Rising Baseball Salaries Don’t Show Us ‘Everything Wrong With America’s Financial System’

The Detroit Tigers in March signed All-Star pitcher Justin Verlander to a contract that will pay him about $180 million over the next seven years, a record sum for a Major League pitcher and an amount that has Slate’s Edward McClelland rethinking his love of both his favorite team and the game itself. Verlander’s salary, and the rising salaries of other players, McClelland writes, “reveals everything that’s wrong with the American financial system.”

It doesn’t take long for McClelland to go off the rails, though, since his main thesis is quite misguided:

Over the past 40 years—the period of rising economic inequality that former Slate columnist Timothy Noah called “The Great Divergence”—Americans’ incomes have not grown at all, in real dollars. But baseball players’ incomes have increased twentyfold in real dollars: the average major-league salary in 2012 was $3,213,479. The income gap between ballplayers and their fans closely resembles the rising gap between CEOs and their employees, which grew during the same period from roughly 25-to-1 to 380-to-1.

Attempting to compare baseball players to CEOs gets wrong the dynamics of baseball’s labor market. Players aren’t CEOs — they don’t control the purse strings or the contracts or the benefits or the labor situation. They are the workers, the people on whose backs the company’s profits are built. There might be some argument in which comparing the growth in player salaries to the lack of growth in wages for the average worker is relevant, but it isn’t this one, because workers and players are ultimately on the same side of the equation.

Given that the most fundamental piece of McClelland’s argument is based on a fallacious comparison, it’s little surprise that he totally bungles the next point he tries to make:

I’m singling out professional athletes for my class envy because they’re the highest-profile beneficiaries of changes that have enriched those at the top of the economic order while impoverishing those at the bottom. The labor policies of the mid-20th century depressed the price of skilled labor while inflating the price of unskilled labor. Athletes’ bargaining power was constrained by the reserve clause, which tied a player’s rights to a single team for his entire career. At the other end of the labor market, unions represented 35 percent of private-sector workers and had their own political arm in the Democratic Party.

The deregulation of the American economy that began in the 1970s has increased the salaries of professional athletes enormously while reducing those of blue-collar workers. In 1975, pitchers Andy Messersmith of the Los Angeles Dodgers and Dave McNally of the Montreal Expos appealed to arbitrator Peter Seitz to strike down baseball’s reserve clause and allow them to sell their services to the highest bidder. The Seitz decision, which was upheld by the 8th U.S. Circuit Court of Appeals, began the era of free agency in professional sports. After increasing arithmetically for the first three-quarters of the century, salaries rose geometrically during the past 25 years of the 1900s and have continued to balloon in the 2000s.

Because the reserve clause was eliminated at the insistence of the Major League Baseball Players Association, the Seitz decision is considered a victory for organized labor. It wasn’t. It was a victory for the laissez-faire marketplace.

The Seitz decision is considered a victory for organized labor because it was a victory for organized labor. The reserve clause existed solely for the protection of ownership — baseball’s corporate class. It restricted player movement and suppressed salaries, since players couldn’t receive more than a set raise from their teams and couldn’t offer their services to other teams who might pay them more. It restricted worker rights and labor movement and kept the share of money players received artificially low, and the only reason it lasted as long as it did was because the federal government granted Major League Baseball an antitrust exemption that was upheld by the Supreme Court in 1972.

The Seitz decision, though, gave baseball’s players — its working class — the right to negotiate fair salaries and the ability to gain a fairer share of the revenues and profits they helped create. Abolishing the clause gave the players a voice in the system and allowed them to share in the riches as baseball blossomed into a major business over the ensuing decades. It ushered in an era of unprecedented rights for ballplayers, something McClelland would seem to enjoy, given his concern for stagnant wages and declining unionzation rates for average workers even as the CEO class continues to prosper. Arguing that the reserve clause was a good thing that might need to make a comeback isn’t just the ultimate #slatepitch, it also undermines everything McClelland seems to be in favor of in the labor-business dynamic.

McClelland holds the belief, one with which I agree, that it is problematic that the wages of average workers have stagnated even as executive compensation has risen dramatically, and that the decline in unionization has played a major role in the struggles of the American worker over the last several decades. But baseball’s labor fights, and those in other sports, are similar in dynamic to labor fights at Caterpillar or ConEd or any other business, and rising baseball salaries (which, I might add, aren’t rising as a share of total revenues) are much closer to the ideal than the problem. A strong union has ensured that players are sharing in the prosperity they help create. The problem is that other workers haven’t been able to do the same.