Thursday, December 14, 2006

'Tis The Season To Give

Another off-season, another installment of Beantown Vs. The Evil Empire.  Ho hum.

Now, before you get the idea those two clubs play in a higher league let me remind you the Tigers and Athletics played each other in the ALCS.  As for the best teams money bought in 2006, the Red Sox failed to make the post-season and the Yankees made an early exit.  Only the networks, their spnsors and Tommy LaSorda were disappointed.  Everyone outside Route 128 and the Island of Manhattan openly rejoiced.

Still, when one looks at all the money being thrown around it’s not hard to understand how these two teams dominate the news and will once again be favored to make it to the post-season.  After all, how many clubs spend $51.5 million just to talk to a free agent?  The Red Sox may have scored a few points among their jealous rivals if  they indeed stared down Scott Boras in the Daisuke Matsuzaka negotiations and he blinked.   Poor Scott.  If reports are true he “settled” for a $52 million, six-year contract for his 26-year old client.  

Meanwhile, over in the poor old National League, which despite generally being considered the weaker of the two leagues managed to win the World Series last year, the Dodgers have reached deep into their pockets and made a number of acquisitions that will likely make them the favorites in the West.  Not to be outdone, by anyone in either league as it turns out, the Chicago Cubs lavished millions of dollars on several marquee players in an almost desperate attempt to break the endless cycle of futility that hangs over this storied franchise.  Unfortunately, none of the beneficiaries of their munificence can pitch, at least not without breaking down.

What has become evident in baseball among all the major sports is the spiraling out of control of salaries.  Go ahead, name the top salaries paid to NFL superstars like Peyton Manning or Tom Brady.  Of course, you haven’t got a clue; but you can name the “posting” fee for Matsuzaka.  Tell me, what are the Penguins paying Sidney Crosby?  A little louder, please.  Meanwhile, over at the NBA, no stranger to ridiculous salaries, the big names there, take your pick, are making how much?

Those who point out that baseball is enjoying record attendance and revenues and can afford these salaries forcibly remind me of the so-called securities experts who during the tech boom of the late ‘90’s and early turn of this century argued that earnings were not the true measure of a company’s worth or prospects.  

We all know how that turned out.


RickSchuBlues said...

I recall the off-season of 1989-90 when people were shocked, just shocked, as superstars like Kirby Puckett and Dave Stewart broke the $3 million per year barrier. Stars now are standardly topping $10 million, many $15 million.

Meanwhile, the federal minimum wage was $4.25 in 1991 and it's $5.15 now. Anyone see anything wrong with this picture?

George S said...

Baseball salaries are like they are for two classic economic reasons:

1) There is too much money chasing too few goods, and that always results in inflation.

2) Baseball is a protected monopoly, unlike the other major sports in America. When their sports became enormously profitable, these other leagues had to either expand (accepting new franchises) or face rival leagues in order to meet the market demand.
Baseball does not have to face that. When profits go way up, it can restrict any and all new participants from getting into the industry. No threat of competition.

The real danger to baseball is twofold. First, all of these insane salaries are guaranteed, meaning that any peak or downturn in revenue is going to kill a lot of these teams.
Secondly, there is a limit to how much of these costs can ultimately be passed onto consumers. When that limit is reached, they will spend their money elsewhere.

As for the minimum wage, it'll never really go up by much as long as we have a large pool of unskilled labor available. There's no need to raise it to attract people into the workforce. Want the MW (or wages in general) to go up? Control the influx of illegal immigrants.
With unemployment as low as it is right now (offically) there should be great pressure on wages to rise. But this large invisible workforce is keeping wages down. Great for consumers, but bad for workers.

Sorry for wandering off the baseball tangent.

Corey & Carson said...

These contracts truly are blowing my mind. I understand the most talented/productive players (A-Rod, Manny, Ichiro, Pujols, etc.) getting the big bucks, but when Gil Meche is cashing in for 11 million a season we know it has gotten outta hand.

gr said...

george s-

the current trends in the workforce aren't just bad for some of the unskilled laborers (although i would argue that a large portion of that labor tends to move up through the ranks, thereby making an increase in the minimum wage a moot point), they're bad for the country as a whole.

two things: first, we're short on true skill in the country, mostly because the boomers are all retiring but also because we're not training much needed occupations like science, technology, engineering and math ("stem"). thus, we have to import them from countries that do train them (india, china, japan). however, all those countries have improving economies, which means we'll be about to draw or at least retain less of that foreign talent. bottom line, we're in trouble, just like the cubs.

is that off-topic?

RickSchuBlues said...

gr, since you mentioned the Cubs - no, not at all. ;)