The Chicago Cubs could benefit from increasing minor league salaries

Minor league salaries are shockingly low and represent the next exploitable market inefficiency.  Athletes need proper nutrition and rest to perform at peak levels.  Bumping up minor league pay might be the best investment the Chicago Cubs could make today.

The most valuable commodity in baseball today is a talented player under team control.  In 2015, Kris Bryant, Addison Russell, Kyle Schwarber, Jake Arrieta, Hector Rondon and Kyle Hendricks earned a combined 23.6 bWAR, representing 59% of the Cubs’ season total.  Yet collectively they were paid $6.2m, just 5% of the Cubs payroll.  They were cheap because the MLB collective bargaining agreement grants teams six years of team control over prospects once they reach the majors, the first three at league minimum salary.

Because young talent is so valuable, the Cubs – like every other team – spend significant amounts of time and money scouting amateur players.  Using this information, the Cubs then draft forty new prospects every year, hoping each will turn in an all-star.

And then they pay them $6,500 a year.

That number is not a typo.  Minor league players in Single-A are paid between $1,150-$1,500 a month, and only for the five months of the season (April-August).  Even at Triple-A, salaries are only $2150 per month.  Regardless of minor league level, players receive a mere $25/road-day meal allowance.  These salaries are set, and paid, by the parent MLB teams.  In this case the Cubs.

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Some prospects can supplement their meager pay with signing bonuses.  For example, in the 2015 draft the Cubs paid sizable signing bonuses – averaging $1.5m – to their top five picks.  But the remaining 35 Cubs’ draftees received substantially smaller bonuses.  Sixth-round pick David Berg signed for $50,000.  He was followed by Craig Brooks who got a whopping $5,000.  The next three picks received $30,000, $5,000, and $2,000 respectively.  The remaining 30 draftees, likely received only nominal amounts based on the one documented signing bonus in that group, a $1,000 bonus paid to 33^rd round pick Michael Minacci.  Thus, the vast majority of minor leaguers rely on their meager salaries for living expenses.

A $6,500 salary does not buy much.  Dirk Hayhurst wrote in his book documenting his minor league experience that he lived on peanut butter and jelly sandwiches because it would not spoil and he had no access to a refrigerator.  He talks about playing hungry and sleeping on an air mattress for a season.  He also says his experience was typical.  Which means a lot of prospects are getting sub-par nutrition and restless sleep.  That affects their on-field performance.

For example, lack of nutrition and sleep affect the ability of the prefrontal cortex region of the brain to learn new athletic skills.  In other words, well-rested, well-fed players are more likely to absorb the instruction their coaches are providing.  Plus, better nutrition, in the form of lean protein and fresh vegetables, will aid muscular health, increasing performance and decreasing injury risks.   Teams lecture prospects on the benefits of proper nutrition, they just don’t pay them enough to follow through.

And therein lies an opportunity.  If the Cubs provided every minor-leaguer a $40,000 salary, prospects could afford to eat right and sleep comfortably.   Player development might improve.  Imagine how much free agent money the Cubs would save if the farm system produced an extra major-leaguer every year.  The Cubs will pay David Ross $2.25m to be a backup catcher.  Trevor Cahill will be paid $4.25m as relief pitchers.  Replacing either of these players with a minimum salary prospect would represent significant savings for the Cubs.  If the Cubs developed an extra all-star, it would be worth tens of millions in value.

You may think it unlikely that any low-round, low-bonus prospect would ever amount to a quality major leaguer, much less an all-star.  Yet 62nd round draft choice Mike Piazza was just elected to the Hall of Fame.  Closer to home, Ryne Sandberg was a 20^th round pick.  Plus, low ranked prospects are already blossoming in the Cubs’ farm system.  Ryan Williams was a 10^th round draft selection in 2014 and signed for a mere $1,000.  In his first season, Williams surprised the Cubs by rising to Double-A where he went 10-2 over 16 starts with a 2.97 ERA over 88 IP.  He is now a top-ten Cubs prospect.  and Bottom line, quality major leaguers can come from anywhere.

The Yankees may already be thinking in this direction.  In 2014, they began outbidding other teams for minor league free agents.  Minor league free agents are players who have exceeded 7 years of minor league service but have not yet made a major league roster.  They are usually signed as organizational depth.  Most clubs have fixed salaries for these minor league free agents (in the $80,000-100,000 range) and will not negotiate.  In 2014, however, the Yankees began negotiating with top minor league free agents, signing them for salaries of $120,000-$150,000.  The Yankees recognized that if even one of these players became a valuable bench contributor, it would be a tenfold return on investment.

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The Cubs could get a similarly good return.  I calculate it would cost only $5.4m to pay every Cub minor leaguer a $40,000 salary.  The Cubs have eight minor league affiliates with 25 roster spots apiece.  That is 200 players.  Twenty or so players have salaries governed by the MLB bargaining agreement because they are on the 40 man roster or have major league experience.  That leaves 180 players.  Currently, these players average around $10,000 in salary.  $30,000 in raises x 180 players = $5.4m.  To put that in perspective, the Cubs will pay Edwin Jackson twice that to pitch for another team this year.  Plus, the $5.4 is not merely salary, it is an investment.

The benefits of this investment are, admittedly, speculative.  Every player is not going to miraculously improve.  But a few, here or there, might show slight improvement.  Maybe one or two might take the next step.  Maybe.  But it seems like a good idea to find out.  The Cubs generate well over $300m in annual revenue and have a 2016 payroll of over $130m.  A $5.4m annual investment, that could generate huge payroll savings down the line, seems like a worthwhile risk.  Certainly a better risk than paying $12m to a 39-year-old Ben Zobrist in 2019.

Plus, the benefits of increasing minor league pay extend beyond on-field performance.  A class action lawsuit is already working its way through the courts alleging that current salary structures violate minimum wage laws.  Similar lawsuits, like the O’bannon case, generated intense bad publicity for the NCAA in its “student athlete” fight.  The Cubs could generate a lot of positive PR, and inoculate themselves against future backlash, by increasing minor league salaries now.

Another benefit would be the recruiting effect of these salaries.  Draft picks do have the option of declining to sign, so teams entice promising prospects with signing bonuses.  But each team has a limited pool of bonus money, as defined by the MLB collective bargaining agreement.  An extra $30,000 per year in minor league salary, however, would be a de-facto bonus for every draftee while not counting a penny towards the bonus pool.

For all of these reasons, I think the Cubs would be wise to restructure their minor league salary system soon.