Sports / Baseball

Cognitive Dissonance and Minor League Wages

In February 2014, three retired Minor League Baseball players brought a lawsuit against their former teams and Major League Baseball, claiming unfair pay practices. The case, Aaron Senne v. Office of the Commissioner of Baseball, is in the pre-trial phase, with no settlement in sight. The plaintiffs argue that MLB has violated the Fair Labor Standards Act, a piece of New Deal legislation that created the 40-hour workweek and the national minimum wage in 1938. The plaintiffs contend that minor leaguers are criminally underpaid, not receiving minimum wage or overtime, despite the full-time demands of professional baseball.

This is not the first time that MLB has faced lawsuits over minor league wages. A similar case, Miranda v. Selig, was also filed in 2014, though the court ruled in favor of Selig (MLB) last fall. MLB is protected by an antitrust exemption, as has been ruled by the U.S. Supreme Court on multiple occasions. This exemption allows the league to set artificially low wages in a manner that would be illegal in most industries.

MLB’s position seems to be as strong in the Senne case, and a magistrate judge denied the minor leaguers class-action status this July. As a result, every minor leaguer will have to file individually in order to join the lawsuit. This ruling, though currently under appeal, makes the prospect of court-ordered, systemic changes to the minor league pay system highly unlikely, no matter the outcome of the Senne case.

Regardless of the decision of the trial, minor league pay practices are an institutional failure. Beyond the supposed unfairness of low wages, underpaying minor leaguers is almost certainly a detriment to the major league franchises themselves. In an attempt to minimize costs, MLB has lost sight of the fundamental purpose of the minor leagues; without a strong support system, the players cannot develop optimally. Through its myopia, MLB has cost itself productive players, hampering its ability to field the best teams possible. As Aaron Senne himself put it,

“It’s like a lot of for-profit businesses, where they don’t necessarily view their minor league players as ‘employees equals people’… They view [them] as a cost… You look for, ‘How can I reduce my costs as much as possible?’”

Major Scale

Professional baseball is unique among the major North American sports in that it develops its own players on a massive scale. Regardless of how they were acquired, all major league prospects are funneled into the minor leagues; players do not make the jump straight from college, as they do in football or basketball. Furthermore, while the NBA does have a development league, nearly a third of the league’s teams do not have an affiliated club. Conversely, each MLB franchise has at least six separate minor league teams, from Rookie Ball to Class AAA, the highest level. The sheer enormity of the minor league is unmatched; it contains nearly two hundred fifty teams and just under six thousand players.

Minor league franchises are affiliates of MLB teams, meaning that they are owned and operated by their major league counterpart. The mother club determines pay, rosters, and player movement; therefore, all actions taken by a MiLB team are built into a larger plan orchestrated by the major league franchise. Indeed, MLB teams are not at all concerned with the success of their affiliates. They will call up any player they desire, no matter the effect on the competitiveness of the minor league club. A star shortstop in a Class AAA team’s pennant race, for example, can become a utility infielder in the major league in an instant, and the affiliated team is completely beholden to the decision.

MLB franchises have shaped the minor leagues into an instrument with one fundamental purpose, namely to create a talent pipeline. With only two exceptions since 2000, every player signed by a major league club has spent time in the minors, no matter if they were the twelve hundredth pick of the amateur draft or a Cuban defector receiving a $40 million signing bonus. The breadth of MiLB  reflects its developmental aims, ones not shared with its counterparts in other sports. The NBA’s D-League, for example, is an island of misfit toys, a place for franchises to stash castoffs, journeymen, and undrafted signees. The league’s function is not to cultivate great talent; nearly every player with All-Star potential is already on the parent team’s roster. In contrast, MiLB is focused on developing excellent major league players. With large coaching staffs, especially at the Class AA and Class AAA levels, teams aim to help players build the skills necessary to thrive at the highest level. Even the most highly touted prospect will begin his career at Class A, working his way up through Class AAA before a promotion to the big leagues.

Minor League Life

The minors, then, are a place to grow major league talent as efficiently as possible, putting the least amount of financial strain on the big league organization. By minimizing the amount of resources going into the affiliates, a larger slice of the pie can be used by the major league club for everything from signing free agents to funding the scouting department. As a result, the current system is built to exploit minor league players, compensating them as little as possible. That is, until those who prove themselves on the field are promoted and can reap the rewards of a major league salary.

But this principle of cost minimization has been taken to a dangerous extreme. Most minor leaguers earn between $3,000 and $7,500 for the five-month season, below the $11,490 poverty level for an individual. In comparison, an annual salary at the federal minimum wage is $15,000, and the major league minimum is $507,500. Furthermore, as increased revenues have brought MLB salaries up by a factor of twenty since 1976, minor league wages have decreased in that time period, after accounting for inflation.

