ago, I interviewed a man named Art Mahan who played first base on the 1940 Phillies. In Mahan’s only season in the majors, the Phillies went 50-103 and drew 207,177 fans, Mahan for his part posting one of the lowest adjusted offensive production rates for a first baseman in baseball history. Nearly 70 years later, I heard nothing but gratitude and wonder from Mahan. He spoke of meeting his wife in Philadelphia that year, saying he never would’ve met her otherwise. The $6,000 salary he received, the equivalent of $96,916 in 2012, was better than four times the average U.S. income that year of $1,368. Mahan earned enough, in fact, for a few of his brothers to make down payments on houses.

Don’t get me wrong. Since Lip Pike signed the first professional baseball contract in 1866, for $20 from Philadelphia, players have been lucky. To make any amount of money playing baseball, let alone a living wage is lucky. Making the Hall of Fame is luckier still. Every man on this list attained some degree of baseball immortality with his enshrinement. Most, if not all, made more money in baseball than they would have gotten doing something else. Even Bid McPhee, for all of the $2,300 he received in 1887, got a pretty sweet deal, relatively speaking.

Was McPhee severely under-compensated in a historical sense, cheated by a system specifically set up to marginalize his earning power? Goodness yes. But I doubt he or any other man here would’ve traded the experience.

References & Resources

172-tie King Kelly $5,000 in 1887 $129,333
172-tie Joe McGinnity $5,000 in 1905 $129,333
172-tie Jim Bottomley $8,000 in 1937 $129,333
Rank Player Actual salary Salary in 2012 dollars
175 Dan Brouthers $4,700 in 1889 $121,573
176-tie Jim O’Rourke $4,500 in 1885 $116,400
176-tie Old Hoss Radbourn $4,500 in 1887 $116,400
176-tie Jesse Burkett $4,500 in 1904 $116,400
179 Eddie Plank $5,000 in 1914 $116,013
180 Tim Keefe $4,250 in 1889 109,933
181 Ed Delahanty $4,000 in 1902 $107,446
182 Cy Young $4,000 in 1904 $103,467
183 Addie Joss $4,000 in 1907 $99,771
184 Jesse Haines $7,500 in 1926 $98,459
185 Hughie Jennings $3,360 in 1901 $93,865
186 Chief Bender $4,000 in 1914 $92,811
187-tie John Clarkson $3,500 in 1888 $90,533
187-tie Roger Connor $3,500 in 1889 $90,533
187-tie Mickey Welch $3,500 in 1891 $90,533
190 Billy Hamilton $3,400 in 1892 $87,947
191-tie Amos Rusie $3,000 in 1895 $83,808
191-tie Kid Nichols $3,000 in 1899 $83,808
191-tie Hugh Duffy $3,000 in 1900 $83,808
191-tie Elmer Flick $3,000 in 1901 $83,808
195-tie Cap Anson $3,000 in 1885 $77,600
195-tie Pud Galvin $3,000 in 1888 $77,600
195-tie Sam Thompson $3,000 in 1892 $77,600
195-tie Rube Waddell $3,000 in 1903 $77,600
199 Jake Beckley $2,500 in 1902 $67,154
200 Vic Willis $2,400 in 1900 $67,046
201 Bid McPhee $2,300 in 1887 $59,493

[No salary info on Baseball-Reference.com: Chick Hafey, High Pockets Kelly, Freddie Lindstrom, Tommy McCarthy, Sam Rice, Travis Jackson. Also, I didn’t include Deacon White in this exercise as he’s not officially a Hall of Famer until he gets enshrined this summer.]


41 Comments
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Carl
10 years ago

Graham,

Just a head’s up that historical inflation rates are extremely difficult to accurately gather/interpret prior to 1914, which is the first year the US Govt provides the annual inflation factor.  Therefore, Bid McPhee’s $2,300 (and other Pre WW I salary calculations) is probably far greater than the nyumber shown. 

Even in the site you mention, his $2,300 salary when put in 1871 dollars comes out in excess of $3K rathe than being discounted backwards.

Also, note that the 1920s and early 1930s was a time of negative inflation, which at the time made Ruth’s salary seem even more extreme.

Anon
10 years ago

“We finished last with you. We can finish last without you.”

SABR 101…. Wait, I mean Branch Rickey

Graham Womack
10 years ago

@Carl—I think this works best as a relative exercise. I’d be a fool to suggest any long-ago player’s salary could be known or adjusted for inflation with any certainty. Still, I think this info gives a general idea of what economic times were like for players.

Baseball financial research historically still seems like largely uncharted waters. I hope what I’m offering here may in some small way spur further research and discussion.

Marc Schneider
10 years ago

This just proves that if you give people undue power, they will use it to advance their own self-interest.  The owners didn’t have to pay fairly, so why should they?  It doesn’t mean they were necessarily evil people but they had developed settled expectations about the relationship between owners and players.  This also reflected the typical ownership mentality in business generally, I think, that workers should be happy and grateful for anything they got.  That’s why unions grew so much in the 30s and 40s to make up for the overwhelming power of employers.

AaronB
10 years ago

Thanks Graham, nice work.  A note on Pete Alexander that I always found interesting…Cards owner Sam Breadon would send money to Alexander from time to time after his retirement.  Due largely to Alexander’s role in helping the Cards win their 1st World Series in 1926, but also because Breadon believed Alexander needed some help, due to his alcoholism and other issues.  Alexander never realized that Braedon was sending him money from his own pocket, he believed it to be his pension from playing baseball.

