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Wednesday, August 21, 2002

Why There Won’t Be a Strike

I sure hope Eugene is right.

There has been a lot of hue and cry on SABRmetric websites such as Baseball   Primer and Baseball Prospectus   about why neither of the owners’ key proposals will increase competitive   balance. There has been even more hue and cry in the mainstream media about   why the spoiled, greedy players, who average $2.4M per season, should not strike,   especially with the first anniversary of the September 11 terrorist attacks   only a week and one-half after the scheduled strike date. This column deals   with neither of these issues and you should be glad about that because the topics   have been discussed ad nauseam over the past few weeks.

Last week we heard a lot of optimism from the players who delayed setting a   strike date. Instead of the sides moving closer together, nothing happened.   That’s why one sets a strike date if one is the Union. But, it also showed   that the owners wanted a strike date to be set. They wanted the upper hand in   the media campaign that was shortly wrested from them by the players deciding   to defer any action. Now that the owners are again winning the media war, something   that the players care little about, they have begun negotiating again at the   table.

First, there is a procedural issue that has not yet been addressed. The players   have not yet voted to strike. I do not have a copy of the MLBPA Constitution   and By Laws, but I can assure you that the players must individually vote to   strike. Instead, all that has happened thus far is a sense of the Union has   been taken by the Player Representatives on each team, and from that sense,   the Executive Board of the Union has authorized a strike date. Eventually the   vote will have to be taken, and it is likely the vote will be pro forma, but   it is necessary for a strike to occur. Even so, I do believe that should it   come down to a vote, the membership will authorize a strike.

The real reason that there won’t be a strike has to do with the owners.   The owners have already won. This may come as a shock to you, but it is true.   Go back to the beginnings of this collective bargaining process. The owners   were calling for increased revenue sharing, a much stronger salary tax system   than was in the previous CBA, a worldwide draft, and steroid testing. Which   of those issues have they not achieved? The Union began by arguing that owners   were not losing money as they said they were. They argued that a salary tax   was a de facto salary cap and they weren’t going to buy into any salary   cap. They argued that steroid testing would violate players’ privacy.

Since then they have agreed to a worldwide draft. I actually think this is   good for the Union as a whole. Remember, the Union is made up of its current   members. It only has to negotiate on behalf of its current members. Foreign   players who are currently free agents take away potential money that could be   spent on Major League free agents, who are current members of the Union. If   those foreign players become part of the much lower paid class of draftees,   then more money will be spent on the current membership of the Union.

The Union then bought into steroid testing. Although the system is not yet   fully fleshed, or in this case muscled, out, it will be in effect beginning   in 2003. The Union’s proposal maintains the anonymity of the players and   protects them from discipline. These are the two major issues that the Union   was arguing on positionally. So they were able to meet their interests without   being locked into a position.

Now the Union is wrestling with a salary tax. The Owners have proposed taxing   the portions of payrolls over $102 million (using 40-man rosters and including   $9 million per team in benefits), and using a tax rate of 37.5 to 50 percent.   The Union has proposed thresholds of $130 million to $150 million, with a tax   rate of 15 to 30 percent. Where is this compared to where we were months ago?   It’s a long way. The players have already bought into the principle of   taxing salaries based in the manner that the owners want- based upon a fixed   cap. Once the cap is exceeded, each marginal dollar is taxed. This is a complete   departure from the Union’s original position. First, they were philosophically   opposed to a tax. Second, if they were to accept a tax it should be like the   tax under the last CBA. That tax was levied against the five highest payrolls   only. This allowed each team to move upward without penalty as long as they   stayed outside of the top five. Conceding to the owners fixed ceiling, whether   it’s at $102M, $130M, or somewhere in between is already a capitulation   to the owners.

Many of the owners are looking to break the Union. That is not a realistic   goal. Their goal should be to achieve their proposals at the table, and if they   cannot achieve them totally, they should look to achieve them longer term. Once   the majority of owners realize that they’ve achieved their goals this   will settle quickly. Part of that realization has to do with the messenger.   Selig always talks in terms of gloom and doom. He may paint the picture of the   current bargaining as still positional based. But, it’s not. The owners   have won on principle. If that’s presented to them in any coherent manner   this will settle without a strike.

Next there is the issue of revenue sharing. We haven’t heard too much   about this issue in recent days, or even weeks. I can’t even find exactly   what the current proposals are. To me this means that the owners aren’t   as united on this issue as they are on the salary tax. They want to punish George   Steinbrenner for having a salary expenditure that’s far and away the most,   but they’re not so sure they want to punish him for having the biggest   draw. Sure the Yankees are the biggest draw, but there are others who are close.   Can Cleveland really support more revenue sharing? Can the Phillies justify   receiving more money? Also, I wouldn’t doubt it if some owners don’t trust each   other to report revenue accurately. Even though this issue keeps being reported   as open there are no facts or proposals attributed to either side anymore. They   are either so close that it’s no longer significant or one side- the owner’s   side, is so divided on this issue that they don’t even have proposals   anymore. Eventually this one will be settled quickly.

