That baseball is our national pastime, and has been for so long that it has become our national metaphor, is itself a cliché. But it has rarely been seen as a harbinger of trends in the labor market.
For almost a century, labor relations in baseball were mired in the reserve clause, dating from 1879. The clause was standard in every player’s contract, and gave team owners the right to “reserve” a player for the season. Players had no way to leverage their talent to the highest bidder; the only choice a player had was not to play at all.
While other industries unionized during the 20th century, and the rights of workers as employees expanded, conditions for baseball players remained petrified by the clause. The Brotherhood of Professional Baseball Players was founded in 1885 and a succession of unions followed, but they were never very effective, and in 1922, the U.S. Supreme Court ruled that baseball was an “amusement,” not an industry, and thus did not engage in “commerce” and was not subject to antitrust legislation or labor reforms.
It was hard for players to gain public sympathy; after all, they got paid to play a game they loved. Finally, in 1975, the Major League Baseball Players Association was able to break the reserve clause through a decision in arbitration, and free agency was born.
Free agency worked for the players because of the transparency of the market. Everyone knew how each player had performed and how much each had been paid, so negotiations were just about the probability of the player delivering certain metrics in the upcoming seasons.
In most jobs, even today, there is no such transparency around pay and performance; each employee negotiates with the employer without knowing what colleagues are paid or how their performance is measured. Ironically, it is usually only for the lowest-paying positions that wages are known, and then because they are minimal. But in a professional sport, especially one so publicly played and statistically analyzed, like baseball, neither performance nor pay is secret.
In 1975, we did not live in the gig economy, and employment meant having an employer. Free agency seemed enviable: bargaining your way to a higher salary by putting your very visible performance up for bid. And for the players who made the headlines, the bargaining paid off handsomely; they got paid a fortune to play the game that they loved. Younger players earned relatively little until they qualified as free agents, but then were well rewarded. Contracts got bigger and bigger and team payrolls went nowhere but up. Now those trends have begun to reverse. Unlike the “moneyball” innovations by teams in less lucrative markets, teams—even the wealthy, major market Yankees and Dodgers—are cutting back on payroll. And it’s not for lack of revenues, which have never been higher, coming from new media streaming outlets as well as cable and ticket sales.
While there are still the widely reported megadeals, they are few. Most free agents are signing for less, or re-signing with their teams to avoid free agency at all. More than a few, even stars, remain unsigned as the season begins. They have lost bargaining power as teams have simply stopped buying—even if it means that they have stopped winning or are taking the “rebuilding year.” As a result, in 2018 both total team payrolls and the average player salary actually decreased. And while it is still hard to find sympathy for those who, after all, get paid to play, we should perhaps take note.
The bidding for talent that began with free agency in 1975 presaged an era of superstardom—not just in sports but also in entertainment, finance, medicine, higher education, and just about every profession—which saw earnings concentrated and wealth accrued only among the best in show.
Those labor economics are great for the superstars who could command their share of that wealth, but not so much for everyone else. Yet, that changed labor market has been widely applied. We are all expected to compete for and negotiate salary, albeit without the advantage of transparency or the security of lucrative contracts.
Now that even the superstars are less able to negotiate for their pay, we should wonder how many employers are likewise willing to sacrifice performance to regain labor market bargaining power, and we should wonder how employees will be able to bargain at all, because in this gig economy, we are all free agents now.