The Argument Against Arbitration: Extra Bases
As we near Spring Training, many of baseball's young stars will be going through a little something called arbitration. One of the more mysterious institutions in baseball, few fans know what arbitration really is. Sure, they have a vague idea of what it is and maybe even what it is supposed to do, but nobody knows what really goes on in those hearings. Well, I am here to help educate you guys about one of sport's worst contract systems.
So what was the cause for arbitration? Well, originally, it was put into place for two main reasons. One was to put an end to the old method of how players got raises: holding out. It also established a good middle ground so that young players could get contracts that were close enough to market value that they deserved, while owners were able to keep these rising stars on their team without having to deal with these players outrageous contract demands that were simply based off of potential. Sounds good, right? In theory, it sounds great. However, due to certain failures that we will talk about later, it has produced poor results, and sometimes downright hideous results.
So who is eligible for arbitration? Any player who has less than six years of service under their belts, but more than at least three can file for arbitration. In addition to these players, players known as "super-twos" are also allowed to file. This is where it gets a little confusing, so see if you can follow this. "Super-twos" are players with two full years of service, plus at least 86 days more. These players are then ranked in descending order based on their extra days of service after the two years. The top 17% of these players are considered "super-twos". Don't ask me to tell you why they have this system for "super-twos" in place; some things are just beyond explanation.
Now on to how arbitration works. After a player files for arbitration, both the player and the team submit how much they think the contract should be for. These numbers are based off of the contracts that similar players have gotten in arbitration in years past, also called comparables. This is one of the rare times that clubs can talk amongst themselves about player salaries, which is a fun fact about arbitration.
All of this sounds good and dandy, but in practice there are a couple of big problems with the system. The case is not presented to a baseball official, but a professional arbitrator. Many of these arbitrators have little, if any, knowledge of baseball. So the arguments are almost solely based around the simple stats. Things like batting average, runs batted in, wins, and ERA. There are none of the new, more refined stats like VORP or even OPS. As a result, great players that are unlucky and don't have players on base in front of them or have their games blown by the team's closer will probably not earn the money they deserve. On the opposite side, a terrible pitcher who pitches for a team that scores a lot of runs and thus gets a lot of wins, will be likely to get overpaid.
The other flaw with the system is that there is no definition of who can be used as a comparable. Do the players have to play the same position? Or do they just have to put up similar statistics? What about being in the same year? The list goes on. Suffice it to say that teams and players will often stretch the meaning of "comparable" to its limits. And this also branches off into the argument for whether or not arbitration players can count regular free agents as comparables. This argument will usually only work for fifth year arbitration players, who will see a raise similar to the free agents of the year, only slightly pared down. The next year, fourth year arbitration players will use fifth years as comparables, and so on until every single player has seen a raise. I hope you are seeing at what I am getting at. In arbitration, one bad decision by an arbitrator or a GM signing a free agent has a trickle down effect through the whole arbitration system. And unfortunately, there is nothing in place to correct these bad decisions, unless every arbitrator begins ruling in favor of the teams and thereby cuts the contracts down.
So now you see hope for the system. You are saying, "Eventually there will be a profound change in the arbitrators that will fix this mess." Ah, but not so fast. For you see, Major League Baseball has thought of every possible way to prevent a solution from arising. Either the player's union or MLB can remove an arbitrator from the pool at anytime without reason. So if these arbitrators start ruling only in the favor of the owners, then pretty soon the player's union will be sending them packing, bringing in a fresh set of naïve arbitrators that will only allow this terrible system to continue on.
There really is no bright side to this, at least as far as I can see. The only nice thing is that it means that I will always have overpaid players to boo when I go to the games. But there is almost no chance that arbitration will be eliminated any time soon. For the most part, it works, at least as far as producing predictable outcomes. The owners are afraid of making a change because it could end up allowing the players to make too much money. Likewise, the player's union worries that a change will remove the raise that players who file for arbitration are assured of getting. Plus, the arbitration is a business itself. Lawyers who take a case all the way from the original filing to the hearing itself can make somewhere around $100,000 dollars. That's for one case. You might wonder why the agents don't do it, and while I'm sure some do, this is a time consuming process that requires tedious work in order to win. Sounds like it's right up a lawyer's alley to me. We will probably never see a change, at least not for a good long while. Even my beloved salary cap might not be able to vanquish arbitration.