The strain of this lifestyle is evident in ballplayers’ eating and sleeping habits. The demanding travel schedule forces minor leaguers to rely on fast food or gas station fare. With little time or energy to cook, and the appetite of a professional athlete, the $25 per diem rarely lasts the day. Furthermore, most players are forced to board together in cheap, overcrowded housing. Players often travel with air mattresses, rather than sleep on motel floors when on the road.

While it is possible to work in the offseason or get a second job, and most players do both of these things, the demands of professional baseball make finding substantial employment close to impossible. The duties of a minor leaguer go beyond the five-month, 144-game season; players must train year-round: they must stay in top shape and focus on developing skills for a possible career in the major leagues. For instance, minor leaguers go to pre-spring training workouts and a post-spring training instructional league, both of which are unpaid. They are also responsible for finding practice spaces and equipment during the off-season, when they are expected to refine their skills on their own. This leaves little time for education or vocational training. Many players repeat this cycle for years on end before they are forced to leave baseball, still in their athletic prime, without any marketable skills.

Misplaced Incentives

Returning to the goal of the minor leagues, it is worth wondering if the system in place is really optimizing player development and creating major league-caliber players as effectively as possible. When players are concerned with their most basic needs, such as worrying about getting enough to eat and finding a place to sleep, they are diverting their attention from what should be, in the eyes of the clubs, their singular goal: getting better at baseball.

Furthermore, players who are sleep deprived or lacking a nutritional diet will necessarily develop worse than a comparatively healthy player. Baseball is a game of tiny margins, and the smallest adjustment could mean the difference between a perpetual career in Class AA and a ten-year major league career. Making these adjustments, however, requires incredible focus and practice, attributes that are surely dulled in the under-rested, under-fed ballplayer. Indeed, such a disadvantage could be all that is separating a player from a lucrative major league contract.

While is it difficult to calculate the true cost of this system, for one cannot easily project how a player would have developed in an alternate reality, creative methods can be used to approximate the effect. Notably, research by Russell Carleton of Baseball Prospectus has found that draft picks receiving lower than a $100,000 signing bonus are 10 percent less likely to produce at the major league level than those receiving between $250,000 and $500,000. While this is partly explained by a difference in skill level, as there is a clear reason why the latter group was drafted higher and signed for more, Carleton has shown that MLB teams are generally poor evaluators of amateur talent, beyond the top few selections (those who receive over bonuses of $1.5 million or more). Therefore, it is highly unlikely that talent alone is separating the two groups and there must be a difference in how they develop in the minor league. As Carleton concludes, MLB teams do not seem “ready to invest in the idea that nurture might be a very powerful force” and “are shooting themselves in the foot with their policy of paying so little to minor leaguers.”  

Indeed, while certainly a boon for the players, the development of minor leaguers is in the team’s interest as well. Under the current Collective Bargaining Agreement, homegrown talent is the most valuable asset in the sport. A team has a player’s rights until they have spent six full years in the major league. For the first three years, the players have no bargaining power whatsoever; the club can pay them the $507,500 minimum if they wish. For the next three years, players can go through an arbitration process, negotiating a higher salary, though one that is still below their market value. It is only after this process that players can reach free agency, and all teams can bid for their services. As a result of this arrangement, young players are significantly underpaid, and thus, are precious assets for a major league club.

Ryan Schimpf and the Value of a Breakout

If a MLB franchise, then, could increase the productivity of its minor league system, the rewards would be tremendous. There are many readily accessible examples to give us a sense of this value, including various players from this past year alone. A particularly instructive example is Ryan Schimpf, second baseman for the San Diego Padres.

This past June, the Padres called up Schimpf after a stretch of excellence for the team’s Class AAA affiliate. Schimpf was no Top 100 prospect, or even a prospect of any kind. Drafted by the Toronto Blue Jays in 2009, he had played nearly eight years in the minor leagues, spending time with seven different affiliates. In the past offseason, the Padres signed Schimpf to a contract, assigning him to their Class AAA team in El Paso. At age 28, Schimpf was the kind of player who often would resign to life in minor league limbo. The average player debuts at age 24; by age 28, nearly every player destined for the majors has been promoted already. It is easy to imagine a world where Ryan Schimpf quits organized baseball altogether.

Thankfully, both for Schimpf and the Padres, this was not the case. In little more than half a season, Schimpf hit twenty home runs and had a batting line nearly 30 percent above the league average. Even more impressive, this production came at the MLB minimum, pennies on the dollar. Schimpf’s unexpected production for the Padres had enormous surplus value, value that can be calculated easily.

