Arbitration In Baseball is Broken
Arbitration is a word that gets thrown around a lot in baseball. Every off-season you hear about some of your favorite players “going to arbitration” with their respective teams. But have you ever really thought about what that means? As far as I know, its a way for owners to disparage their players in closed door meetings without any repercussions for the purpose of paying them less. Oops. Not only was I wrong, but reader of NQTC and a personal friend of mine Jeff, along with one of my law school professors, have written a piece that was published in the Harvard Journal of Sports & Entertainment Law recently showing exactly what arbitration is and why its terrible in its current incarnation. Here’s a small excerpt from the introduction to whet your appetite:
When the 2008 Major League Baseball (“MLB”) season ended, New York Yankees star outfielder Bobby Abreu became a free agent.1 Although Abreu was an established star able to negotiate with all of the baseball clubs in MLB, his salary did not go up; it went down dramatically, symbolizing the full circle that baseball economics had traveled since free agency began in 1976. How could this have happened?
Over the course of the 2008 season, Abreu’s cumulative batting average was .296, and he totaled twenty home runs, one hundred runs scored, and one hundred runs batted in.2 That season marked his sixth consecutive year with at least one hundred runs batted in.3 The Yankees paid Abreu $16 million in 2008, and at the close of the season he was seeking a new three-year contract for $48 million.4 It seemed all but certain that the Yankees would offer him salary arbitration.5 Yet, in mid-February 2009, Abreu signed a one-year deal with the Anaheim Angels for $5 million, a 68.8% reduction from his 2008 salary.6 The Yankees’ replacement for Abreu had batted .219 with only twenty-four home runs and sixty-nine runs batted in for the 2008 season.
Salary negotiations in 2008 with another star outfielder, Adam Dunn, ended with similar results.8 Dunn, who had just tallied five consecutive seasons with forty home runs for the Arizona Diamondbacks,9 signed a new deal at a 38.5% salary reduction with the Washington Nationals.10 Meanwhile the Diamondbacks’ replacement for Dunn only hit twelve home runs with seventy-five runs batted in for the 2008 season.11 Both Dunn and Abreu were forced to explore the free-agent market for one simple reason: they were not offered salary arbitration by their former teams. In each situation, both the player and his former team were left in a far worse position—the player with less money and the team with an inferior athlete. A closer examination into the salary arbitration process reveals numerous flaws that likely contributed to the Yankees’ and the Diamondbacks’ decisions not to offer salary arbitration to Abreu and Dunn.