Dollars and Sense Part Two: MLB Player Salary Analysis

In last week's session of Purple Row Academy, I examined the Opening Day payrolls (ODP) of all 30 Major League Baseball teams, as well as the Rockies' payroll historically. Today, I switch from a team focus to an individual player focus. After a lengthy writing process, I've decided to save both my sanity and that of my loyal readers and split this topic into two more manageable parts.

This week, I'll take a look at the average salary per player in MLB historically and how the average salary varies by league, division, and team. Next week I will examine the salary outliers in MLB (high and low) and will also analyze in detail the Colorado Rockies' ODP distribution now and in the near future. Once again, the salary data used in this report is courtesy of the USA Today Salary Database.

Major props go out to the Biz of Baseball's incomparable Maury Brown, whose article was the inspiration for this series. Note that that the payroll data does not include money paid or received in trades or for players who have been released, such as Jason Marquis for the Rockies or Gary Sheffield (released by the Tigers) this year. 

2009 MLB Payroll Expenditure by Player

Last week, I noted that in 2009 MLB overall ODP expenditure was down 1.56%, or about $42 million, from 2008. However, according to some number crunching by Brown, MLB's Opening Day average salary actually rose 2.7% this year to $3,240,206 (up from 2008's $3.15 million) for the 818 players on MLB Opening Day rosters.

How is this possible? Well, it is because fewer players are collecting major league paychecks on Opening Day this year--37 fewer, according to the AP's Ronald Blum. Why is this? This year there are only 69 players that opened the year on the DL as opposed to 106 last year, accounting for the ODP discrepancy. Players that are on the DL accrue service time and draw a MLB paycheck, and thus are treated as members of a team's Opening Day roster.

It should be noted that by the end of the year, the average player payroll will have gone down slightly as teams release expensive veterans and call up young players as they fall out of contention. Last year the average salary fell by about $200,000 from the beginning to the end of the 2008 season.

In other news, the median salary (the middle salary amount of all 818 salaries) for MLB players was a cool $1,150,000--up a whopping 15% from the previous year. What this means, in essence, is that 433 players are making more than $1 million this year.

Historical Significance

Before I go any further with the data, it's time for a little historical perspective on MLB's 2009 average salary of $3.24 million and major league minimum salary of $400,000. For the early years of baseball, when players were treated more as owned commodities than people with rights, the average salary was of course quite low. From the forties to the sixties the average was around $6,000 per player, but after the implementation of arbitration (and subsequently free agency), both average and minimum salaries of MLB players soared.

Baseball Almanac has developed a great chart that shows quite starkly the huge increases in player salary since 1970. At the time of the Seitz Decision in 1975, which effectively legalized free agency, the average MLB salary was still just $44,676 with a minimum of $16,000. Within five years those numbers were $143,756 and $30,000, and by 1985 it was $371,571 and $60,000. Heck, during MLB's boom period between 1995 and 2000, the numbers went from $1,071,029 and $109,000 to $1,998,034 and $200,000.

These incredible increases in player salary have far outstripped inflation or reasonable economic doctrine. The data goes further to prove my point that salary arbitration bears a great deal of responsibility for not only skyrocketing player salaries, but also an increased cost of attendance as the owners pass on the increased cost to fans. To wit, the average team's 2009 Fan Cost Index (which I may discuss at length in a later session) for taking a family of four to a ballgame averaged $197.17.

But enough doom and gloom. Join me after the jump as I break down the average salary numbers by league, division, and team.

Breaking Down the Numbers

Next I'll look at how this ODP data breaks down, first by league, then by division, and finally by team.

By league: In 2009, an average American League player will be paid $3,371,417 whereas his National League counterpart will be compensated at a rate of $3,121,812 for his services--a difference of $249,605 or 7.4%. There are a couple of reasons for this split. The easy explanation for this is the fact that not only are there two less teams in the AL, but also that a large portion of big-money teams (Yankees, Red Sox, Angels, Tigers) reside there. The bar for winning is also set higher in the AL--in other words, teams feel they must spend more on payroll just to compete. This is in large part due to the effect that the Red Sox and Yankees have on the AL, usually taking up two playoff berths every year. As a result, there is almost a Cold War-like arms race in the AL just to catch up with the Evil Empire and the Nation (sounds like a comic book).

