Salary Cap: Baseball

Sports is business — big business. However, as stratospheric as the revenue may be that is generated by all of the major league sports in America, this is truer for baseball than any other team sport. In baseball, players have tremendous personal leveraging power in negotiating their salaries. The other major spectator sports in the U.S. — hockey, football, basketball — have salary caps for their players. Baseball alone does not. The consequences of this are obvious — with grinding predictability, the major franchises that can afford to buy the top players dominate the game. The idea of a baseball team ‘underdog’ winning the World Series — the baseball equivalent of the NY Giants’ victory over the undefeated New England Patriots in Superbowl 2007 — seems ludicrous. “As economists like to point out, if you want less of something, you should put a tax on it — and player salaries are no exception. Reduce the ability of the richest teams to bid up the price of players and salaries are sure to fall” (deMause 2006).

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Reducing player’s salaries would have a number of positive effects on the game. Increased competition between teams would widen the fan base. Already, baseball has lost many fans in recent years to basketball and football, and the trend will continue if there is little suspense, year after year, as to what teams will make it to the playoffs. A lack of competition makes for uninteresting play and drains the game of the type of heart-stopping suspense characteristic of the NCAA playoffs, for example. At present, “perhaps 12 of 30 Major League teams have any possibility of reaching postseason play, and fewer still have a realistic hope of winning a pennant” (deMause 2006).

Recent revelations of scandals involving steroids have hurt the game’s credibility, and created an impression that its top players are merely money-hungry, rather than interested in playing for the fans, much less becoming role models. A cap might also reduce the financial ‘win at all costs’ mentality that continues to dominate the game, even in the post-steroids era. When so much money is at stake, players are willing to do anything, including risk their future health, simply to improve their swinging, throwing, and shorten their recovery time from injuries.

Finally, salary caps would bring back baseball to being a true ‘team sport.’ Baseball’s early appeal was its sense of ethics and ‘one for all, all for one.’ The public is growing resentful of a sport charging higher ticket prices and paying players higher salaries, even while so many people are still suffering economically. Eventually, if salaries don’t go down, people will stop patronizing the parks of even the famous franchises.

This leads to the question of how the salary cap would be enforced. Most concede that there is no perfectly fair way to allocate revenue, and there are injustices that will be done, regardless of whether a cap is enforced or not — highly talented players will be hampered in cashing in on their skills by the cap, despite the fact that they have an extremely short career and no job security. “There’s probably only one perfect system for compensation in sports, and it’s in individual sports like golf and tennis. You finish first, you make the most” (Kendrick 2008). But ultimately, the small injustices that might be perpetrated on individual players should not be used to outweigh the good that can be done for the sport. Ultimately, baseball, unlike tennis and golf, is a team sport, and the good of the team and creating a competitive league should outweigh the interests of a few individuals.

“Perhaps no two words in baseball generate as much controversy and emotion as ‘salary cap'” (deMause 2006). The proposed salary cap, as it would function in baseball is as follows:

Every team would have a limited amount of money it could spend on player salaries. “Once teams have reached the magic payroll number, they are forbidden to spend more. This reduces salaries in two ways: Teams over the cap are taken out of the bidding for free agents (or for pricey trade targets), giving available players fewer options and reducing bidding pressure, and teams just below the cap will resist blowing their budget on a single player” (deMause 2006). In other words with a salary cap, there will be no more ‘Yankees-style’ domination of the teams, no more A-Rod-sized paychecks.

The NFL, in contrast to MLB, is allowed “to spend a certain percentage of the league’s total revenue, which is shared equally among all the teams. Every team is allowed the same percentage to spend on players, which provides a level playing field financially. There are no exceptions to a hard cap so no team can spend more than the cap” (Levy 2006:4). This cap was instated to ensure a level playing field for all of the players. The NBA likewise has a salary cap, although it is less rigid than the NFL’s, as teams can re-sign players without observing the cap placed upon salaries (Levy 2006:4).

