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February 8, 2012
Prospectus Hit and Run
Rising Payrolls of the Post-Collusion Era
Last time out, I examined the 2012 Mets' Opening Day payroll drop—projected to exceed $50 million—and placed it in the context of other drastic payroll cuts dating back to 1989, since my source for the payroll data, the USA Today Salary Database went back to 1988. Given data that went further back, I’d have liked to place the teardowns of the A's dynasties of the 1910s, 1930s, and 1970s—are there any other dismantlings so famous?—into a similar context, but as one Twitter follower said, we go to war with the data we have. Today I turn my attention to the flip side of the story, the largest payroll increases during a timespan that conveniently stands as the point when baseball was just emerging from its collusion scandal.
Historically speaking, at least within the time period under discussion, it's a whole lot easier for a ballclub to increase payroll than to decrease it, since major-league salaries have been rising faster than the rate of inflation for decades. To refresh your memory, here's the lay of the land going back to 1988. All payrolls cited here and throughout the rest of the article refer to Opening Day payrolls:
As with the list of the largest drops of the period, any attempt to rank the largest payroll increases from a dollar standpoint winds up concentrated in the recent past, though in this case, not quite as heavily:
Seven of the above teams are from the 2008-2011 period, including three apiece from each of the past two seasons. By comparison, the list of the largest cuts in dollar terms featured 10 teams from that recent stretch, a time when payroll growth slowed, largely due to the sluggish economy. While all of the teams on the list above are from 1999 or later, they’re also a bit more evenly distributed at the other end of the spectrum that’s represented; eight are from the 1999-2001 period—not coincidentally, the steepest part of the average payroll graph, a time when baseball was booming as the 1994-1995 player strike and the rancor surrounding it receded into the rearview mirror. Only one of the top 20 payroll cuts of all time, the 12th-ranked 1998 Reds, took place in that stretch.
By contrast, the list of largest rises by percentage is downright ancient, with 18 of the 20 teams hailing from 2001 or earlier, one of them as far back as 1989. Note that the dollar amount of some of the increases 20-some years ago might equal what an arbitration-eligible player makes today:
Of the two post-2001 teams on the list, one is the 2007 Marlins, the immediate successor of the team with the largest percentage cut (75.2 percent) on record. The other also hails from Florida, the newly-exorcised 2008 Rays, who flushed the Devil out of their name, upgraded their bullpen and their defense, and turned into a pennant winner.
In an attempt to create a more authoritative list of the biggest payroll spikes of the post-1988 period while controlling for the long-term rise in salaries, I used a method that averaged the standard deviations of the year-to-year increases (or decreases) in payroll in both percentage and dollar terms as a means of connecting those swings to the industry conditions under which they took place. Rather than devise another example or paraphrase what I wrote before, I'll simply quote myself:
Take the Rays, who went from a $71.9 million payroll in 2010 to a $41.1 million payroll in 2011. The standard deviation in 2010-to-2011 payroll changes for all 30 teams was a record $17.3 million, reflecting a year that in dollar terms featured some relatively large cuts and gains; historically speaking, six of the 17 swings of $30 million or more in either direction took place last year, the Rays among them. Their drop was −1.78 times that year's standard deviation. Meanwhile, in percentage terms, the standard deviation in 2010-to-2011 payroll changes for all 30 teams was 22.4 percent, which is on the low side of recent history; the size of those swings is obviously connected to the increased size of the payrolls. The Rays' 42.9 percent drop was −1.92 times the standard deviation. Average −1.78 and −1.92 together—because I'm weighting the approaches equally—and you get −1.85. The Rays' drop was 1.85 standard deviations below the average year-to-year change of the 1989-2011 sample.
