Why Investing More in Minor League Salaries is Smart Baseball Business

Minor League baseball players don't make much money.

A small percentage of players do receive large upfront bonuses via the draft, but those who fall into that category make up only about 5% of the farm. The salaries received for most players only applies in-season and often runs below the poverty line. Most players find it necessary to work seasonal (and low-paying) jobs in the off-season to get by, and some still can't. In other cases, players are forced into retirement because they can't afford to play.

There is perhaps a moral argument to be made here – that an entity as profitable and successful as Major League Baseball should simply pay their prospects a living wage because it is the right thing to do. And there may be merit in that view. But that isn't the argument I'm making. There is also some question about whether minor league salaries are effectively below minimum wage and therefore violating labor laws, but we're not going to touch that either.

This is a business case. I'm going to argue that if a ball club elected to set a minimum salary of $30,000 a year for every minor leaguer, and taught them how to better use that money, it would ultimately be a benefit to the organization as a whole. It would give them a competitive advantage, for reasons detailed in this article.

Let's start with some basic numbers. There are 30 Major League Baseball organizations, with each at any given time employing about 200 minor league ballplayers. Official numbers are not all published, but typical salaries range from as low as $1,100 (source here) to as much as $3,000 a month, but that only applies during the season (which can be 3 to 6 months). Beyond that there are a small handful of players who are on the 40-man extended roster and make more than $40,000 a year, but that is only up to 15 players per team. The club may have a few minor league free agent signees that make beyond the typical pay scale, but for the more than 90%, players are receiving somewhere between $3,300 and $18,000 a year, mostly in the lower end of that range.

There are also some other monetary and in-kind benefits to take into account. While on the road, minor leaguers receive $25/day for meals, across all levels and all players. So that does add $1,000 to $2,000 to the equation. Teams will also, on occasion, provide "spreads" for the players prior to games. Spring Training is another thing - players are paid a per diem ($25 per day if staying in the team hotel, $40 if not), but no salary. So the 6 weeks of ST (or more if in extended) are like a long road trip, but without the salary.

Now some other key parameters. The primary purpose of the minor league system is to hone players' tools into baseball skills, and provide the major league club with as much talent available for the 25-man active roster as possible. Unlike their major league brethren, minor leaguers are not part of a union, and so don't enjoy the benefits of organized representation. Their pay and benefits are almost purely at the discretion of their parent teams and Major League Baseball.

One important note - teams are now providing college scholarship monies to help draftees complete their Bachelor's degrees (if they don't already have them) as part of their initial professional contracts. This is a serious and welcome investment in their people, though it does little to improve a player's likely on-field value.

What would it cost to pay all of them a minimum of $30,000 a year? Let's assume that about 180 players are A) not on 40-man rosters and B) are not minor league free agents on one-off contracts at or above that salary. Further, we'll use a current average salary of $10,000 per year as a baseline. This means the club would need to pay an extra $20,000 to each of about 180 players each year, for a total cost increase of $3,600,000.

That's not a small amount of money - it represents about 3% of the average dollars that teams pay their major league rosters. So, why would they do that? There is plenty of player talent in the minors, so why spend the extra money? What do they get out of it, as a business?

Start with this - how much an athlete can contribute on the field is limited by their health. The affiliate teams have trainers giving prospects routines for stretching, conditioning and strength. But how effective is that if these athletes are living on fast food, leftover ballpark concessions and what little they can afford from the Piggly Wiggly? If trainers can provide players some guidelines for eating healthy (which they already do) that is also actually affordable (the key part), as a group those players will be healthier. More protein and fresh produce and less packaged foods means better muscle health and overall endurance. More sustainable energy, and fewer muscle cramps. More focus on development.

Russell Carleton of Baseball Prospectus did a deep dive into the nutrition and conditioning aspects back in 2012, in this piece.

How about living arrangements? Some players are lucky enough to stay with host families who can give them a bed and decent meals. But many are crammed four or five-deep into two-bedroom apartments, sleeping on inflatable mattresses or camping pads. So, the teams want some 6'5" pitcher to go out and pitch a strong game, after sleeping on the floor the whole summer? A little more money means they can at least afford beds, and get some good rest. More alert players, with fewer sore spots. Going deeper in games and, again, more focus on their baseball skills instead of exertive overhead.