Baseball has flirted with the concept of salary caps before. For example, since 2003, baseball has imposed a so-called ‘luxury tax’ on teams that pay players over a certain level: “Teams can bust their league-appointed budget, but at the cost of being taxed — ‘fined’ might be a better word — for the excess amount” but the threshold is so high the powerful baseball player’s union did not even go on strike to protest its instatement in 2002 (deMause 2006). Teams that the tax might apply to are so wealthy, its provisions mean very little.

Despite the luxury tax, “the Yankees have roughly 10 times the amount of revenue going to players than the Florida Marlins” (Kendrick 2008). The Yankees five highest paid players make more than the entire Florida Marlin’s 25-man roster. If the Yankee’s top five players “were the only players on the team, the Yankees would still have the fifth highest salary among the 30 teams in major league baseball” (Levy 2006). The star magnetism of the Yankee roster has enabled them to dominate the game, even during some of their weaker seasons, and prevented smaller teams with some emerging talent from shining.

Without a salary cap, restoring any level of equity between the teams is virtually impossible, particularly given the market of media economics. Teams like the Yankees, the Chicago Cubs, and the Red Sox usually have cable TV deals and/or can draw substantial advertising revenue because of the large market base they command — in contrast, teams from smaller media markets struggle. Without a salary cap, there is no way that smaller teams can overcome the hurdle of not having a built-in media venue and existing fan base to promote their product.

Baseball is ultimately a team sport, but because of the focus on high-paid stars, it has become ‘about’ the players, rather than rooting for particular teams. Some of the most interesting up-and-coming teams have originated in relatively small markets such as the Oakland As and Minnesota Twins. These teams have a balanced roster, and spend the money they have wisely. Encouraging such behavior should be the aim of MLB, not simply cultivating star power (Levy 2006: 8). “When you have rich and poor teams, the rich teams would always beat the poor ones — will become more of a real problem the more efficient the market becomes. The Oakland A’s — and other poor teams — can compete with a small payroll because they can find ways to make that money go further. But once they lose their intellectual advantage, they are doomed” (Lewis 2005). Although the Oakland As made a strong showing in some years so in the presence of salary caps, this is the exception, not the rule. With salary caps, strong, balanced teams that work together as teams, not merely as constellations of highly-paid individualistic stars would become the norm.

Salary caps have their greatest influence in terms of how teams “acquire and retain athletes. The salary caps allow teams with less talent to have the opportunity to entice players away from better teams because all teams (theoretically) have the same amount of money to work with. Instead of having some teams with deep pockets and some teams with little to spend on talent, all teams should have the same buying power and ability to build a strong franchise” (How salary caps changed sports, 2011, Investopedia).

One of the main arguments against the salary cap provision is that it is very easy to circumvent with sign-in bonuses, which are common in the NFL, and through specified loopholes (such as the allowance in the NBA for higher salaries to a player who is resigned). But although it is true that the spirit and the letter of the law of salary caps can be circumvented in all sports, the growth of salaries in the MLB is unlikely to continue at its current levels, with salary caps. A team will be reluctant to give a large sign-in bonus, even to a very strong player, given it is uncertain of how he will perform. Many top recruits did not flourish and become great players.

The player’s union has opposed salary caps vigorously, but even players might benefit. Yes, they might not make A-Rod salaries. But there would be less pressure from fans and owners to perform at an unrealistic level. Baseball is attempting to transition into a kinder, gentler era, with less emphasis on using drugs to perform at a high level. Instating a salary cap would be excellent PR for the sport, and improving the image of baseball and its players would be good for the game and good for the teams. And ultimately, elevating the image and level of play of teams, rather than the fortunes of a few ‘star’ players, is the true spirit of the game.


deMause, Neil. (2006). Baseball between the numbers: Why everything you know about the game is wrong. Excerpt available at ESNP July 23, 2011 at

How salary caps changed sports. (2010). Investopedia. Retrieved July 23, 2011 at

Kendrick, Scott. (2009). Salary cap in baseball? Keep dreaming.

Retrieved July 23, 2011 at

Levy, Ryan. (2005). Dispute: A salary cap in Major League Baseball. COSC 627-Ellis.

Lewis, Michael. (2005). 10 questions. The New York Times. Retrieved July 23, 2011 at