Jay Stevens
10 years ago

It’s ironic as baseball players’ earning grows as a proportion of the profit their work creates, the average U.S. worker’s shrinks. Speculate freely.

Andrea Studebaker
10 years ago

Very interesting work. Thanks, Graham. I would love it if you added another column which gave the median U.S. household income for the year referenced on each line. I realize this would be a lot of work. I just think it would give an idea of the relative buying power without having to track down the cost of a market basket of goods for each year. Thanks for what you’ve done here.

Capt Science
10 years ago

Thanks, this is interesting.  As a next step, can someone take this information and compare it to how those players would be compensated if they were free agents in the 2012-2013 offseason?  It would be interesting to see how much Barry Larkin (for example) would be estimated to make and how that differed from his actual and inflation-adjusted numbers.

kyle.
10 years ago

just finished a book on the 1957 braves. in the book it is mentioned that warren spahn turned down an offer of $0.05 per fan for the 1953 season in favor of a $25k salary. when the team unexpectedly moved to milwaukee weeks later, their attendance jumped and he lost out on well over $150k which is twice as high as his peak salary earned in 1965.

Marc Schneider
10 years ago

Kyle,

Was that the book called “Bushville Wins!?  That was a very good book.

People always say players today play just for the money and oldtimers played for fun.  But many of the oldtime players had little education and few good options outside of baseball.  Even though the players were arguably underpaid relative to what they would have made without the reserve clause, many of them still made a lot more than they could have doing anything else.  So, for them, this was more than a game, it was really their livelihood.  I think that explains why, especially with the better teams, the games could be so bitter.  The way that owners could discard all but the very best players at will, I think most were really playing with desperation.

Drew
10 years ago

I’d like to see this by percentage of total MLB payroll.  So, if the total payroll for all players in 1930 was $5,000,000, then Ruth made .0016% of that.  Then, translate that into 2013 and see what we get.  Make sense? That would account for salary inflation, which I find far more interesting than just regular inflation.

Paul G.
10 years ago

It would be also interesting, though probably impossible, to see salaries as a percentage of the league’s revenue and profits.  Generally, you don’t pay a player a million dollars when the revenue is two million dollars, no matter how good that player is.

Also keep in mind that while baseball could be and still usually is quite profitable for owners, it was not always so.  The 19th century is full of financial failures.  Even in recent times teams have claimed not to make money in some seasons and I sense that at least some of them speak the truth.  We’ve had a few bankrupted owners in recent years, though typically their problems are more general than baseball specific.

Marc Schneider
10 years ago

No doubt some teams in the 30s and 40s drew so poorly they did not make money and some owners were underfinanced.  Without the reserve clause, these owners presumably would have had to sell the team. But those teams were also the teams that were least competitive; revenue advantages didn’t start with free agency.  The Yankees had a lot more resources than most other teams and it showed even though it didn’t flow to the players like it does today.

northern rebel
10 years ago

It is kind of ironic that Cy Young’s adjusted income is less than Bert Blyleven’s.

No knock on Bert.

Why do you think we had the Black Sox scandal? Owner’s were notorious for their penny pinching, before free agency.

The Yankees dangled World Series money in front of their players, to keep salaries in line.

George Weiss, and Branch Rickey were known for dumping their players before age 30.

Weiss once brought Phil Rizzuto into his office, to discuss which player should be cut, knowing Rizzuto would figure out it was him.

Graham Womack
10 years ago

@LenG—I certainly approach research with an open mind and I enjoy research that surprises me. That’s a lot of the fun of it, learning new things and getting a broader base of knowledge as a writer to draw from.

As a writer, researcher and journalist, I strive to give an honest, fair reflection of whatever I find out. I don’t write leads before I cover a story. I don’t purposefully omit something if it’s valid and runs against whatever opinion I have heading into a story. I cast a wide net and try to write the best, most accurate piece I can with the facts I find.

All this being said, I appreciate your feedback and will bear it in mind through my next round of research.

Marc Schneider
10 years ago

Len G:

Is your conclusion that the reserve clause did not hold down salaries at all?  It seems to me that you are right that teams could not have paid players the equivalent of what they make today.  That doesn’t mean that they would not have been paid more under a free-market system than they were.  Your assumption seems to be that teams would not have competed for the services of star players.  Obviously, a team can’t pay money they don’t have but that doesn’t mean that they necessarily would not have paid more than they did.

The other issue, which is less relevant here, is how the reserve clause affected the salaries of non-star players.  Teams may well have had reasons to pay star players a lot and hold down the salaries of lesser players under the reserve clause. Granted that revenues were less than today-in part, I would argue, because free agency forced teams to develop new revenue sources-it’s hard for me to believe that there would not have been some competition for free agents that would have at least pushed the average salary up.

Graham Womack
10 years ago

@LenG—“Is your conclusion that the reserve clause did not hold down salaries at all?”

No, absolutely not. How did you get that out of what I wrote?

The Reserve Clause kept salaries down. Its abrogation is what’s primarily led to the explosion in salaries today.

Graham Womack
10 years ago

@LenG—I owe you an apology. I didn’t realize Marc wrote that last comment.

