Welcome to 2018, but it still feels like we’re stuck in the offseason of last year. We are nearly two months into the offseason, a little less than two months away from pitchers and catchers reporting, and the highest profile free agents—namely, Jake Arrieta, Eric Hosmer, Yu Darvish, and JD Martinez--have yet to be signed.
Usually, this wouldn’t be cause for concern. The free agent market for veterans has been booming for years now, and the influx of new television revenue streams have even made it possible for mid-market teams to jump into high-profile sweepstakes. That seems to be changing, though, and it could lead to seismic changes in the structure of free agency itself.
The function of a salary cap is to limit salary, full stop. This was what caused the strike of 1994, and the Players’ Union was strong enough then to resist. Instead, the system evolved into a hybrid one whereby each team’s payroll is not capped, but any dollar spent over a certain amount is taxed at 50%.
Today, with a considerably weaker union, the new CBA approved a plan that makes the cap a little harder. They established rules that introduce gradations for taxes on the dollar for each offense--going up to nearly 90% after $40 million over the cap—and draft pick and international slot money forfeits for offenders who sign players who rejected a qualifying offer.
What this essentially means is that there is now a salary cap in baseball. It is a silent cap, and it doesn’t mean teams can’t go over it, but if you make something so prohibitively expensive that is infeasible, it might as well be a cap proper.
This lays at the feet of Tony Clark, the Executive Director of the MLBPA, of course. What we see now are teams holding out until the latest point to sign an admittedly weak free agent class. Teams like the Dodgers and the Yankees are aware that that cherry-on-the-top signing is no longer possible when an offense could have tax and draft implications.
In theory, though, this could change in 2019. The Yankees are set to go under the tax this year, meaning that their first offense next year would only be taxed at 20%, meaning they would actually be taxed at a lower rate than they had been in the past.
Yet, once again, they would be forced to turn back the clock in 2020, or risk facing those consequences. That 2019 timeline is important, though, and it actually could determine the future of the salary cap itself. If the Yankees, say, continue to stay under the cap in 2019 despite their supposed intentions, it may have a ripple effect in a market that already has arguable legal, silent collusion.
If the Yankees signal to the market that, actually, the silent cap is going to be treated like a real cap, and the Dodgers believe this too, then the market shifts considerably downstream. It could have the benefit of enriching lesser free agents that can squeeze under the cap, or last minute trades with cap space at the deadline, but the real market-drivers—the top, veteran free agents—could see their salaries decline.
Once the owners see this, essentially a better market value for the top talent, they’ll see blood in the water. With the league essentially endorsing the silent cap as silent in name only, they will push for what they did in 1994, the salary cap they always wanted.
Many people probably don’t care about this. Players make millions of dollars, and we shouldn’t really care about how much they make. I mean, to an extent, that is true. They make so much more than the average person that I don’t consider them to be at the forefront of labor concerns, but it sets a precedent that has much more troubling implications.
An AP study has determined that the players’ share of revenue has essentially stagnated over the past decade, and while MLB revenue has exceeded $10 billion for the first time ever, minor leaguers and amateur players have yet to secure a living wage. If the owners are willing and able to clip the wings of the union vis-à-vis their crown jewel—the blockbuster, veteran deals—by silently capping salaries, I would not put it past them to institute hard caps, non-guaranteed contracts, and continue to lock amateur players out of quality pay, health care, food, housing, and pensions as revenues continue to climb.
For better or worse, the Yankees will always drive market prices and strategies in free agency. The draft was created to lock the Yankees out of buying up amateurs. Revenue sharing and the luxury tax was created for teams like the Yankees. Ironically, a hard salary cap could come because the Yankees may shrug, and determine that if everyone is under the same salary rules, and their revenue continues to increase, their wallets will be bigger for it. If there’s one thing worse than player salaries going up into the stratosphere, it’s the owners silently inhaling millions more than they deserve.