Major League Baseball’s annual Winter Meetings are underway this week in Nashville, Tennessee. These meetings, where baseball executives get together under one roof, traditionally herald in baseball’s silly season of awarding whopper like contracts to the available crop of premium free agents. This year, even before the meetings began, the aptly named David Price kicked off the festivities by inking a seven-year $217 million contract with the Boston Red Sox. This was soon followed by Zach Greinke who agreed to a six-year deal with the Arizona Diamondbacks for $206 million.
As predictable as the annual free agent spending binge by baseball owners will be, the lament of a lot of sports fans, including conservative ones, is that it is “unfair” that anyone should make so much money playing a game, while the rest of us working stiffs make so little.
Major League Baseball is the poster boy of what today is referred to as “income inequality.” The term has recently made its way into our lexicon, and it refers to large, supposedly unhealthy income gaps between the highest wage earners and low wage workers on the other end of the spectrum. Major League Baseball’s circumstance of income inequality is unique in that contractual labor (players) make much more than management and full time administrators. That aside, you’d be hard pressed to find many CEOs of major corporations with as sweet a deal as David Price.
One of the primary arguments of those who advocate the end of income inequality is that when a few make the lion’s share in an organization, it prevents the resources from trickling down more equitably to the lower paid workers. But is this true? Looking at Major League Baseball as a model, it appears the opposite happens. Do we really believe, for example, if the Boston Red Sox didn’t sign David Price this offseason ownership would have used that savings to give pay increases to lower skilled workers, such as clerical and maintenance staff? Trust me, having worked for a Major League team that didn’t participate in the free agent frenzy, I can assure you that doesn’t happen.
Conversely let’s look at what will likely happen in Boston and Arizona now that Price and Greinke have come onboard. Both teams have just made huge investments, and did so in the belief that these moves will result in more wins and revenues. Just this belief alone leads to opportunity. For example, the Red Sox and Diamondbacks may hire more salespeople, so they can maximize potential revenue. Also, if as anticipated, Boston and Arizona play better this year with the addition of Price and Greinke, it will lead to higher attendance, which means more jobs and hours worked for lower waged employees such as beer vendors, parking attendants, and so on. Who else will benefit from the higher attendance? How about restaurants, bars, merchants, hotels and so on and so forth in the vicinity of the ballparks?
Income inequality didn’t always exist in Major League Baseball. One needs to look back no further than the 1950s when Major League Baseball stars had to work regular jobs in the offseason. But the evidence clearly shows that lower-skilled laborers working in professional baseball were not in better financial shape before income inequality existed in the sport. The left would like you to believe that the economy is a preset-sized pie, and when one person grabs a bigger slice there is less to go around. Major League Baseball proves that this is absolutely false. During the era of free agency which began in the 1970s, All-Star players’ salaries shot up exponentially. Many experts at the time predicted professional baseball would economically implode. Since then, however, revenues for Major League Baseball has risen faster than the astronomical salaries, and today, not only are there more Major League Baseball teams, but without exception all Major League teams have substantially more fulltime workers (front office staff) making better wages than ever before. In other words, baseball’s economic pie has become larger and is feeding more people.
As a society we shouldn’t concern ourselves when the private sector makes large investments in individual people. After all, as in the case of the Red Sox and Diamondbacks, it is a clear signal of optimism and economic growth. On the other hand, one needs to look no further than the economies of Cuba, North Korea, and Venezuela to find what life is like when income inequality is forbidden.