Carl
10 years ago

To answer a previous question, the Census provides the below table of median US Per Capita Income since 1967:

Year   Per Capita Income
2011   27,554
2010   26,558
2009   26,530
2008   26,964
2007   26,804
2006   26,352
2005   25,036
2004   23,857
2003   23,276
2002   22,794
2001   22,851
2000   22,346
1999   21,239
1998   20,120
1997   19,241
1996   18,136
1995   17,227
1994   16,555
1993   15,777
1992   14,847
1991   14,617
1990   14,387
1989   14,056
1988   13,123
1987   12,391
1986   11,670
1985   11,013
1984   10,328
1983   9,494
1982   8,980
1981   8,476
1980   7,787
1979   7,168
1978   6,455
1977   5,785
1976   5,271
1975   4,818
1974   4,445
1973   4,141
1972   3,769
1971   3,417
1970   3,177
1969   3,007
1968   2,731
1967   2,464

Bill Rubinstein
10 years ago

ANother consideration is the level of taxation at the time. Presumably no pre-World War One player paid any income tax. Income tax levels were raised because of the Depression, meaning that the Babe’s net salary in 1930 was much less than $80,000. During and after World War Two levels of income tax were also increased to astronomical levels, again meaning that the net salaries of players like Kiner, Snider, or Roberts were a lot lower than these statistics suggest. As income tax rates have declined in recent years, the real salaries of today’s players are even higher compared with the past, plus there are various tax avoidance schemes probably not around in the past, at least to ballplayers.

Len G
10 years ago

The inflation adjusted salary info is quite good.

The conclusion that players were underpaid is baseless and relies on emotional polemics without supporting data.

Womack makes no mention of and completely fails to discuss the profitability of baseball teams adjusted for inflation and the selling price of baseball teams adjusted for inflation.

The average baseball team had revenue of $227 million in 2012.  Television revenue did not exist in Babe Ruth’s time.  The Yankees in Babe Ruth’s time were not generating revenue anywhere near $12 million, which is roughly what $227 million today was equivalent to back in the late 1920s when adjusted for inflation.

It might have been possible for Babe Ruth, Ted Williams, other superstars and other average or below average players to have been paid much more than what they were paid 50+ years ago, *BUT* the money was not there to pay players 5x or 10x what they were paid.  Again, there was no local television contract or national television contract for any baseball team before television existed.  Television revenue has risen much faster than inflation in the past 60 years.  This is where Womack’s work is lazy and bad.  He ignores this obvious point.

Furthermore, Womack ignores the inflation-adjusted price at which baseball teams were sold.  For example, CBS bought 80% of the Yankees in 1964 for $11.2 million.  That is $84 million in 2013 dollars, i.e., after adjusting for inflation.  The Steinbrenner-led group bought the Yankees for just $10 million in 1973.  That is $59 million in 2013 dollars.

To summarize, Womack’s data on players salaries is good and interesting, but his conclusions that players could have been paid much more in the past is not supported by any work, and had he done minimal work on the subject, such as looking at inflation adjusted revenue and sales prices of teams when team were sold, he would have realized that while teams might have been able to pay owners more in years past, it is high misleading to state, imply or suggest that players in the past could have been paid anywhere near today’s salary levels (on an inflation adjusted basis).  The revenue simply wasn’t there to pay them at that level.

Len G
10 years ago

One minor correction.  $227 million, the average revenue of baseball teams today, was the equivalent of $16 million (not $12 million—sorry for the typo) in 1930, when adjusted for inflation.

Graham Womack
10 years ago

@LenG—You’re right. I don’t have any info about MLB profit margins in my piece, short of linking to a page where Doug Pappas compiled it for teams 1920 to 1950. My computer doesn’t have Excel, so I’ve yet to access any of Doug’s spreadsheets. I should’ve found a way to check them out ahead of filing my piece.

Economic times have certainly changed in baseball and I wrote a little about this in my piece. Television was one game-changer. I acknowledged this in one sentence midway through my article, though I could’ve gone much deeper. One thing I didn’t mention: When the first pension plan was instituted in 1947, it drew off newly-emerging television revenue, I think.

I still believe players were historically underpaid, for a variety of reasons. I can give this another look through future research, though I think I’ll still conclude that teams took advantage of players’ lack of bargaining power prior to 1975 and used the Reserve Clause to keep salaries depressed.

Len G
10 years ago

@GrahamWomack

Thanks for responding.

I am concerned you may be engaged in what is called “Results Oriented Research” (something like doing research with an “axe to grind”).  This is research that the researcher designs and biases in order to reach a conclusion that the researcher wanted to reach.  This is a big problem of most baseball analysts of the past 20 years (unlike Bill James, who many of these analysts cite as inspiration).

Unlike Bill James, who in his Baseball Abstracts was very open to getting research results that surprised him, most online-published baseball analysts today start their research and bias their research in an effort to get the results they want.  I hope you approach further analysis with an open mind, such that if the data says players in the past were not “underpaid” (however one defines that), you will not hesitate to write an article stating that players in the past were not “underpaid”.  Of course, if the data shows that players in the past were underpaid, then obviously you should write about that.  But you should go into the research with an open mind and without biases.

In 1964, 80% ownership of the Yankees was sold for $84 million in 2013 dollars (grossing up, 100% was $105 million 2013 dollars).  The Yankees had just won their fifth straight pennant, and were the lead franchise in New York, the largest media and consumer market in the US.  The Dodgers, located in the second largest media and consumer market in the US, were sold last year (2012) for about $2 billion, or a valuation *NINETEEN* greater than the Yankees 1964 value expressed in 2013 dollars.