Let's say you are skeptical of the health implications. How about business 101? Outside of the first round or two, an open secret in the draft is that teams do indeed feel out potential draftees before actually selecting them. Some high school or college prospects may send a signal they are or are not interested in signing with a specific team, especially if they aren't college seniors. If a team is known for paying their players better while in the minors, players are much more likely to want to sign with that team. That means a broader effective talent pool, and possibly being able to sign players for slightly lower bonuses. This is no different than other lines of work. It even more heavily applies to international free agents that aren't part of a draft, as well as other undrafted free agents, as they can sign with any team they'd like and have far fewer restrictions on negotiation.

So here's the equation. How much player value would a club need to get in order for their investment to pay off? Let's do an ROI calculation, using WAR (Wins Above Replacement). At present, depending on who's calculations you use (here's Fangraphs' take from 2014), one win above replacement value is somewhere between $7-8 million dollars if accessing the free agent (unrestricted) market seeking value. Using $7.5M as the average, that means an investment of $3.6M equates to about 0.4 WAR when sought out on the open market. So to re-frame the main question – can the return from this investment create an increase in 0.4 WAR annually?

The 0.4 WAR of player "value"" could come from one player, or across multiple. So for example, if one player sees a handful of fly balls turn into home runs because they are a little stronger, that could get you a pretty big chunk of the 0.4 WAR in itself. Or maybe a late season call-up tears it up for a month or two instead of not being ready until the next year. Trayce Thompson did that for the White Sox - he registered 1.5 WAR (per both B-R and Fangraphs) this season in just 44 games. Now, if the typical 25-man active roster has around 10 homegrown players, you just need an average of 0.04 WAR improvement per player - basically, one more extra base hit for a batter, or just a couple fewer baserunners allowed for a pitcher. That's a pretty low bar to hit.

This doesn't even get into the recruiting aspect, which may be the bigger potential windfall. If you are a Dominican free agent, looking to sign for say $100,000, and one team would pay you $100,000 more dollars in the minors over five years even if you don't make the majors, wouldn't you favor that team pretty heavily? Or if you are a potential draftee who won't be paid a 7-figure bonus (which is the great majority), wouldn't a team that could pay you that much more be one you're far more likely to send positive signals to? It is a substantial recruiting tool. A club could potentially grab a handful of better prospects each cycle based on this, maybe more.

There is no definitive return result number to calculate here, as the benefits cannot be mathematically derived in any rock-solid way. Like most investments, there is risk involved, but when you consider the recruiting and health values, it is hard to believe that $3.6M wouldn't pay for itself and then some over time. It is exploiting a current market inefficiency, and history shows that taking a novel approach underpinned with good business sense can give a team an advantage in performance. This idea is worth a shot.

Note: in addition to the sources embedded throughout the article, we also spoke directly to some minor league ballplayers for further color.

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    I think the problem with better pay is, unfortunately, that many players would be perfectly content to play baseball for a living at $30K/yr for 6 months. By 26 they would realize they will never make the majors and so resign themselves to a pretty good job. Now teams would have to release players who would say "what about my family, my mortgage?". Teams don't want their players to be content playing in the minors. All teams have a few older guys at each level. With a pay raise like that, the competition for those jobs would be insane, with the alternative being to have to go out and get a job for the first time in their lives. Few baseball players made it through all 4 yrs of college if they went at all. It would be especially desired of those players who come from poorer countries. What I do think they should do is provide free housing to the players so they can keep what little money they get. Teams could just buy apartment buildings. It's an investment. Or maybe they already do that. And they should definitely be paid for spring training. That's just wrong. Again, it's kind of unfair, but teams want their minor leaguers lean and hungry.

  • In reply to Jim Pedigo:

    Thanks for your thoughts, Jim. I see what you are getting at, but frankly I have a hard time believing that pro ballplayers who've reached that point would ever lack motivation to make the majors. I also don't think teams would be any more hesitant to release guys who were underperforming - in fact they may do it slightly more quickly.

    Your idea on more in-kind contributions like housing is a good one, and something we've seen discussion on.

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