Finally, we have contraction. We also have an arbitrator who appears unable   or unwilling to decide the case. Many times I will contact an arbitrator and   ask that a decision or hearing be held in abeyance pending settlement discussions.   This allows the parties to negotiate the issue without the pressure of a third   party ruling one way or the other and mooting discussions. I would suspect that   the owners have already given in on contraction for the Union’s concessions   on a salary tax system. It is far better to reduce pay slightly overall then   lose 80 jobs. And, don’t doubt that the Union considered this to be 80   jobs, because each team in question has a 25 man active roster, but 40 players   considered Major Leaguers, receiving benefits, and paying Union dues.

The important thing to note in all of this is that both parties are on the   same page for each of the issues now. They are dealing with numbers only and   not principles, theories, and positions. The owners have achieved all of their   overarching goals. The Union has prevented those goals from being achieved to   the fullest extent possible while saving 80 jobs. I don’t know whether   or not a critical mass of owners will realize that they’ve won on principle   prior to August 30. In the final few days leading up to August 30 there will   be a lot of conference calls and perhaps a few face-to-face meetings. At some   point one of the owners will figure it out and explain it to his colleagues.   Perhaps they already know. That is what will prevent a strike. The owners have   won, they only have to figure out that they have.

 

Eugene Freedman Posted: August 21, 2002 at 06:00 AM | 10 comment(s) Login to Bookmark
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   1. Eugene Freedman Posted: August 21, 2002 at 12:41 AM (#605916)
Although my home computer is now officially dead, due to the W32.Klez virus, I do have access at work.

I just read Doug Pappas' site regarding the open issues and have reviewed the recent proposals regarding revenue sharing. Both the Union and owners have proposed increase sharing as we well know. According to the most recent public disclosures the parties are $50M apart and differ in terms of how to distrubute the revenue sharing. The Union wishes to use the current method based upon a higher amount of shared revenue distributed to the lower revenue teams, whereas the owners want a per capita distribution. The owners also have proposed a larger Commissioner's pool. That difference is approximately $40M. Since the parties are apart by approximatley $50M and $40M of that is the Commissioner's pool, it does not appear as if they are too far apart. As I said, the owners are probably not as unified on this issue as they are on the payroll tax, so $50, or on average only $1.67M per team is not likely to scuttle the deal.
   2. Andere Richtingen Posted: August 21, 2002 at 12:41 AM (#605917)
A predictably insightful article from Eugene Freedman. I'm somewhat convinced, but I have doubts that rational thinking will prevail among the owners regarding their own self-interests. They may well realize that the players have given them significant concessions, but only look at that as an opportunity to get more out of them.
   3. Srul Itza Posted: August 21, 2002 at 12:42 AM (#605928)
Eugene:

I have done labor negotiating and settlement negotiating for several years now, and based on the "published" information, and I have come to essentially the same conclusion as you did: The "principle" type issues have been resolved, the Union has made some significant (abnd surprising to me) concessions on the salary front, and they now are only talking about dollars, with the numbers being so close relative to the whole sum at stake that a labor settlement is the most likely rational outcome.

The only fly in the ointment, as I see it, is on the Owner's side, because you are not dealing with a single entity, but with a groud of owners -- essentially a committee. It has long been my experience that among the worst of all possible clients is a committee. You never know how the dynamics are going to work, or when someone with a very strong agenda which is not necessarily in everyone's else's interest will manage to hijack control.

So if everything plays out by a logical scenario there will be settlement. Of course, the normal scenario is often a last minute or courthouse steps type of thing, and I would not be surprised if we lost a few games in the process of getting to a settlement. Let's hope that logic wins out.

BTW: You referred to the fact that there has to be a vote for a strike. Do you happen to know how many owners have to agree to have a deal?

   4. Eugene Posted: August 21, 2002 at 12:42 AM (#605930)
The owners require a 3/4 majority to approve the CBA; a very high threshold to be sure. This was put into place just prior to the 1994 negotiations process. Selig, Reinsdorf, and a few others could use this to scuttle any deal, but the internal pressue of an "outing" of their position might convince them not to fight to the death. I wonder if Selig gets to vote for the Expos and his daughter for the Brewers, or if the Expos no longer have a vote.
   5. Walt Davis Posted: August 21, 2002 at 12:42 AM (#605939)
Eugene, I'm a bit confused about your first comment (i.e. not the article itself) on revenue sharing plans. I thought the Union had proposed revenue redistribution based more on market size while the owners had proposed something closer to the old distribution plan, though giving a bigger break to the "middle market" teams. Could you give some more detail.