If the money generated by teams 40 or 50+ years ago was anything remotely like the money generated today, then obviously the Yankees would have sold for much more than they did in 1964.  If the market value of the Dodgers today is NINETEEN times what the Yankees were sold for in 1964, then as an opening set of assumptions to test, it seems very reasonable to assume that if player salaries in 2013 are at or close to a “fair” level (however one chooses to define “fair”), then the “fair” level for players salaries in 2013 would be roughly 10x – 25x the “fair value” of player salaries in 1964 expressed in 2013 dollars.  In other words, the preliminary data suggests that players back in the 1960s or other historical period were not nearly as underpaid as your article and your selective presentation of data implies.  For example, if one applies 10x – 25x multiples to the salaries you show above for DiMaggio, Pennock, Koufax, Robinson, and Gibson (among others), one gets values that correspond roughly to the salaries of today, i.e., $8 million – $24 million.  In other words, if, as a starting point (which could and should be revised based on serious research), we assume that the increase in franchise value from the Yankees in 1964 to the Dodgers in 2012 is a decent proxy for the change in revenue available to pay players, then it doesn’t look like the superstars of the past were paid much differently or less fairly (however one defines “fairly”) than the superstars of today.

Graham Womack
10 years ago

Oh goodness, Len, read my whole piece. I made a long, detailed case why players were underpaid. It’s just clearly not to your liking.

Enough already.

Len G
10 years ago

Graham,

So when confronted with the weaknesses and biases of your work, and a clear and explicit quote from you, “It also showed the degree to which nearly every other generation of players has been exploited by its clubs”, you resort to non-substantive dismissiveness.  Your “exploited” comment does not square with your comment that:

“As a writer, researcher and journalist, I strive to give an honest, fair reflection of whatever I find out. I don’t write leads before I cover a story. I don’t purposefully omit something if it’s valid and runs against whatever opinion I have heading into a story. I cast a wide net and try to write the best, most accurate piece I can with the facts I find.”

When I showed real numbers and data that are easy to investigate further, verify, and correct (the data on what team revenue was in the past, based on attendance and ticket prices), instead of looking at that data yourself (you could look at the Haupert article among others, Baseball Reference for attendance data, and simple web searches would lead you to rough data on historical ticket prices).

What it looks like to me, and I could be wrong, was that you wrote a piece that you thought would have a catchy title and perhaps would get you exposure on Yahoo Sports or other online sites beyond your own, this one, and SABR.  Presumably, this was to get yourself exposure and get paid for articles in the future.  Obviously, I could be wrong.  That is just an observation.

A serious writer or researcher doesn’t run away from substantive criticism and hide his or mistakes or oversights.  A serious writer or researcher addresses that criticism and either points out how the criticism was wrong, or accepts the criticsm and adjusts his or her original work appropriately.

You did work assembling salary data on more than 200 players.  I am surprised that you show no interest in comparing that data with team revenue (which also seems to have grown much faster than inflation).  It is a serious flaw in your original article.

Len G
10 years ago

When I wrote “instead of looking at that data yourself” I left out “you did nothing except show non-substantive dismissiveness.”

Bill Rubinstein
10 years ago

I think that Len G is very slightly over the top. One question is if all the salaries of players came from the team’s revenues. What about millionaire owners like Yawkey, Wrigley, or Col. Ruppert? Did they ever dig into their own pockets to pay their players? Were players on teams with rich owners paid more than those on teams whose owners had no independent wealth?

Marc Schneider
10 years ago

I don’t think Graham and Len G disagree as much as it appears.  As I understand Len’s argument, he is NOT saying that the superstars were NOT underpaid.  He is simply saying that because they did not generate as much revenue as players today,it is incorrect to argue that they should have been paid as much (in constant dollars). Players were not worth as much to teams back then because they did not generate as much revenue.  Len’s point, though, is you can’t simply extrapolate back from current salaries to the past; just because A-Rod makes xx dollars doesn’t mean that Ted Williams should have made the same.  Nevertheless, I suspect they were certainly paid less than they would have in a free market system because why would a profit-maximizing owner pay a market salary when there is no market? 

With respect to Bill’s question, my understanding is that Tom Yawkey was known to pay higher salaries than other owners.  The Yankees, despite their higher revenues, often paid less because they assumed that players would get World Series money. I would be really surprised if owners ever “dug into their own pockets” to pay their players because why should they?  The players couldn’t go anywhere. There were clearly some teams with higher revenues that were probably more successful and that probably paid higher salaries than bad teams (simply because they had more good players)but there would be no reason for them to pay more than a fraction of the additional revenue generated to the player.  Most of the additional value generated by the players, I assume, went to the owners.

Len
10 years ago

Len,

I’ve overreacted to your criticisms of my work. As an aspiring writer, I value and welcome constructive feedback. It’s how I get better.

To address your original point, you’re right—this article would’ve benefited from looking at the percentage of team revenue that Hall of Famers were paid. While I doubt it would change my views that players would’ve made more under a free market, it would offer an interesting look at the constraints that teams may have been under.

For what it’s worth, I intend to do further research and write a follow-up piece, either here or on my website. If you’d like to email me at
, I’d be happy to share my methodology heading into research and invite you to add anything to it.

Regardless, thank you for your time and I apologize for taking your criticisms personally and fueling argument between us.

