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Business News NEWSROOM

High salaries do not ensure winning major league baseball teams

Sept. 3, 2002

"If owners want to ensure parity in Major League Baseball, the answer isn't necessarily trying to slow down the runaway train of outrageous salaries on which George Steinbrenner is the engineer. Rather, they should pay more attention to doing the much harder, but highly rewarding, job of player evaluation and development. The problem lies more in owners' inability to correctly judge the talent and potential of players and paying high salaries for underperforming players," says Dr. Kirk Wakefield, chair of the marketing department at Baylor University's Hankamer School of Business.

Dr. Wakefield has examined payroll and player performance data for Major League Baseball (MLB) and its relative effect on winning percentages for the entire league for the last decade, showing that payroll does have an impact on winning, but not as great an impact as all-star players, who may or may not have high salaries. The data seems to indicate that owners are not efficient at evaluating and rewarding talent, otherwise salaries and the number of all-star players (including MVP's and Gold Glove winners) would be more closely related to each other. "Clearly, there are a lot of over-paid players," he says.

Major League Baseball (MLB) players are threatening to strike tomorrow (Aug. 30) in what may cancel the rest of the season, as they did in 1994. The main point of disagreement between owners and players is the luxury tax, which teams with very high payrolls will have to pay and that will be redistributed to the other teams.

For more information,Wakefield can be reached at (254)710-4267 or by email Kirk_Wakefield@baylor.edu.

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