Tommy Pham made more money in a single day (Tuesday, February 6th) than he had before in his entire life. An arbitrator found in his favor in his dispute with the Tampa Bay Rays, awarding him a salary of $4.1 million for the 2019 season. Per Spotrac, Pham had previously earned $2,177,736 (gotta love the precision) in his Major League career. Now, there’s no record of his minor league pay or any summer jobs he held as a kid, but I feel comfortable saying they didn’t pay two million dollars. At the most basic level, I couldn’t be happier for Pham. That amount of money is very literally life-changing. It’s a reward for the years of struggle in the minors, the setbacks, the sheer belief to keep at baseball as a 16th round pick. It’s also a vindication of his belief in himself. When the Cardinals offered him a two-year extension last year to guarantee his 2019 salary, he refused. “The numbers didn’t seem right. I wouldn’t sell myself short like that,” he said at the time. While the terms of the contract were never disclosed, this win in arbitration surely feels especially sweet given he had already wagered on himself twice- once by refusing the Cardinals’ offer, and once again by not settling with the Rays before arbitration. Next year could be even better. Pham will be 31 next year, and in his second year of arbitration. David Peralta, a 31-year-old player in his second year of arbitration coming off a four-WAR season, agreed to a $7 million contract with the Diamondbacks. After years in the wilderness, Pham’s ship may be coming in.
Let’s try this with a slightly different frame. This January, a millionaire employee got into a dispute with the billion-dollar corporation he works for. The corporation wanted to pay him millions of dollars. He thought their offer wasn’t enough. The two sides agreed, as millionaires and billionaires do, to settle things the civil way, via legally binding arbitration. Arbitration is a funny process, if you’re going to continue to deal with the party you’re in a dispute with. You want to win, obviously, but your mutually beneficial relationship that earns fistfuls and fistfuls of money for both of you is also important. At the end of the day, this is a gentleman’s dispute, settled between one percenters over how to split up their generous slice of the pie.
Sometime soon, Bryce Harper and Manny Machado are going to sign massive contracts in free agency. Every time my phone buzzes with a notification, I’m excited. What if this alert is one of them signing? Now that I think about it, though, I just feel confused. What do I want out of this alert? Am I gearing up to complain about a hundred-millionaire receiving $20 million, $30 million, $50 million less than I perceive him to be ‘worth’? Am I ready to declare that all is right with the baseball world if a 26-year-old receives a pile of money he can never reasonably spend? The baseball world is up in arms over what free agents deserve to make, and the question of splitting the pie equitably is made all the more confusing when some of the pieces get measured in the hundreds of millions. Yasmani Grandal signed for $18.25 million last month. Objectively, that’s a lot of money. Also objectively, it’s a lot less than he might have expected to make given the booming business of baseball. Millionaires and billionaires are squabbling, and the argument has all the trappings of the classic fight between capital and labor, only with a few extra zeroes tacked onto everyone’s net worth to make the situation feel truly absurd.
In 2016, Deadspin published an article titled ‘How To Get By In The Minors On $1500 A Month’. It details, as you might expect, the day-to-day reality of living as a professional athlete who makes $40 a day after taxes. There are some positives in the ledger- $25/day per diem on road trips, free lunch and dinner on homestands, and baseball gear. There are negatives, too- $8 every game to the road clubhouse attendant, living on a couch in the living room to cover rent. The High-A season runs five months, which means $7,500 a year in salary from the team. Spring training covers another two months or so, but comes without a paycheck, which means that players have five months off from baseball every year to make a little money. Popular options include substitute teaching, dog walking, driving Ubers, or delivering for Postmates. Congress recently passed the hilariously named Save America’s Pastime Act, which, obviously based on the name, legally enshrines teams’ right to pay their players whatever they please, rather than being bound by federal minimum wage laws. Outrage exists about this state of affairs, to be sure, but outrage exists about nearly everything these days. If you think minor league pay is bad, consider this: the World Bank estimates that 736 million people around the world live on less than $1.90 a day. Meanwhile, Bryce Harper and Manny Machado don’t even order Postmates, or ride in Ubers. They have chefs and drivers, and throngs of people on the internet arguing over whether owners’ greed is unfairly impoverishing them. How do we determine fairness between two sets of well-off frenemies when minor leaguers exist, when millions upon millions of people who struggle to find enough food to live exist? I don’t have the answers for you. I hardly even know how to think about the question.