Courtesy of Keith Allison/flickr.com

Courtesy of Keith Allison/flickr.com

A major league player’s production can be quantified using wins above replacement (WAR), a catch-all statistic that encompasses a player’s offensive, defensive, and baserunning value. As a simple rule of thumb, a 2.0 WAR player is league average, while a 5.0 WAR player is an All-Star. Furthermore, by observing free agent contract values, it can be calculated approximately how much 1 WAR is worth on the open market. The number is climbing nearly every year, and as of this past offseason, it is at about $8 million per WAR. That is, a league average player receives about $16 million per year in free agency.

Ryan Schimpf, in only 89 games of the 162-game season, produced 2.4 WAR, nearly All-Star level production. Accordingly, Schimpf was worth about $19.2 million to the Padres last year, while being paid $507,500. The surplus value, for 2016 alone, was $18.7 million. Furthermore, Schimpf is now under team control for five more years, and even if his production regresses considerably he will still be worth over $10 million per year.

Ryan Schimpf’s breakout, however, was not the product of blind luck, nor did it occur in a vacuum. Schimpf remade his swing playing Class AAA with the Padres, adding a leg-kick and an uppercut in order to get more power and lift on the ball. As a result, Schimpf’s ground ball rate went from about league average to the lowest in the major league (minimum three hundred plate appearances). Incredibly, the gap between Schimpf and second place in this metric is larger than the gap between second and sixteenth place. This adjustment in approach was the catalyst for the second baseman’s unexpected success; Schimpf’s emphasis on fly balls produced home run totals no scout had predicted. Surely, Ryan Schimpf’s attention to detail and focus on development while in the Minor Leagues will be worth tens of millions of dollars to his team.

Making the Investment

Major league teams should be searching for ways to optimize their player development; that is, teams should try to maximize the number of Ryan Schimpfs they produce. Breakouts like Schimpf’s are rare; they require an unusual mix of good fortune, effective coaching, and incredible dedication on the player’s part. The third item is especially important within the current, exploitative system. Given the low level of support that minor leaguers receive, there have surely been players who were not given the resources necessary to achieve their full potential. By building a support system for minor leaguers and creating an environment as conducive to development as possible, MLB franchises could increase the likelihood of such breakouts. To this end, a simple, productive change would be to give minor leaguers a living wage. With the security that comes with the raise, players will be able to devote more of their energy to baseball, and they will be incentivized to stay in the system as long they are physically able, maximizing their chance at big-league success. Even the players already destined for a major league career will have access to better nutrition and recovery, lowering the risk for an injury that could limit their production in those valuable, cost-controlled years.

Of course, this wage increase will require an initial investment, but it is one that major league teams should certainly be able to afford. MLB’s profits have soared this past decade, reaching a record $9 billion. While the wealth is, of course, not distributed evenly among the thirty teams, even the smallest teams receive close to $200 million in revenue. Raising MiLB salaries to $40,000 per year would cost each team about $8.4 million. In the player market, this amounts to a little over 1 WAR of cost each year. If a franchise could produce only one additional average player each decade, with the cost-controlled nature of homegrown talent, this cost will be completely offset. Given the expected long run returns, there is simply no reason for a franchise to plead poverty as an excuse for not investing.

Taking Initiative

Despite the ease with which the system could be remedied, real change will require MLB to radically shift its thinking. As seen in the Senne and Miranda cases, systemic change will not come at the behest of the courts, and minor league players have little recourse for their dissatisfaction. Simply, major league baseball will have to take the initiative if any reforms are to take place. This does not seem likely in the short term. This July, MLB endorsed the Save America’s Pastime Act, a bipartisan bill that proposed to amend the Fair Labor Standards Act, creating a specific exemption for minor league baseball. As MLB put it in an official statement, “Minor League clubs could not afford these massive player costs… [Minor League Baseball] is not a career but a short-term season apprenticeship in which the player either advances to the Major Leagues or pursues another career.” While one of the two original sponsors, Congresswoman Cheri Bustos (an Illinois Democrat), has since withdrawn her support, and the bill is unlikely to pass, it is illustrative of MLB’s current position on the subject of minor league wages.

There is still hope for long-term change. Since the “Moneyball” revolution of the early 2000s, teams have been searching for new ways to find an edge and increase efficiency. Many franchises, notably the Los Angeles Dodgers and Pittsburgh Pirates, have invested in sports science, understanding the important relationship between physical and mental health and on-field performance. It seems to be only a matter of time before some club directs its energy to minor league development; if it find success, the rest of the league will follow in its footsteps. For all parties involved, one can only hope that this process moves quickly.