The Reserve Clause in Baseball: Why Did Players Buy It for so Long?

 

More from "A Well-Paid Slave":

The committee had been meeting for the last two years. Each time the players proposed an alternative to the reserve clause, the owners rejected it. “If you want to change one comma,” Miller said, describing the owners’ position, “Yankee Stadium will fall.”

So went the argument in support of baseball's reserve clause, which was in place until 1975. Without the reserve clause, players would be able to freely negotiate with any team after their contracts expired. The owners argued that this would lead to ruthless bidding wars and eventually make the costs of running a baseball team so high that the league would go bankrupt. Even many players bought into this argument.

That the system remained in place for so long reflected a widespread misunderstanding of economics. In free markets, the forces of supply and demand ensure that prices reach optimal levels. Ballplayers have quantifiable values, based on how many additional wins their contributions are expected to bring, and in turn how much additional revenue these wins will generate. If the Yankees thought Alex Rodriguez's contributions wouldn't earn them more than $32 million a year in additional revenue, why would they give him such a big contract? Why would teams systematically commit to payrolls that they couldn't cover based on their expected income?

If players collectively demanded $10 billion a year, owners aren't going to pay it, because the league only generates about $6 billion a year (and has many other expenses besides player salaries). No amount of vicious bidding could support such demands. But the free market has driven player salaries up exponentially in the past three decades, and the league is still alive and well. The only difference is that a greater share of the profit is now in the hands of the players instead of the owners.

Sometimes, revenue can be unpredictable. Many teams in all sports are lamenting the long-term contracts they've signed ahead of the current recession, and some are losing money in the short term. But, like in any business, any team or any league that loses money year after year will eventually go bankrupt. Teams will not consistently make wild, unsustainable bids for players and drive themselves into oblivion.

I've written previously about this book, analyzing how it's so difficult for athletes to bargain collectively.

Curt Flood and the Difficulty for Athletes to Negotiate Contracts

I've been reading a book called A Well-Paid Slave. It follows former major league outfielder Curt Flood, who helped bring an end to baseball's reserve clause.

Under the clause, a player was bound for life to the team that drafted him; he could either accept the team's salary offer at the end of each season or sit out the season. He could not freely negotiate with other teams.

After the 1969 season, Flood sued Major League Baseball, arguing that his reserve-clause salary of $90,000 was analogous to slavery. For more details, follow the links or read the book.

The reserve clause was toppled in 1975, bringing about the era of free agency. Under free agency, salaries have exploded, driven up by teams bidding against one another for the services of the best players.

Outside of baseball, organized labor had been making tremendous strides for decades. Why did it take baseball players so long to organize successfully?

Athletes have comparatively less leverage in labor contracts for several reasons:

• Short careers. Athletes age quickly. For a major leaguer in the prime of his career, a labor dispute that costs him even a year of his career could prove devastating. For instance, Curt Flood had to sit out the entire 1970 season. It is rare for players to play into their 40s, so they only have a few years to cash in on their lifetime's worth of practice. Similarly, a minor leaguer would be unwise to miss time practicing and vying for the attention of scouts amid the literally thousands of other young players hoping to break into the bigs (each MLB team has about six minor league squads, in addition to independent leagues and college teams). If a young player is proving to be too much of a problem, the club may just shift its attention to the next kid in line.
• Few alternative opportunities. If workers at a steel mill lose their jobs because of a failed attempt at organization, they can find similar employment elsewhere. In contrast, a displaced baseball player cannot find other opportunities that are quite as lucrative or prestigious.
• Public relations. Workers making near minimum wage are often successful in tarnishing a company's image by appealing to appeal to its customers for support. It's harder for professional baseball players, who make several times the national average for playing a children's game, to vilify the owners by appealing to the fans, many of whom can barely afford to go to a game as it is. Indeed, Flood's analogy  comparing the reserve clause to slavery has been widely ridiculed.