Best wishes and talk to you later.

Sincerely,
Graham Womack

Len G
10 years ago

@Marc Schneider wrote

“Is your conclusion that the reserve clause did not hold down salaries at all?”

I think you were reading someone else’s comment or some other article.  I didn’t make any mention of the reserve clause.  Also, your “did not hold down salaries at all” has nothing to do with anything I wrote.

You wrote:

“Your assumption seems to be that teams would not have competed for the services of star players.”

I made no mention of free agency at all.  I made no such assumption of the form you mentioned.  I don’t think you read what I wrote.  It seems you either read something someone else wrote, or you simply decided to ascribe stuff to me that I did not write about.  If you have a question about what I wrote, you should quote what you are questioning.

You wrote:

“Obviously, a team can’t pay money they don’t have but that doesn’t mean that they necessarily would not have paid more than they did.”

Again, this has nothing to do with what I wrote.  The Did you have some preconception, bias, or personal focus or agenda regarding player salaries in the past?

In fact, I very clear and explicitly said it is possible players might have been paid much more in the past.  As I wrote:

<<It might have been possible for Babe Ruth, Ted Williams, other superstars and other average or below average players to have been paid much more than what they were paid 50+ years ago, *BUT* the money was not there to pay players 5x or 10x what they were paid.>>

Len G
10 years ago

@Graham Womack

The line of yours that I quote below is a good example of why your article appears to be agenda-driven and/or results oriented research rather than a sober-minded look at the data.

You wrote:

“It also showed the degree to which nearly every other generation of players has been exploited by its clubs.”

Without any work whatsoever on how much revenue or income after non-player expenses teams had, you establish no basis in the article for saying if any of the Hall of Fame players or other non-Hall of Fame players were “exploited” (you only refer to about 5 non-Hall of Fame players in the article, whereas you list information about and/or refer to more than 200 Hall of Fame players; thus, it seems that your article does not justify or support you making a generalization about “generations of players”, rather than “Hall of Fame players”, especially when your headline is “How Hall of Fame players rank for salary in 2012 dollars”).  It is very possible that Hall of Fame players or other players were “exploited” in years past, but your article does not establish that, and “exploited” is a particularly strong, charged, and inappropriate word to use without substantiation and support.

To reiterate and expand on what I wrote previously, it is quite possible that Hall of Fame players in years past were underpaid relative to what they would have gotten had there been free agency in their era.  However, the data presented in the article does not support that argument.  Readers of this comment should read the preceding sentence carefully.  That sentence and I in general, do *not* argue that players were not underpaid.  Simply because the data in the article does not support an argument that players were underpaid in the past does not mean that an opposite argument is true, i.e., it does *not* mean that players were *not* underpaid.  The article does not establish whether players were underpaid or overpaid or “fairly” paid.  The conclusion that Hall of Fame players, or players in general, were overpaid, underpaid, or paid “fairly” (i.e., in between underpaid and overpaid), requires research and data which this article does not have.

For what it’s worth, it is fairly easy to get a very rough estimate of what the range of revenue was for baseball teams roughly 50 – 85 years ago.  Annual attendance for teams generally ranged from 500,000 to 2,500,000 per year, and ticket prices very roughly ranged from 25 cents (bleacher seats in the earlier part of the period) to $3.15 (high quality seats in major markets in the later part of the period) until the late 1950s.  As there was very little non-ticket revenue in that era (merchandise sales were minimal, food and beverage sales were much lower than today, and TV contracts did not exist in any form until the latter part of the period), it is easy to make a very rough estimate that typical teams were likely generating revenue of roughly $750,000 – $3 million (and one should be very aware that inflation means that $1 in 1930 had different purchasing power from $1 in 1955).  Notice that I have used the terms “very rough” repeatedly.  I am not arguing that this is rigorously researched data, I am simply arguing that these are very rough numbers that others are welcome to research and explore in depth and correct as appropriate.

To give some more data to think about, $25 million in 2013 dollars is equivalent to about $2.9 million in 1955 dollars using the US government’s CPI data, and about $1.8 million in 1930 dollars.  When one considers that the 1927 Yankees highest ticket price was $1.10, and that annual Yankee revenue in Babe Ruth’s era was probably in the very rough range of $1.5 million – $2.5 million, it seems highly unreasonable, to give one example, to have expected that the Yankees could have afforded to pay Babe Ruth anything remotely comparable in inflation-adjusted terms to a top level salary of today, i.e., $1.5 million – $2 million in 1930 in inflation adjusted terms is what high-end salaries are today.

Serious, detailed research on historical baseball salary levels, historical team revenue levels, and historical team non-player expense levels would be very interesting and might be able to prove or disprove arguments made in the article, and to prove or disprove arguments that the article did not raise.  I look forward to reading such research if it is done by anyone.

Len G
10 years ago

@Graham Womack

Thank you.  I look forward to your future work on this and other topics.

Len G
10 years ago

@Bill Rubinstein and Marc Schneider

Marc Schneider gave a good summary of my argument in his first paragraph above, starting with “As I understand Len’s argument . . .” and ending with ” . . . doesn’t mean that Ted Williams should have made the same.”

