The Marvin Miller Model That Made so Many Ballplayers Rich is in Trouble

The surface looks fairly solid for baseball’s labor side.

Manny Machado and Bryce Harper are expected to sign record-breaking contracts in the hundreds of millions.

The Philadelphia Phillies entered the offseason talking about how they were willing to “spend stupid money.”

Even players no longer at the top of their games can rake in some nice coin. Pitcher Matt Harvey, whose career has taken a nose dive over the past three seasons, signed with the Los Angeles Angels for $11 million. Factoring for inflation, that is close to three times as much as the highest-paid pitcher (Roger Clemens) made in 1989 after signing a record-breaking contract.

The Major League Baseball Players Association recently extended the contract of Executive Director Tony Clark.

Look closer. Underneath there are cracks.

The model put into place in the 1970s, guided largely by former union chief Marvin Miller, is showing signs of crumbling.

Since 1978, MLB has had a three-tiered system for contracts that by-and-large kept players happy and made many of them wealthy:

  • Minimum salaries for players with 0-2 years’ experience
  • Arbitration after years 3-5 (and for certain players after two years)
  • A largely open market for players with more experience

The system tends to underpay younger players in their most productive seasons. But a player with star power has been able make it up on the back end.

Under Marvin Miller, the MLBPA revolutionized how baseball players were compensated for their work. But in 2018 and beyond, the system Miller institutionalized back in the 1970s is crumbling.Click To Tweet

Players at the top of the compensation hill set the market for the rest of the players.

But something has changed. Teams are reluctant to give players in their 30s expensive, long-term deals, and it is going to upset the game’s pay structure.

Disturbing trends for players

On December 21, the Major League Baseball Players Association announced that the average salary for a player in 2018 was $4,095,686, down a little more than $1,400 from the previous season. Major League Baseball’s figures show a slight increase, 0.77 percent, from 2017 but a lower average salary $4,007,985. The two sides figure the compensation differently.

By the union’s figures, this is just the fourth time salaries have decreased since 1967. One time was in 1987 (then only $66), when the owners were later found to have colluded to keep free-agent salaries down. The other times were 1995 after the strike that canceled the 1994 World Series and in 2004.

But the problem for the union isn’t just last season. Average salaries have gone up only 3.5 percent since 2015.

Compensation for 2018 was held down by a glacial market for free agents last offseason.

The most attractive player on the free agent market last offseason was J.D. Martinez. He was going into his age 30 season and coming off a year in which he hit 45 home runs with 104 RBIs, batted .303, slugged .690, and had an OPS of 1.066 for the Detroit Tigers and Arizona Diamondbacks. His agent, Scott Boras, was talking about a contract in the $200 million range. Sure, agents always start out on the high side, but Boras and Martinez never sniffed anything like that. Martinez eventually signed with the Red Sox for $110 million over five years.

The deal wasn’t finalized until February 26, nearly two weeks after pitchers and catchers reported to spring training. In fact, half of the 140 free-agent deals in 2018 were made after the first reporting date for spring training.

Players and their agents were dismayed at how the market had changed.

Justin Upton, who had re-signed with the Los Angeles Angels and opted out of free agency, told The Athletic: “The way I look at it is, you’re going into free agency and instead of teams telling you, ‘We love what you do. We want you to be part of our team. Can we work something out?’ I know from experience: Teams are calling and telling you what you don’t do well and why they don’t want you. ‘But, hey, will you sign for this?’ No! We just had a conversation about how bad I am and you want me on your team? No! I don’t want to sign with you. That’s the way the process is going right now, which is the opposite of what free agency’s supposed to be about.”

Brodie Van Wagenen, then co-head of the agency CAA Baseball, threw out the idea of players boycotting spring training. Since he’s now the New York Mets general manager, my guess is his views on the matter may have changed.

The union set up a camp in Florida for unsigned free agents to begin their spring workouts. Players and commentators charged that owners had agreed among themselves to keep salaries down.

Expect to hear charges of collusion again, if not this offseason, then next season. The owners have colluded in the past. What other conclusion besides collusion could there be?

Well, it’s not collusion that no one wants to buy a standard-definition TV set. (You can’t give them away. Literally. Charities won’t accept them as donations anymore.)

So is this a nefarious plot of tight-fisted owners trying to cheat stars out of the contracts they deserve? Or is it simply a case that older players have become standard-definition TVs in a high-definition TV world?

