Team Payrolls in Baseball vs. Performance

Does a High Team Salary in Major League Baseball Guarantee Results?

May 26, 2009

Many fans are upset with the lucrative contracts given to Major League Baseball players. A high team payroll does not guarantee on-field success, though.

Every baseball fan knows that age, and injury, are two of the great equalizers in baseball, and virtually every sport.

Having said that, is there any correlation between payroll, and performance? Can a baseball team truly "buy" a championship. Fans of the New York Yankees dynasty in the late 1990s and early 2000s would say yes, but baseball is currently starting to buck that trend.

It is pretty clear that, for the most part, the highest paid players in the league do perform up to expectation (but that is a different argument for a different article). What about the teams with the highest salaries, though?

Salary Caps

Currently, of the four major sports in North America (NFL, NBA, NHL, and MLB) only the NHL and the NFL have a "hard cap" which teams must stay under. The NBA has a "soft cap", and there is no official penalty for being over the cap, but teams over the limit are prohibited from signing free agents for more than the league minimum, with only a few exceptions.

In Major League Baseball, there is a slightly different technique used to try and keep salaries under control. The MLB implements a "Luxury Cap", an arrangement by which teams whose aggregate payroll exceeds a certain figure, determined annually, are "taxed" on the excess amount. The tax is paid to the league, which then puts the money into its "industry-growth fund."

Do High Team Payrolls = Success in MLB?

First, there is a need to establish a baseline for success, and it would seem appropriate to say that "making the playoffs" would be an appropriate base.

It would be arduous and tedious to perform a season-by-season analysis of payroll and correlate success, so for this analysis, lets use the results of the 2008 MLB season (Major League Baseball 2008 League Standings).

Payrolls and Performance

The following is a list of the five highest and lowest payrolls (in millions of dollars) in the league in 2008, along with their level of success (Rankings: 2008 MLB Payroll Figures):

Now almost immediately, the first piece of information that jumps out is that the top three teams in the league, in terms of salary, did not even make the playoffs. Moreover, the 2nd lowest paid team (Tampa Bay) won their division (defeating the 1st and 4th highest paid teams to do it), had the second-best record in the American League, and made it all the way to the World Series (by defeating the 4th and 5th highest salary teams, Chicago and Boston).

Of course, there are statistical anomalies like the LA Dodgers. The Dodgers, statistically, should have missed the playoffs, but thanks to playing in the weakest division in baseball, made the playoffs with a winning percentage of .519%.

The Middle of the Pack...

It is clear by looking at the above numbers that paying too much for a team does not necessarily lead to positive results, but neither does skimping on player salaries, either. Yet, by being in the "middle of the pack" and having a payroll near the middle of the league, the level of success that teams enjoy proves that it is possible for teams to remain competitive, and not break the bank.

By examining the bottom five teams in the league in terms of payroll, and the top five, it is clear that the bottom five had a combined winning percentage of 0.47%. Not very encouraging. Yet, it by examining the winning percentage of the TOP five teams, their combined winning percentage was 53.7%, and the only team that made the playoffs in 2008 with a winning percentage below 53.7 % was the previously mentioned LA Dodgers. Moreover, the World Series Champion Philadelphia Phillies had a payroll of $98.2 million, good for 13th highest and less than 1/2 the payroll of the New York Yankees.

Finally, by looking at the teams ranked from #4 - #15 in payroll (12 teams), 7 of them made the playoffs (out of a 8 possible spots) including each team from #4 (Boston) to #8 (Los Angeles Dodgers).

Clutch Players

This statistic is more for statistical interest than anything else, but if a statistician (or team Manager) was to look at one stat to determine how players performed in the clutch and when the game was on the line, (presumably what every team hopes their big-salary players can do), perhaps the most obvious statistic would be to examine each team's performance in 1-run games.

The top five salary teams in the league accumulated a record of 103 - 97, or a 0.515 winning percentage.

The bottom five salary teams in the league accumualted a record of 120 - 111, or a 0.519 winning percentage.

Now, the differences are almost negligible, but isn't that the point? It would seem that the lower paid players and teams performed equally well (or slightly better) in high-pressure situations than the highest-paid teams.

It would seem that money CAN'T buy happiness, at least, not when the MLB standings are concerned. Just ask any fan of the Tampa Bay Rays.

The copyright of the article Team Payrolls in Baseball vs. Performance in Major League Baseball is owned by James Jackson. Permission to republish Team Payrolls in Baseball vs. Performance in print or online must be granted by the author in writing.