Regarding owners having paid players out of their own pockets, I defer to you (Marc and Bill) and others as to whether this actually happened in the past, because I don’t know and haven’t done any reading or other research on whether it happened.  As a general point, if owners were investing additional funds into their teams in order to pay their players’ salaries, then that supports an argument that players were *overpaid*, i.e., if a business does not generate enough money to pay its employees and suppliers, then there is no economic rationale for the business to exist in its current form and performance level.  No rational person wants to lose money for a living (i.e., people want to *be*paid* a salary, people don’t want to *pay*an* employer*a*salary* for the right to come into an office every day; no one opens or operates a business with a desire to *lose* money, people open and run businesses to *earn* money).  This may sound like obvious common sense, but a lot of public discussion in society in general and about sports in particular seems based on the crazy idea that people should work for free or even pay others for the privilege of working for them!  And when I say “work for free” I include the idea that businesses should give away products and services for free and lose money.

So, to be clear, if an owner had to pay a player out of his own pocket, that means the team was losing money and the team’s operations could not support its payroll.  Thus, that team was *overpaying* its players.  Of course, we could carry this thought experiment out further, and ask whether the owner had to pay players out of his own pocket on a permanent basis, or whether the team was only suffering temporary losses but would become profitable again in 1 or 2 years.

Because there is not easily obtainable data on teams’ profits and losses in the past, but it is not too hard to get some data on the price at which teams were sold, it is useful to look at the price at which teams were sold (and the news stories at the time explaining why the team was being sold) as a proxy for team profitability.  For example, the Yankees were sold to CBS in 1964 at a higher price than they were sold to Steinbrenner’s group in 1973.  I do not even mean an inflation-adjusted price, I mean that Steinbrenner’s group paid a lower price to buy the Yankees in asbolute (nominal) dollars than CBS did 9 years earlier.  That suggests that the Yankees profitability had dropped over the 9 years that CBS owned the team.  This is just one of many examples one could look at.  Another example would be the sales of the A’s and the Braves in the 1950’s.  Both teams were reported to be barely profitable or losing money when they were sold.  Many teams, such as the A’s and the Braves had to be moved to remain profitable businesses.  The Giants are another example of a team that was in serious financial trouble in the 1950’s.

CONTINUED BELOW

Len G
10 years ago

CONTINUED FROM ABOVE

I have not done serious research on the financial condition of the Braves, Browns, A’s, Giants and other teams in the 1950’s, but the very limited reading on the subject I have done over the years strongly suggests that those teams were in serious financial trouble (the Dodgers seem to have been the only team that moved in the 1950’s that was not in serious financial trouble at the time that they moved).  If several baseball teams were in financial trouble and losing money, then that suggests that players were overpaid at the time, i.e., those owners weren’t keeping *profits* for themselves, they were taking financial *losses*, so there wasn’t more money available to pay their players, and, if anything, those owners should have been paying their players *less*.  It is simple math—as an argument in favor of players getting paid *more* is that the owners were making very high profits, then obviously if owners were losing money then an argument in favor of players getting paid *less* is that the owners were losing money.

Before anyone flies off the handle in reaction to what I have written, people should carefully and thoughtfully read and reread what I have written.  I have written that I have not done extensive research on these issues.  I suggest that others do such research if they want to come to informed conclusions.  I suggest that anyone looking at this issue should come in with an open mind, and not spout knee jerk assumptions such as “greedy owners” or “greedy players”.  It could be that upon doing serious research someone will assemble clear data that shows that teams were very profitable in the past, that teams were barely profitable or that teams were or that teams typically lost money at times in the past.  It could be that upon doing serious research someone will assemble clear data that shows that players were underpaid, overpaid or fairly paid in the past.

The issues are a lot more complicated than what I have outlined above.  Some other random issues to consider are that if one wants to argue that baseball teams were extremely profitable businesses in the past and that teams were underpaying their players, then that person should be able to explain why there aren’t lots of owners who became very wealthy from owning baseball teams, and why there aren’t lots of smart and savvy businessmen who decided to buy baseball teams because they were such great businesses to run.  Offhand, I cannot think of any owners of baseball teams from years past who, away from their baseball activities, were regarded as very smart and savvy investors or talented and perceptive business managers.  If baseball teams were great businesses to run (and if one of those reasons were that they were able to exploit and underpay their labor to generate great profits for the owners), then why weren’t lots of smart of savvy businessmen buying baseball teams as investments?  For example, even in one of the few exceptions (i.e., one of the few situations when a smart and well run company / businessman bought a baseball team) why did CBS, a large company with a talented management team, sell the Yankees at a loss after 9 years of ownership if owning a baseball team was a great opportunity for an owner to make huge profits by exploiting labor?

Marc Schneider
10 years ago

Len,

You make some good points but I have to disagree on one thing.  You argue that teams such as the Braves, A’s, Browns, etc. may have been in financially bad shape before they moved, thereby suggesting that players on those teams were possibly “overpaid.”  I don’t think that’s true; it like saying that I can’t afford a Mercedes, therefore Mercedes are overpriced.  The fact that those particular teams may have been losing money-not entirely clear, but let’s assume so-does not mean that the players were overpaid.  It just means that those particular teams were not as successful as others, whether due to poor management, small market, or whatever.  In fact, players can’t be overpaid.  IN a market economy, the market determines the value of the asset; if someone is willing to pay a given amount for the asset, it is “worth” it at least to that person.  IN the case of the pre-free agency MLB, I don’t see how the players could possibly have been overpaid since the owners decided what to pay.  The point is that there was a minimum amount of salary that a team would have to pay to field a major league team; if that team did not produce sufficient revenue to support those salaries, that just means those teams were unsuccessful, not that the players were overpaid.  After all, the players were professionals; you couldn’t expect them to play for nothing.  It’s like a business that is bankrupt; you don’t expect the employees to work for free.  The business simply folds.  Moreover, other than the Dodgers and possibly the Giants, the teams that moved were bad teams and, therefore, had lower-paid players.  You may well be right that baseball in those years was not a great investment, but the fact is it was a going business and some teams were making profits; if not, how could any of the teams have stayed in business?  I suspect that the teams that moved may well have been losing money, which is why they moved.  But that doesn’t mean the players were overpaid; it just means those teams were not successful.