I'm calling this new number the Change in Annual Payroll (CAP) score. Here's a list of the top 20 CAPs from 1989-2011:
I've extended the list to 21 spots for two different reasons. First, it's still heavily skewed toward teams at least 10 years in the past, but I didn't have to go much further to come up with a more contemporary example in the 2011 Rangers; the aforementioned Marlins are the only other post-2001 team among the upper reaches of the list. Second, because the companion list of the largest cuts of the post-1988 era now goes to 21 as well; I inadvertently omitted the number-three team, the 1996 Blue Jays, by somehow deleting the CAP score calculation of a small handful of teams within my spreadsheet, a hazard of plonking around for too many hours. In the interest of completeness, here they are in context:
Back to the list of the largest spike: First, it’s worth noting that the CAP scores are of considerably larger magnitude. That’s because the vast majority of teams, 459 out of 626, increased their Opening Day payrolls from year to year as part of the larger trend, and they were bounded on one side by 25 times the minimum salary.
I admit I'm surprised that so many of those teams are so old, but as noted last time around, the dollar amounts by which those older teams increased payroll are so small by today's standards that it didn't take much to do so by a significant percentage. The 1989 Brewers, who preceded the leader of this particular pack, had $3 million players (Teddy Higuera, Paul Molitor, and Robin Yount) making a combined $4.075 million, while the 1990 team jumped to five such players (that trio plus Dan Plesac and Dave Parker) making $10.6 million, accounting for two-thirds of the team's overall increase. Note that those Brewers—Bud Selig's team—led the way in spending as the average payroll increased by a whopping 29.4 percent over the previous year. It’s a rather amusing irony given what was to follow just a short time later, when Selig was part of the small-market junta that ousted commissioner Fay Vincent and went to war with the players’ union. Four other teams from that same year made the top 20, as did three from the following year, which featured a period record 38.7 percent jump in Opening Day payrolls. No wonder the owners needed to be saved from themselves.
While I'd like to embark on a similar history lesson as I did last time, providing capsule summaries of the top teams' biggest gains, that will have to wait for another day due to my failure to master time travel to a point where such research could still happen in time to make this deadline. Instead, I'll eschew another 4,000-word monster and stick to summarizing the data. For starters, the teams with the 21 largest payroll increases by this methodology combined for a .492 winning percentage, with three of them making the postseason: The 1999 Diamondbacks ramped up their payroll in just their second year of existence and won 100 games, while the 1992 Blue Jays won 96 games and a World Series after making the playoffs the year before, and the 2011 Rangers won 96 en route to their second straight pennant. Eight of the 21 teams played .500 ball or better.
One year later, those teams (reduced to 20 in the sample, because we lack a crystal ball for the 2012 Rangers) improved just barely, via a .495 winning percentage. Four of them made the playoffs: the 1992 A's, the 1993 Blue Jays (who repeated as world champions), the 1995 Rockies (who won the NL wild card), and the 1996 Padres. Ten of the teams achieved winning records, while two others landed right at .500.
Two years after their payroll spikes, those teams fell off, producing just a .478 winning percentage, with the World Series-winning 2001 Diamondbacks the only one even to make the playoffs. While nine of the 20 teams played at least .500 ball, the 2002 Tigers and Devil Rays both slumped to 55-106 records (.342), weighing down the entire class; the latter did so via the era's 12th-largest payroll cut.
Three years later, those teams improved a bit, to a .483 winning percentage. Two of them, the 1998 Padres and 2002 Diamondbacks, made the playoffs, with the Pads going on to win the NL pennant. A third, the 1994 Reds, were clinging to a half-game division lead when the strike hit. Nine teams played .500 or better ball, but the 2003 Tigers' near-record futility (43-119, .265) dragged the overall winning percentage down 13 points all by themselves.
Summarizing the above and their payroll cut counterparts in a neat little table:
21 Largest Payroll Cuts (CAP < -1.56)
21 Largest Payroll Increases (CAP > 2.56)
Not surprisingly, the group of teams that made the biggest cuts was significantly worse than the ones who made the biggest gains, both in the year in question and the year afterward, by margins of 5.5 and 4.9 wins per team-season, respectively. But two years after the fact, the belt-tighteners surpassed the big spenders by 2.9 wins per team-season, suggesting some method to the madness. Three years after the fact, the two groups were virtually equal. None of the groups reached .500 over the four-season span, which suggests that extreme fluctuations in payroll in either direction are generally not the soundest strategy for building a winning ballclub. I suspect there are even more interesting nuggets waiting to be revealed from within the data, but those, along with the historical summaries of the teams with the biggest increases, will have to wait for another day.