Some players gained more than others, which raises the question: How do the arbitrators' decisions fit in with market values?
Because of the difficulty in comparing across positions, we will look to win shares for a baseline:
*"Winners" and "Losers" indicates whether the
player won or lost their arbitration claim*
Howard is the clear-cut champion here, receiving a massive bump up from last year's $900,000 to $10 million, the highest amount ever awarded to a first-time eligible player. What exactly is Philly getting for their $10m? In 2007, Howard hit .268/.392/.584 with 47 bombs and 136 RBI and is just one year removed from swatting his way to the MLB home run title in 2006. It's hard to deny his tremendous value to this team, despite flirting with 200 strikeouts every season, especially considering he hit to a clip of .260/.413/.630(!) in September, when Philly made their exciting push to the playoffs.
Yet Howard's 26 win shares seem a bargain compared to K-Rod's 12 WS for the same salary. Granted, K-Rod is clearly one of the most consistent closers in baseball, with an 89.8% save percentage since 2005, slightly edging Trevor Hoffman (89.7%) and Billy Wagner (89.6%) over that same time span. Only Mariano Rivera has a higher closing rate, with 90.7%. Nevertheless, is a closer worth the same price as a superstar slugger? The Angels are paying more than twice as much per win share for their All-Star closer, which is another symptom of big-money clubs drastically overpaying for closers.
Jose Valverde was even more dominant in '07, notching the same amount of win shares, an MLB-leading 47 saves, and a 2.66 ERA, yet his market value is less than half of K-Rod's. Houston is getting great value for their new closer, who dominated hitters in Arizona with a BAA of .196, plus the club will no longer have to worry about Brad Lidge's visions of a towering Pujols homer that has yet to land. Compare his $4.7m salary to the ridiculous $11.5m paid by Cincinnati for Francisco Cordero (79.8% save pct.) and it's easy to see Valverde is a bargain.
Another area we see some disparity is in starting pitching. Chien-Ming Wang, the Yankees' most consistent starter, gets a huge bump up from his $489,500 in 2007 to $4m, bringing his value to $250K per win share. Not too shabby for an opening day starter with about 200 innings and 19 wins in each of his last two seasons. Shouldn't the Yankees really be paying this guy, considering he's been the only reliable part of their shaky rotation?
Perez, on the other hand, was awarded $6.5m, despite having just one good year since 2004. It's curious that a starter with a 5.02 ERA and a losing record over the past three years gets awarded $2.5m more than Wang, who is better in just about every statistic. The discrepancy can only be explained by MLB service, as Perez has been in the league for three more years. Nevertheless, we can expect to see a big payday for Wang once he reaches free agency.
All in all, the arbitrators' decisions are fairly consistent with clubs' spending tendencies in the market, namely, overpaying closers and sporadic valuation for starters. It begs the question of what factors and statistics the arbitrators consider relevant, especially with the proliferation of sabermetrics in regard to the economic aspects of the game. Value is somewhat easier to define for some players, but agents will need to find new methods of doing so if they want to take down the owners in the future.
7 comments:
Hey guys. Came over from DRB to see what you were doing. Have to reset Google account so went anon for now. Good luck with your blog!
Matt, perhaps the issue with differential pay here is the result of how the arbitrators slot players for analysis, and the different data sets they use based on where you are in the process. It's not nearly so simple as comparing across all players in a positional catagory or even less comparing across positions. And I don't think "win shares" are likely used at all. Win shares were designed as a statistical construct to compare players across positions, which isn't the approach in arbitration, so wouldn't be used. That win shares are actually arbitrarily multiplied by 3 to enhance player differentiation reduces its real world usefulness in the critical issue of salary. While market forces play a role, the process is far from a free market system.
Second, the fact is that perhaps the key variable in the arb process is where one is in it - 1st, 2nd, or 3rd year. That explains the bulk of variations you're discussing here, for example the variation between K-Rod (year 3) and Valverde (year 2) - plus the fact that the former is a 6-year closer, the latter just became a fulltime one. Same "what year" issue with Wang (year 1), and Perez (year 3). Given the "seniority", Wang's actually doing much better than Perez. I was actually surprised Howard won his hearing - that was a huge award for a 1st year arb player. As an example, Morneau (also a 1B) was awarded less than half that after his MVP year.
The fact is arbitration isn't by any means a pure market instrument - players salaries can't be reduced more than 20% and the arbitor has to choose one of the 2 salary numbers. It's a pretty cumbersome process that I think the owners have come to hate. If you look at the numbers, its become the area where more large year to year salary increases are gotten. And it has shifted teams contract approach so that most of the long term deals are now done with players entering or early in their arb years in the hopes of trading security for income maxization and gaining more cost certainty.
Free agency by comparison has become an income death zone for all but a few of the players. Of course that also has to do with the fact that its a completely free market - perhaps the best example in capitalism of a free labor market, since so much info is available to all parties. Clearly a good topic for an economics thesis if anyone cares to take it on - it likely already has been treated in a few ways.
Anon DRB Fella,
Thanks for being our first poster! You bring up some very good points about the arbitration process, particularly the importance of MLB service.
What I was trying to offer here was a bit more rudimentary comparison of this year's arbitration class to similar player values in free agency (as I referred to as the market).
Win shares was the stat that I thought best if we were to choose just one, because it is simple, intuitive and can be applied across positions. I felt it was appropriate for this basic overview approach.
Granted, arbitration is certainly no free market, as you bring up, but I was simply trying to remove the restrictions (as I'm sure the players would appreciate in real life) for a brief comparison.
Thanks for posting and offering a different perspective on the matter. Hope to read your comments again in the future (with a name!).
Service time is key.
I believe in the last year of arbitration you are actually allowed to compare yourself to free agents, so salaries can really get up there.
Of course win shares are great, but when they do an arb hearing they stick to the basics. I heard they were actually comparing Howard to Babe Ruth and Lou Gehrig!
Normally the comps are current players of course.
Chuck
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