The Boom and Bust Salary Cycle

Dave Studeman at the Hardball Times examines free agent cycles over time in his most recent article, and the data reveals a couple of interesting things. Even though the overall salaries have been continually increasing since Free Agency came into being, the rate of change has been anything but constant. What are causing these fluctuations? Studeman offers a couple interesting possibilities, one of which involves the contributions by pre-arbitration players:

The extraordinary crop of rookies and sophomores has freed up a lot of short-term baseball salary budget. As I've mentioned before, the 2006 minimum-salary players contributed over 1,000 more Win Shares Above Bench than the 2004 crop. In the short run, this is equivalent to an $800 million salary windfall. In fact, I don't think the average major league salary in 2007 will rise nearly as much as you might think because kids making the minimum (or in their first year of arbitration) will help keep it down.

Although the new CBA brings into effect a higher minimum salary, the drastic increase in free agent salaries seems to have more than made up for it from a cash outlay perspective. This, in my view, makes in ever more imperative for clubs to not only make good use of pre-arbitrarion players, but to make sure that those players are ready to contribute as soon as possible.

As an aside, I'm really glad that the Indians were able to lock up Cliff Lee before the offseason.

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