A young man’s game

The market seems strong for Machado and Harper, who are entering the free-agent fray at the beginning of their primes.

Youth is king in the era of analytics. It is like the old line about how the race is not always to the swiftest nor the battle to the strongest, but it is best to bet that way.

In the room where I am writing, there is a cardboard box full of issues of The Sporting News from 1970 to 1973. And I bet if you went through them all, there would be a dozen or so mentions that an athlete’s prime — particularly a major-league baseball player’s prime — is around age 27.

Everyone who followed sports closely has known this for decades. What has taken a while to figure out is just how quickly players decline after 27.

Not everyone declines at the same rate. Willie Mays had an incredible season at age 40. Ted Williams hit a .388 as a 38-year-old. Yes, Lou Brock stole a career-high 118 bases at age 35. Nolan Ryan went 12-6 with a 2.91 ERA with a league-leading WHIP of 1.006 at age 44. Adrian Beltre compiled more WAR from age 31 to 39 than from age 19 to 30.

We tend to focus on those players who kept Father Time at bay longer than most because they are exceptional.

And we root for players we loved when they were younger to do well in their athletic dotage. I think we tend to give more weight to their accomplishments, and we are overly optimistic that they can somehow be one of those exceptions.

But numbers don’t lie. Except they did — at least for a while when it came to aging.

The Moneyball revolution came about in the early 2000s. People besides Bill James, some nerdy fans, and a few obsessive, ultra-competitive fantasy players started looking more closely at empirical evidence to measure performance. But in that particular era a lot guys were aging surprisingly well — which we now believe was because of PEDs.

Today the front offices are wise to the rapid decline of most players.  The fan bases know it, too. And the front offices know the fans know. Which further discourages throwing big bucks at an aging player.

Remember how excited Angels fans were about the Albert Pujols signing in 2011. Do you think signing a player today who was heading into his age 32 season for 10 seasons at huge money would elicit more squeals of joy or gasps of horror?

As more teams are in tear-down mode hoping to rise again at some unspecified date, the desperation for a quick fix is lessened. That means a veteran corner outfielder with moderate pop, a low batting average and proclivity for strikeouts who once might have three or four teams looking at him, now has one. At most.

So under the current system you are unlikely to see the increases in salaries players have come to expect. From 1978 to 2015, the average player salary increased from $99,876 to $3.95 million.

Curt Flood, Marvin Miller…  and NBA star Rick Barry?

To appreciate what Miller created, you need to understand the system the existed for almost a century.

In 1879, National League club owners came up with what was called “the reserve clause” that allowed them to renew a player’s contract if the team desired. Player salaries fell.

The first players union, the Brotherhood of Professional Baseball Players, created its own league in 1890, largely to end the reserve clause. The Players’ League lasted just one season.

Despite challenges to the reserve clause on antitrust grounds that reached the U.S. Supreme Court in 1920s and 1950s, the reserve clause lasted until the 1970s.

Many people think a courageous outfielder named Curt Flood got the reserve clause overturned by taking baseball to court in the early 1970s. Truth is while Flood was courageous and did take MLB all the way to the United States Supreme Court, he lost. The guys who had more to do with ending the reserve clause were Miller, pitchers Andy Messersmith, Dave McNally and, oddly enough, pro basketball star Rick Barry.

You know how in comic books there is a super villain, or a monster, or some malevolent force that seems indestructible, but it turns out to have one weakness that is its undoing? Well, that was the case with the reserve clause.

It had been interpreted that a club could keep renewing the contract with the player year after year. But that is not the way contract law works. The reserve clause really was an option to renew for one year.

In 1967, Rick Barry wanted to jump from the San Francisco Warriors of the NBA to Oakland Oaks of the ABA. He went to federal court and exploited that weakness, or rather, his legal team did. They argued that the Warriors could renew the contract and retain the exclusive rights to his services as a pro basketball player for one season. Then the contract was over. The court agreed. After sitting out a season, Barry went to the rival league.

In 1970, Miller, a former economist for the United Steelworkers of America who become director of the Major League Baseball Players Association in 1966, got the baseball owners to agree to arbitration for grievances.

That was the wedge. Now if a player would just go a season without a contract, the union could argue the differing interpretations of the reserve clause constituted a grievance. The union could then take the matter to arbitration and destroy the reserve clause.

“I felt confident the arbitrator would overturn it,’’ Miller told me in a 2002 interview. “The language was the same as the NBA contract. The NBA had taken it from the standard baseball contract.”