Another valid reason for this salary discrepancy is that AL teams have the option of, and in their competitive environment, must employ the designated hitter, a player who is often a veteran slugger with high ML service time and a correspondingly high salary. This results in a team like Boston paying David Ortiz $13 million this year to do nothing more than hit whereas a NL team can fill that roster spot with inexpensive role players like Omar Quintanilla. While this does save the NL a considerable amount of money, it often also extends the talent gap between the two leagues. The perception around MLB is that the AL is the better league, as the AL teams must field on average a slightly more expensive, more veteran-oriented roster to fulfill the AL's more demanding requirements.

However, when one is examining ODP by division, a couple of things are made clear. Here's how the average player salary breaks down from highest to lowest:

AL East: $3,852,904
NL Central: $3,397,057
AL Central: $3,154,315
NL East: $3,132,243
AL West: $3,040,435
NL West: $2,792,455

As you can see, the AL East is the division that really causes the AL average salary to be so high--even with the presence of the spendthrift Rays. The AL East is a considerably higher spender on average than the second highest NL Central division--whose high mean is due in large part to the Cubs' $134.8 million payroll--spending $455,857 more per player than any other division in baseball. That is a salary discrepancy that is wide enough to open up the aforementioned $249,605 gap between leagues. In actuality, the other two AL divisions are near to or below the NL average in average player salary.

The other factor that really drags down the NL average is the fact that the NL West, which was already the division with the lowest average payroll in 2008, dropped its average salary severely, taking it $247,980 below any other division. This decrease is largely due to the payroll cuts of the Padres from their ownership turmoil combined with a horrible 2008 campaign (a 40.64%, or about $30 million reduction) and the Dodgers' payroll drop of 15.29%, or about an $18 million reduction. This $48 million pay reduction was only somewhat offset by the raises in payroll by the Giants ($5.7 million), Rockies ($6.6 million), and Diamondbacks ($7.3 million). As a result, what is often considered to be baseball's weakest division is also its lowest spending by a large margin.

In addition to the Padres in the NL West and the Rays in the AL East, the rock bottom average salaries of the Marlins, Nationals, Athletics, and Pirates considerably lower the averages of the NL East (counteracting the top ten payrolls of the Mets and Phillies), AL West (Angels and Mariners), and NL Central (Cubs and Astros) respectively.

Looking the data from team by team perspective (it is handily broken out by team and player by Brown, the Yankees, who at $201,449,289 have by far baseball's highest ODP, are also the team with the largest average salary at $7,748,050. Teams right behind the Evil Empire in average player salary are the Cubs ($5,402,000), Mets ($4,849,071), Phillies ($4,185,335), Tigers ($4,110,184), and Red Sox ($4,089,867).

Meanwhile, with the exception of the Athletics (whose DL contracts--Justin Duchscherer in particular--brought them slightly above the Rays) the bottom five teams in average salary are also the bottom five in ODP (no surprise there): the Marlins ($1,314,786), Padres ($1,528,454), Pirates ($1,874,731), Nationals ($2,045,793), and Rays ($2,183,208).

Within the NL West, the overall ODPs were also indicative of per player expenditure. The Dodgers were the high mark at $4,018,324 per player, followed by the Giants ($3,043,017), Rockies ($2,785,222), Diamondbacks ($2,724,877), with the Padres bringing up the rear with the aforementioned $1,528,424 per player. Don't worry Rowbots, though in the last two articles I have by and large glossed over the Rockies (as most national media outlets do), next week I will go in depth specifically on the Rockies' roster--both Opening Day and current.

Sources and Additional Reading

Not only highly recommended, but also now required if you want a passing grade on the final exam...and yes, there will be one on both the MLB Transactions and the Dollars and Sense modules. You do want a PR Academy diploma, don't you?

USA Today Salary Database, USA Today

Individual Player Salary Analysis, the incomparable Maury Brown

Baseball Payrolls Drop, Ronald Blum (AP)

Team ODPs by Player, Maury Brown (pdf)

MLB Average Salary Chart, Baseball Almanac

Post-Arbitration Salary Analysis, Bob Warja (Bleacher Report)