Between 2017 and 2018, exactly twenty players were worth more wins above replacement than Tommy Pham, according to Fangraphs. Exactly two of them, Aaron Judge and Luis Severino, had lower career earnings than Pham going into this offseason. The cosmic irony of the biggest spender in baseball having the two least-compensated stars aside, the fact remains: Pham was an outlier, paid remarkably little relative to his production. Baseball teams combined to pay $4.2 billion last year in major league salaries, generating 1000 wins above replacement in the process. Even including the rookie-wage stars who generate teams’ sacred surplus value, the average cost of a win above replacement was $4.2 million. Tommy Pham generated 4 of them, in a down season. He will be paid the equivalent of one win’s worth of value next year, and no matter how you look at it, the Tampa Bay Rays will come out ahead on the deal.
The Tampa Bay Rays are paying three players on their current roster more than they’ll pay Pham this year. Two of them, Charlie Morton and Mike Zunino, were acquired this offseason. The third, Kevin Kiermaier, is a longtime Ray who signed an extension with them in 2017 before reaching arbitration for the first time. The Rays are paying two other players $5 million apiece. Those players, however, have never so much as donned a Rays uniform. The team is on the hook for five million dollars each to Carlos Santana and Edwin Encarnacion- by avoiding spending money on players actually on their team, they’ve acquired enough surplus payroll space to pay down other teams’ contracts in exchange for cost-controlled prospects. The world of baseball economics is a weird one.
Tommy Pham projects to make around $7 million in 2020, and as such, he probably won’t play for the Rays by then. In 2018, the team didn’t pay anyone that much. In 2017 and 2016, only Evan Longoria made the cut. You have to go back to 2015 to find two players making more than $7 million (Longoria and James Loney), and the team has never had three players hit that mark. In short, the team probably can’t pay Pham after this year, which makes his arbitration victory bittersweet. Baseball is a business. The Rays run theirs in a peculiar way, but they certainly run it to maximize surplus value and minimize cash spent. It’s hard to believe that they inhabit the same world as the Yankees, until you turn around and realize that the Yankees have the two lowest-paid stars in the game.
From 2008 until 2013, the Federal Reserve embarked on a historic program of buying treasury bonds and government-guaranteed mortgage-backed securities. Through a mechanism known as the portfolio balance channel, they increased the value of a broad range of financial assets, with equity appreciation estimated in the linked paper at 9.5%. While estimates of such an indirect mechanism are necessarily approximate, let’s use it as a starting point. The total market capitalization of domestic stocks reached $30 trillion in early 2018, which means that the Fed essentially created between $2.5 and $3 trillion of wealth via their program. To the people who received a piece of that pie, it probably feels like it was deserved. They earned the capital, they sagely invested it, they reaped the rewards of their foresight. Still, though, it’s hard to escape the feeling that it was a windfall, a glitchy side effect of a plan to unfreeze credit markets. Equity holders were simply in the right place at the right time when a man known as Helicopter Ben for his desire to throw money from the sky did just that to financial markets. What does this have to do with baseball? Well, the concept of who deserves what money is confusing. The concept of deserving is confusing. So much of life is being in the right place at the right time, is having the right family or the right upbringing, is being born with the right randomly determined physical and mental characteristics. Who deserves what money? Who deserves anything?
My thoughts on fairness and baseball, like this article, are scattered and jumbled together. It’s hard to keep the scale of everything consistent in my head, when we’re talking about the orders of magnitude involved here. You probably don’t want to hear my opinion on who deserves what in the current struggle between the MLBPA and the owners, so I won’t share it. Pitchers and catchers report on February 12th.