from Amazon
Friday, December 04, 2009
Why so few arbitration offers for free agents?
Tommy Bennett notes:
Of the 21 Type-A free agents who could be offered arbitration, 11 were not… Of the 53 Type-B free agents, 38 were not offered arbitration.... the salary a free agent receives is likely to be similar to that which he received the year before (and, under the CBA, it may not be less than 80 percent of his previous year’s salary
That last part is the key. Normally, a guy going from his last year of arb to his first year of free agency gets a 25% to 50% increase in his salary. But, what happens if you are in a market correction? What happens if the market decides to drop the free agent prices by 30%? Well, if the typical arb guy increases his market price as x1.40, and the market corrects at x0.70, then guess what: the free agent market and the last-year arbitration market is the same! (1.4 x 0.7 ~ 1)
But, left to their own devices, the arbitrator is not going to be aware of the market correction. The comparables that will be submitted will most likely be from pre-market correction contracts. So, it would be crazy for someone outside the market set the market prices. The arbitrator is supposed to reflect the market, but, that’s based on the presumption that the market is fairly flat year-to-year. You don’t want a market-unaware arbitrator involved.
So, you throw your free-agent-eligibles to the wolves, and let the market correction happen. If the owners were smart, they’d insist on what Charlie Finley wanted 35 years ago and what Marvin Miller most feared: free agency for all players. Even though nearly 20 years ago Marvin Miller stated in his book his biggest fear, MLB has decided to continue to let the free agent market set above-true-free-market prices. Only in this day and age of global depression has MLB seen a sliver of what is possible when you glut the market with free agents and see what can happen.
Indeed, if this continues, you will even see arbitration-eligible players be left unprotected, and thrown by the teams themselves into free agency. In the next CBA, owners should fight to bring the protected years from 6 DOWN to 4. In reality, the economy will pick up, and each owner will think they can outsmart the other owners, and the free agent players will once again prosper.
I didn’t mention this in the article, but the CBA also explicitly prohibits either teams or players from mentioning the financial status of the team, which supports your conclusions.
Even still, some of these decisions are just wrong, no matter how bad you think the market is going to be (and I think guys are still going to get around $3.5 to 4 million per expected WAR).