Len G
10 years ago

@Marc Schneider and Paul G.

Good and interesting discussion and questions.  Glad to be a part of it.  Thanks.

A lot of the discussion on this page has been oversimplified by everyone (yes, even though it has been very lengthy, most everyone has been engaging in shorthand, simplifications, etc., and I think that is normal in any complicated discussion).

In one sense, something is worth what someone else is willing to pay for it.  In the short-term, that is generally true.  However, over the long-term, what someone is willing to pay right now for something, does not necessarily reflect what someone else is willing to pay for it.  This is because if I can sell a house for $2 million right now to one specific buyer, but no other buyer is willing to pay more than $650,000, and all the other houses in the area sell for $500,000 – $700,000, then it is very likely that the buyer paying me $2 million is overpaying in the sense that there is no market depth to his bid of $2 million, and if he somehow gets a $1.6 million mortgage to buy my home and he is counting on selling the home in 5 – 8 years to pay off the mortgage, it seems very likely he will lose all $400,000 of his down payment and still be unable to pay off the mortgage after the sale (which means the bank will take a loss on the mortgage).

I don’t think Marc’s Mercedes analogy (Marc raised the issue of what it means about Mercedes if he can’t afford a Mercedes) holds for baseball in the 1950’s.  It wasn’t 1 team out of 16 that was in financial trouble.  It was at least 4, and likely more.  If 5% of market participants are not doing well, then it is likely those market participants who are mismanaging their companies.  If 25% or more of market participants are not doing well, it is likely there is a structural problem with the market in which these companies compete (i.e., costs for the market participants have risen a lot, but the market participants find that when they raise their prices to cover those costs, their customers stop buying their products; an extreme example of this is the airline industry around the world).  Thus, with several (not just 1 or 2) baseball teams having significant financial problems in the 1950s, it seems likely there was a structural problem with baseball.  To use Marc’s Mercedes analogy, if many fewer customers than Mercedes expected can afford Mercedes cars, then the problem is that Mercedes cars are overpriced.

I think we (Marc, Paul and I) are in general agreement that businesses need to cover their costs.  In fact, if a business that is wholly-owned by one person never earns a taxable profit, the IRS does not even consider it a business for tax purposes (i.e., the owner is not allowed to take a tax deduction for its losses).  The IRS considers such a money-losing business a hobby.  Obviously, if a business is always losing money, the owner must have savings or other sources of income away from the money-losing business in order to survive (eat, pay for housing, etc.), so the IRS’s attitude is that a business that never makes money is a hobby in the way that painting, fishing, bowling, etc. are hobbies.

What I find particularly interesting and surprising (to me, at least) about the historical salary data is that even though there was no free agency, it looks like superstars of the past were paid vaguely comparable percentages of team revenue and team value compared with superstars of today.  For example, what Mickey Mantle was paid as a percentage of Yankee revenue and the price at which the Yankees were sold is not wildly different from what top players are paid today as a percent of team revenue and a percent of the prices at which teams are sold today.

Sometimes research shows that what intelligent and common sense observers thought was very wrong.  At the very least in this case, I found it surprising that the superstars of the past did not seem to be paid wildly differently from the superstars of today when measuring their salaries as a percent of team revenue and team value (sale price of the teams; I use sale price as a value of the teams because there are enough examples of sales of teams in the past to assess rough market values and prices for teams, i.e., prices at which there seems to have been depth to the market, unlike in the hypothetical case I described of selling one house to one buyer at a price about 3x higher than what any other buyer was willing to pay).

Back to you, gentlemen.  I look forward to your (or anyone else’s) continued observations (or new research) on this topic.  Thanks.

Paul G.
10 years ago

WARNING: This goes long.  Why break the pattern?

Certainly, players can be overpaid just like any employee can be overpaid.  Ask Johan Santana, Vernon Wells, or Alex Rodriguez.  Actually, scratch that.  Don’t ask them.  They’ll probably get ornery and they carry sports equipment that can double as weapons.  Well, then again, you can probably escape the two ambulatories with only modest effort and Vernon can’t hit anything, so you’re probably safe.  Anyway, back on topic.

In a market economy, the price is typically what the market will bear.  However, sometimes the market will act irrationally because, among other reasons, everyone is caught up in the latest economic fad (housing, tulips, baseball cards, dot-com startups, South Sea Company stock, etc.) or because someone with a lot of money and not a lot of brains thinks he’s a freaking genius.  When these things happen things can get way out of whack (see Wells, Vernon), which can persist anywhere from a few minutes to years.  And the market will let you do this all you want, especially because it is only an abstract concept and therefore makes a lousy wing man.  What will happen eventually is any irrational enthusiasm will become quite intimate with reality, resulting in the very stoppable force meeting the epitome of the immoveable object.  At that point a bunch of people lose their shirts and everyone else wonders how they could have been so stupid.  Market corrections can be cruel and tend to be a lesson to all, which they will promptly forget all about when a friend’s cousin’s guy who knows a guy overheard someone in the hotel that there is some guy in Nigeria… you get the idea.

