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Monday, April 05, 2010

As the Baseball Season Begins

It's time to take a brief look at the payroll numbers, as reported by USA Today.

Not surprisingly, the Yankees had the highest team payroll, both in 2010 ($206.3 million) and in 2009 ($201.4 million). In 2010, the Pittsburgh Pirates seem poised to begin the season with the lowest team payroll ($34.9 million, down 28% from 2009). The Pirates' payroll decline is MLB's largest (14 teams enter this season with lower payrolls than last, and 11 of these teams have cut their payrolls by 10% or more; Toronto, at -23%, and Cleveland,at -25%, were fairly close to the Pirates; the largest dollar reduction: Cleveland, -$20 million; Toronto, -$18 million, and the Mets, -$15 million).

If 14 teams cut their payrolls, then 16 teams increased them. Boston (+$40 million), Minnesota (+$32 million, partly on the basis of Joe Mauer's large salary increase), and Philadelphia (+$28 million; winning two consecutive pennants will do that to you) led the way in dollar terms, with Florida (+55%), Minnesota (+49%), and Boston (+33%) having the largest percentage increases. And Boston managed the third largest payroll increase from the third largest base ($121 million, behind only the Yankees and the Mets--$149 million--in 2008).

Overall, the average team payroll is up 2%, from about $88.9 million to about $90.6 million. In 2008, the largest team payroll was 5.47 times as large as the smallest (again, that's the Yankees and the Marlins); this year, it's 5.9 times as large (Yankees and Pirates).

There's a fair amount of stability at least in the rank order of team payrolls; the correlation between 2010 payrolls and 2009 payrolls is 0.91 (1.0 is the maximum correlation).

How well does payroll correlate with winning? Here, the answer may depend on what your expectations are. Payroll clearly does not determine team wins, although it is fairly strongly related. The correlation between team's payrolls in 2009 and their wins was 0.48. Perhaps not surprisingly, the correlation between 2010 payroll and 2009 wins is stronger, and significantly stronger, than that: 0.59. Clearly, teams pay a price for winning. The correlation between 2010 payroll and a team's change in wins from 2008 to 2009 was also 0.59--so getting better also has a (future) cost. And the correlation between a team's change in payroll from 2009 to 2010 with its change in wins from 2008 to 2009 is also relatively robust, 0.42. (the correlation between the percentage change in a team's payroll and its change in wins is somewhat smaller, only 0.38).

Oh. And were the best teams in 2008 and in 2009 the same? Well, yes and no. The Phillies and the Dodgers both repeated as division champs, and the Phillies made the World Series in both years. Only the Angels repeated as division champs in the AL, and the Yankees, who won the Series in 2009, were not in the playoffs at all in 2008. More concretely, the correlation between wins in 2008 and wins in 2009 was a significant, but not huge, 0.48.

Let the games--and the arguments about whether you can buy a pennant/World Series--begin!


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