I agree, the owners have won and all they need to do is realize it. The luxury tax is still a hurdle, but I wouldn't be surprised to see something like a 20% tax at the owners' threshhold and a 50% tax at something close to the players' threshhold.

But if folks wonder why the owners may not be able to agree on this....according to <a > ESPN</a> via <a >the Union</a>, the Yankees total revenue sharing plus tax will be around $87 M per year. Using Forbes estimated franchise values, the Dodgers are worth $435 M. Over 5 years, the Yanks will have paid enough in revenue sharing and tax to have bought the Dodgers. The Mets, Red Sox, and Mariners would all be in the $30-35M range, so over the next 5 years, they'll have combined to pay enough for the A's, Royals, and Blue Jays.

It's hard to imagine that the high revenue teams will tolerate this for any length of time. It's not just revenue being shared, but franchise value is being shifted from the Yankees et al to the Royals et al. This move will make lots of money for the David Glasses of the world.
   6. Shredder Posted: August 22, 2002 at 12:42 AM (#605946)
Excellent article, Eugene. You summed up a lot of the points that you've made in previous points very succinctly, and hopefully you're right and a deal will get done.

The only thing I would quarrely with is this sentence in response to a post: The owners require a 3/4 majority to approve the CBA. Certainly you must understand that this is merely a formality, because Bud and company *never* make a decision that isn't unanimous. Like the 30 votes for contraction, for instance...or was it 28...or even less?
   7. Don Malcolm Posted: August 22, 2002 at 12:42 AM (#605947)
I think the best bet for the Union at this point would be to tell the owners that they'll accept their revenue sharing figure (maybe even the higher one that was on the table before the most recent offer) in exchange for a removal of the salary cap...er, "luxury tax" provision altogether. They might want to also make a few concessions in arbitration as well, in order to "sweeten" the deal.

There will be no "winner" in this situation, IMO, until the luxury tax concept is dead and buried. And that doesn't appear to be likely, at least not in this round of negotitations.
   8. Marc Posted: August 22, 2002 at 12:42 AM (#605954)
I agree that the owners' proposals are about salaries, but do relatively little (I wouldn't say nothing) to help small market teams. So here in Minnesota contraction is still the big issue. And knowing Minnesotans as I do, if contraction remains an option, if we still have a gun to our head, Minnesotans will refuse to fund the stadium and the team will contract. If contraction is not an option and if "baseball gets its house in order," Minnesotans may decide to fund a stadium. In that case MLB will have won here in Minnesota by getting a stadium without really helping the Twins compete.

As an aside, if there is a vote, there will be a strike. A prominent legislator and supporter of public funding for a Twins stadium sent a letter to Denny Hocking, the Twins' player rep, in which he said that a strike would kill a stadium deal. Hocking said, basically, gee, this sounds like he's blaming me (personally). I'm just one guy. What good is it if the vote (among Twins players) is 24-1 instead of 25-0. It seems never to have occurred to him to share this information with his teammates, to ask them to consider any reasons why NOT to vote for a strike.
   9. Marc Posted: August 27, 2002 at 12:44 AM (#606042)
Jonathon,

Yes, this legislator has made it clear to Carl's sons and president Jerry Bell that a strike will probably kill a Twins stadium deal.

The letter to the players is important, however, because it is the players whose position right now is less consistent with the Twins' ability to compete longer term. With the economic situation of 1995-2002, even a new stadium doesn't enable the Twins to compete. Significant revenue sharing and luxury tax are necessary for the Twins, Pirates and many others to have a chance.

The fact that "Twins players" are not sympathetic to this argument unfortunately makes it clear that they are not first and foremost "Twins players," that their loyalty first and foremost lies somewhere else.

As Paul Molitor has said, is Don Fehr really doing what's best for the players when his proposals relegate two-thirds of them to non-competitive status long before opening day?
   10. Marc Posted: August 27, 2002 at 12:44 AM (#606043)
PS. I just saw that a CNN-USAToday-Gallup poll showed that 38 percent of fans were more sympathetic to the owners and 26 percent to the players, with 30 percent sympathetic to neither. Given the owners are represented in the public mind by Bud Selig and George Steinbrenner, you gotta admit that the players have managed to come off very badly. It is clear that theirs is the more unfriendly position as it relates to the hopes and dreams of most fans (ie. fans of teams other than the Yankees and Dodgers).

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