Before the union got to that point, Flood sued MLB (technically Commissioner Bowie Kuhn).

“We were supportive of his case,’’ Miller said. “But I felt we had a better chance through arbitration.”

The Supreme Court ruled against Flood in June 1972. It took three more years to get an active player and an inactive — though technically not retired — player to go through a season without a contract.

In 1975, Messersmith refused to sign with the Los Angeles Dodgers without a hefty raise following a 20-6 season. The club renewed his contract. McNally, who had a brilliant career with the Baltimore Orioles, hung it up after 12 appearances with the Montreal Expos in 1975. He played in 1975 without signing a contract that season, and after he decided to call it quits, the Expos kept him on the reserve list.

McNally was more-or-less insurance in case the Dodgers managed to throw enough money at Messersmith to get him to agree to a deal.

The two players and the union took their grievance to arbitration.

Peter Steitz, the arbitrator, saw the contract language as Miller did and as the federal court had in the Barry case. Steitz was uncomfortable with a ruling that would destroy baseball’s long-standing system. He wrote in his biography that he tried to get the owners to settle.

Hey, they had been winning for the past 96 years. They saw no need to compromise. On December 23, 1975, Steitz ruled for Messersmith (Steitz also ruled for McNally on December 31), essentially ending the reserve clause. The owners tried to get the decision overturned in the courts but failed.

The only immediate beneficiary was Messersmith, who, after the owners locked out the players for a couple weeks in spring training, signed a three-year contract for $1 million.

Free agency and arbitration

So now the question was what would come next.

Charlie Finley, the maverick owner of the Oakland Athletics, thought the owners should allow every player to play out their option and become a free agent. If everyone was available, it could become a buyers’ market. Miller, like Finley, thought that would work in the owners’ favor.

“You want to limit the supply,” Miller said.

The other owners thought Finley was a nut and wanted to make players eligible for free agency after nine seasons. The union rejected that and eventually agreed to a system in which players with six years’ service could become free agents and negotiate with up to 12 teams, who would conduct a draft. The draft was done away with after a few years.

The other tool for leverage the players gained under Miller’s efforts was salary arbitration.

The owners first proposed salary arbitration in 1973 following the Flood case, which had been too much of a close call for the owners. It was better than free agency was their thinking.

Miller happily agreed to a salary arbitration system in which the panel must choose between the player’s proposed salary and the team’s figure. There is no compromise in the result of the hearing. This was designed to force the sides to negotiate and settle without a hearing.

After the first two years, in 1974 and 1975, that arbitration was used, management knew it made a mistake. The owners attempted to get rid of salary arbitration in the ensuing years.

Richard Justice described the owners’ point of view on salary arbitration in The Washington Post in 1990 as “Arbitration is not divided into winners and losers, only big winners and bigger winners.”

Ownership has prevailed in most arbitration decisions over the years. But the players use the possibility of winning a hearing as leverage in negotiations. Teams have also expressed concern that the negatives they must use in the hearing get back to the player and damage the relationship with the club.

There is a compounding factor. Other teams’ bad decisions help establish the scale for your players. If Team A overpays a second baseman who underperforms, a second baseman for Team B can use that as evidence he deserves similar or better compensation than Team A’s sad second sacker.

Salary arbitration was suspended in 1976 and 1977, but from 1978 on MLB has had pretty much the same system. A few wrinkles have been added over the years: compensation picks for teams who lose free agents, revenue sharing among teams and the luxury tax for teams who spend over a certain amount on salary.

There were eight strikes or lockouts in MLB from 1972 to 1995. It looked there would be another in 2002, but both sides saw there were hurting the sport — and themselves.

What’s ahead

Since then we’ve had labor peace.

The Machado and Harper signings may mask the problem for the union. But not for long. It is rare that a player will have six seasons’ experience by age 26 or 27.

My guess is the union is like any highly successful entity when faced with change that disrupts the marketplace in which it operates. It will deny reality and try to preserve the system as best it can. Hey, I am in the newspaper business. I have painful, personal experience in how this works.

So the union will focus on the luxury tax, which penalizes free-spending teams and acts as a de facto salary cap.

That has suppressed salaries somewhat, and the owners will probably fight to keep it. That’s likely where the negotiations will center in the next Collective Bargaining Agreement.

The real challenge in the long term will be for the union — and the clubs if they’re smart — to find a system that compensates players fairly during their most productive seasons. What that looks like exactly, I am not sure.

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