The Current State Of Major League Baseball In The Absence Of A Salary Cap: Or Should There Be One?
I originally approached this topic, presented in September, with the mindset that Major League Baseball was in dire need of a salary cap to enhance the competitive balance of the game, and more so, the fan’s enjoyment, which I believe is the end product of any professional sporting event. However, after analyzing numerous articles, websites, and journals, I feel that my opinion was uninformed and subject to the hearsay of baseball fans. With this paper, I intend to present arguments that the average fan makes in favor of a salary cap, and refute those arguments with data or opinions provided by experts on the topic of baseball or the economics of sport. Also, I will discuss what baseball is doing in attempt to correct the perceived economic imbalance. Finally, I will make my assertions as to what baseball should do, if anything at all.
But first we must establish what a salary cap is, what it does, and why baseball does not have one in place currently. A salary cap is a labor-cost cap, imposed not on individual players, but on the team as a whole, and would therefore be more appropriately titled a “payroll cap”. In effect, a salary cap limits the amount of money that a given team can spend on labor, or players. Also, as a salary cap transfers money from players to management, it is an agreement among competitors to inhibit the labor market, thus lowering salaries. As economists like to point out, if you want less of something, you should put a “tax” on it – and player salaries and are no exception.1
Baseball’s member owners have tried to implement a salary cap many times, most prominently after the expiration of the Collective Bargaining Agreement (CBA) in 1993, which is the agreement between Owners and the MLB Players Association on revenue splits, contracts, and other economic issues. The disagreements over the salary cap, and some other less tantamount issues, led to a decision by the Players to strike for 232 days, the...
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