Pay for Performance?

Back in America, I've had baseball on the mind. We're about a third of the way through the regular season; sufficient for some analysis. Today the focus is payroll vs. performance.

Major League Baseball (MLB) is the only one of America's mainstream professional sports leagues with no salary cap. In other sports, each team is limited to spend an agreed-upon amount each year assembling their team. If (for example) they need a roster of 20 players and the cap is $200 million, they could spend $80 million on just one player, but then they would have only $120 million for the other 19. Salary caps are a mechanism to encourage team parity- if one team has a lion's share of good players, in theory they won't be able to afford all of them as they hit free agency (this is assuming those players demand contracts worthy of their abilities, which is typically the case), meaning the good players over time will be spread over multiple teams and (in theory) encourage competitive games. I won't get into the effectiveness of the construct here (personally, I like it, but it is no guarantee of parity- good synergy and coaching matter, too). Either way, MLB lacks the construct, meaning any team can spend as much (or as little) as they like assembling their roster.

Per spotrac.com, in 2022, the New York Mets have the highest payroll ($260M), and the Baltimore Orioles the lowest ($46M). The same site shows each team's winning percentage; below is the current breakdown (ranked by payroll; WIN% is the column to the right of the team name).

As you'd expect, some of the teams with the highest winning percentage also have the largest payrolls. But it isn't universally true; the Phillies, Red Sox, White Sox, Braves, and Cubs are above the league average in payroll but below in winning percentage. Conversely, the Twins, Brewers, and Rays are below the league average in payroll but above in winning percentage. 

While winning is what ultimately matters, you can also see how the teams rank in batting and pitching, respectively (stats from ESPN):

In batting, the Rockies, Guardians, Marlins, and Twins are hitting above their weight. The Padres, White Sox, and Astros aren't living up.

 

In pitching, the Rays, Brewers, Twins, Tigers, and Guardians are pitching above their weight. The Braves, Phillies, White Sox, Angels, and Giants aren't living up.

If the MLB is sufficient to prove the concept, you do indeed get what you pay for . . . generally. But here's to those small market teams. I'm cheering for you.