Baseball Salaries (continued)
In this age of free agency, players can offer their services to any team willing to make an offer. Competitive bidding between teams has driven a rise in baseball salaries, to the point that annual salaries of $20 million for baseball’s top superstars are possible. To the average Joe, this is scandalous, but to an economist, this is perfectly reasonable.
In the view of the economist, the salaries of top entertainers, including baseball players, are rational for two key reasons: these individuals are irreplaceable, and their services are uniquely responsible for generating millions upon millions of dollars in revenues for their companies. While an accountant, or a human resources manager, can be replaced at relatively little cost, there are precious few individuals who can perform at the top levels of professional sports. Then, there is the fact that it is the players on the field that induce huge throngs of people to come to the ballpark, and pay $40 each for a ticket, $10 each for parking, and another $40 each on a program, beer, hot dogs, and other concessions.
It isn’t like this for all players, however. Only a small percentage can earn this kind of living playing baseball. The minimum annual salary in Major League Baseball in 2008 is $390,000 – however, for players earning the minimum salary, it may be important to consider that this rate is pro-rated for time on the roster; if they don’t spend the entire season in the big leagues, they don’t get paid that total. As of 2004, the minimum salary for players in the minor leagues (lower levels of professional baseball in a hierarchy, with Major League Baseball at the top), ranged from $850 per month in low-A ball to $2150 for players in AAA (the highest level under MLB).
Here we can see that baseball salaries are driven by unique forces which don’t apply to the typical working person. While many resent the high pay that the top stars receive, many baseball players do take advantage of their position to help in their community, giving aid to disadvantaged children or other worthy causes. Some even operate their own charitable foundations, working in their home city to effect positive changes. Though it may not seem fair to you or I, Major League Baseball is generating record-breaking revenues, and it is the owners who (directly) pay the players that have determined that the high price tag is worth the cost.
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