A minimum wage for pro baseball players? | Professor Matt Ryan
Typically, we don’t consider professional athletes when determining the impact of a minimum wage, because we assume that their wages are far, far above the legislated minimum. For example, the highest paid Major League Baseball player, pitcher Clayton Kershaw of the Los Angeles Dodgers, will make $33 million this season, or approximately $1 million for every game he pitches. That’s about $10,000 per pitch, or about $500,000 per hour of actual in-game pitching.
Kershaw is clearly an outlier, so let’s consider a Major League Baseball player earning the league minimum salary of $535,000. As the season is 183 days long, the minimum salary comes to approximately $2,900 per day during the season. Even if you consider the player to be working for entire year — playing, practicing, or training every single day — the minimum daily salary is $1,465, which is far above the minimum wage.
How much do Minor League Baseball players make?
However, there are a group of professional athletes — Minor League Baseball players — who aren’t nearly as well paid. And they’re taking legal action with respect to the minimum wage and their own wages playing professional sports. Contrary to the popular perception that all professional athletes find themselves in the upper echelons of income earners, a Minor League Baseball player’s monthly wage can be as low as $1,150, depending on the amount of experience accrued and which level the player is assigned to (franchises can have teams at as many as seven separate levels).
Hourly wage equivalents obviously depend on exactly how many hours these players are considered to be laboring — a crucial point of the ongoing legislation — but as a comparison the standard monthly income for a 40-hour-per-week worker at the $7.25 per hour federal minimum wage is about $1,250.
At issue legally is whether Minor League Baseball players are subject to the Fair Labor Standards Act (FLSA), the federal legislation that covers the minimum wage, overtime pay, and a range of other labor market issues. The players, as employees, feel they should be under the FSLA umbrella; the defendant in the suit, Major League Baseball and its 30 clubs, considers minor leaguers to be in a “short-term seasonal apprenticeship,” and therefore not subject to the FLSA.
Should Minor League Baseball players get bigger paychecks?
While it’s certainly understandable that players desire higher wages — after all, supply-side market participants typically like higher prices, while demand-side actors prefer the opposite — the decision of thousands of individuals to voluntarily accept employment as Minor League Baseball players sheds some light on the nature of lower-income employment as a whole.
One important aspect of employment is that compensation often extends beyond the paycheck. Consider my job as an economics professor at Duquesne University. The paycheck I receive is a large part, but not the entirety, of my compensation; there are also benefits I receive that have dollar values, like insurance and parking, as well as those that don’t, like being able to work with prolific economist Antony Davies. All jobs have this paycheck-and-other-benefits dynamic, and it’s an important part of minimum wage analysis.
The compensation of a Minor League Baseball player, while consisting of a paycheck, also contains considerable other benefits — namely, the opportunity to improve as a baseball player and eventually play at its highest professional level. That a small percentage of all Minor League Baseball players ultimately play Major League Baseball is overshadowed by the simple fact that playing Minor League Baseball — either after high school or after college — is far and away the most likely path for prospective ballplayers to achieve their dreams.
Experience in the labor market is tremendously valuable, not only for baseball players but also for the hordes of graduating college students looking to enter the labor market for the first time. Many students accept unpaid internships not because they find income unnecessary but because the most valuable compensation comes from gaining the experience of performing the job.
Much the same can be said about workers earning a legislated minimum wage. Many are accumulating work experience; according to the Bureau of Labor Statistics, about half of those earning the federal minimum wage are younger than 25. Further, over half of minimum wage laborers — about 60% — work part time. These figures imply that minimum wage jobs largely serve to provide the foundation for laborers to increase their incomes — paycheck and otherwise — in the future.
How would a minor league minimum wage affect the players as a whole?
Let’s consider the possible impact on Minor League Baseball should the outcome of the current legal proceedings favor the players and, ultimately, force higher wages for the lowest-paid players.
Minor league wages are paid by the parent organization: the major league club. Since only the lowest-level minor leaguers’ salaries could run afoul of the FLSA, parent organizations desiring to keep their wage costs constant could offset an increase to the lowest level players with a corresponding decrease for higher-level minor leaguers. (In fact, clubs looking for public support could pitch it as a decrease in minor league wage inequality!)
As is often seen in other industries, organizations can also offset mandatory paycheck increases with decreases in other benefits. Minor league players currently receive $25 per diem for meals; this sum could easily be reduced. Spending on transportation and lodging could decrease as well.
And most drastically, although it seems unlikely, the club could also eliminate one or more of the lower-level minor league teams from its operations.
The effects if a mandated minimum wage are hard to foresee in detail. But they are unlikely to be exactly what the minor league players are hoping for.
Article by Matt Ryan, Associate Professor of Economics at Palumbo Donahue School of Business at Duquesne University. Originally published at www.learnliberty.org.