So, yes, baseball players can be overpaid even if everyone was certified sane at the contract signing.  This is especially true since the contracts are for future production which can only be extrapolated from current data.  Predicting the future can be a difficult thing, especially since the Oracle at Delphi was shuttered over a millennium ago and Miss Cleo was last seen pimping used cars.  I think the Mets wouldn’t have paid Jason Bay those truckloads of cash if they knew they were getting an oft injured fourth outfielder for their money, but then again Fred Wilpon is the poster boy for an idiot with lots of money who thinks he’s a genius, so you never know.

To be slightly serious, the general rule of thumb is an employee should produce revenue greater than the cost to employ him or her, else you are losing money.  Just because you hired someone at such and such a price does not mean he or she is actually worth what you paid.  People misjudge, even after a battery of interviews.  Great candidates can develop issues, addictions, egos, etc. that leave them short of their potential.  And some hires are perfectly good, talented folks who would be stars elsewhere but are ill-equipped for the work they actually do.  There is a reason people get fired for reasons other than cleaning out the company’s supplies of sticky notes and/or sexually harassing the coffee machine.

With that said, yes, it is quite possible for a baseball team to pay perfectly reasonable salaries for their players and not make money.  Poor management can do wonders, though not of the “wow, that’s awesome” kind unless you like watching train wrecks.  And putting a major league team in, say, Altoona, would count as poor management.  But it is also quite possible for a good management, after careful research and the most comprehensive analysis, to assemble a group of overpaid, underperforming bums that corner the market on empty seats.  And sometimes you get garbage from both ends of the economic synergy, or as I like to call it: The New York Mets.

Marc Schneider
10 years ago

Len,

I agree with most of what you say, but I still don’t understand how salaries-clearly the largest components of cost for sports team-can rise above revenues where the market doesn’t operate at all. It’s hard to figure to me why a pre-free agency team would ever pay players more than the revenue they generate if they are profit-maximizing.  Now, it’s possible that some of these old-time baseball owners were not profit-maximizing but given that they could pay the players anything they wanted (unless the player was willing to quit), I don’t see how industry costs-ie, salaries-could have been the reason these teams were struggling financially.  Most of the teams that moved-except the Dodgers-were the second team in a 2-team city and just were not drawing many fans.  In addition, some of the teams, e.g, the Browns, were perennially bad.  Now, you can argue this was due to bad management or to being in a bad market, but I don’t see how you can attribute it to higher costs.  I agree there was a structural problem in that there was not sufficient market demand for the teams to survive in those cities, but, unless you think players really should play for free, I don’t see how costs can be an issue.  To run any kind of a business, you have to incur some costs; if your revenues can’t cover those minimal costs (which, obviously for a baseball team, primarily mean player salaries), I think the problem is revenue generation, not costs.

It is interesting that salaries for the star players were roughly in line with revenues.  For whatever reason, the owners apparently felt they had to pay their stars reasonably.  In some cases, it seems to have been a matter of ego; they get close to the star players and want to make a show of generosity.  It would be more interesting to me to see how the salaries of lesser players compared with team revenues because I suspect that’s who the teams squeezed to pay the stars.

Len G
10 years ago

Marc,

I go back to my earlier point.  If 1 team out of 16 was having financial difficulty, it would make sense to assume first (and then study further to verify or disprove) that it was team specific problems (not problems for the baseball leagues as a whole) such as bad management decisions that were the problem.  However, when at least 4 out of 16 teams, 25%, have problems, it makes sense to assume first (and then study further to verify or disprove) there were problems for the baseball leagues as a whole.

You recognize that player salaries were the largest component of team costs, but then you make a puzzling statement that “It’s hard to figure to me why a pre-free agency team would ever pay players more than the revenue they generate if they are profit-maximizing.”  What is hard to figure?  It is what happened.  Several teams had costs that were not covered by their revenue.  It is basic accounting, finance and economics that a company that is losing money or failing to earn its cost of capital is paying too much in costs in expenses.  Consequently, I don’t understand what your point.  It doesn’t make sense.  You seem to be saying that even though several teams were breaking even or losing money that their costs were *not* too high.  Obviously their costs, including player salaries, were too high.

While teams determined their payroll ahead of the season, their revenue was generated during the seasons, i.e., *after* they had set their payroll.  Thus, if a team’s attendance was lower than expected, or if the team had several injured players and had to sign more players to contracts, it is easy to see how a team could go over budget and be unprofitable.  Again, if this only happened to 1 team out of 16, it might be reasonable to assume that it was a team specific problem, but when it happened to 4 or more teams out of 16, it is reasonable to assume it was caused by problems affect the leagues as a whole.

REB
9 years ago

Who Cares…..
Baseball, basketball, or football, the players are nothing but entertainers. Just like actors, singers, etc., if the public wants to pay a large part of their income to be entertained by this ‘entertainment’ then I reckon the entertainers should get what ever they can.
And the American Public gets what they pay for.
And now we have Professional Wresting & 400 channels of ‘Relativity TV’ for those that can not afford the ‘higher cost’ entertainment.
Life is good…..
Have a most excellent day. .. REB