Weep on! and as thy sorrows flow,
I 'll taste the luxury of woe.

-Sir Thomas "Jo-Jo" Moore

Baseball released its payroll numbers for luxury taxes and-surprise!-the Yankees are the only ones who pass the $117 M threshold.

I did a little research though and found that salaries remained relatively flat over the last year. I took the payrolls from an October 11, 2002 AP article that I found at Doug Pappas' Business of Baseball site. However, these numbers are based on 25-man rosters and the ESPN report is based on 40-man rosters. Therefore, I added 15 spots to each team with each spot receiving the league minimum $200K. Also, I added $7,552,271 for health benefits and so that the Yankees don't have to lay off more office staff. I also calculated luxury taxes for 2002, had they then existed.

Here's what I got:

Salaries are a lot flatter apparently this year. But are they equally flat for all teams? Let's take a look.

First, I calculated the difference between the 2003 and 2002 salary per team. Then I represented that as a percentage of each team's 2002 payroll. Next the teams were grouped based on 2002 payrolls. The Yankees were in a class by themselves and then the rest were group at about a half-dozen at a time whenever an appropriately large gap presented itself. Then the payroll differences and percent increase/decrease were calculated per group:

Note the largest dropoff was in the highest salaried teams (aside from the Yankees). The next group stayed about the same and then the next two groups grew at 5-6%.

What this means is that the Yankees' payroll increase looks even sharper when compared to the other high-salaried teams. Let's take a look at team payrolls based on 2002 and 2003 "Yankee dollars", meaning using the Yankees' payroll each year as the standard (i.e., $1.00) and representing the other payrolls as percentages of that:

That's quite a change. Consider that Minnesota increased its payroll by the fourth largest amount in the majors ($13 M, behind the Yankees, Phils, and Cards) but had exactly the same value for Yankee Dollars each year. The Phils were the only team to see their Yankee Dollars increase in 2003. The highest 2003 value (i.e., the Mets') was twenty Yankee Cents less than the highest in 2002 (Boston's) and the lowest was 13 Yankee Cents less (Tampa Bay for both).

One interesting side note, the Astros seem to have the finger on the pulse of whatever is afoot here. They are the closest to average in just about every category so far. The 'Stros took on Jeff Kent's contract but just had a small increase in payroll.

So what does it all mean? Are the highest-salaried teams (aside from the Yanks) just attempting to avoid the luxury tax? Are the lower-salaried teams spending more in anticipation of actual Yankee dollars stuffing their coffers? Who invented liquid soap and why?

Of course, each team has its own set of issues and is to a degree working independent of the rest. But the market does help dictate salary trends. To help make sense of it all, let's look at the necessary salary costs incurred in winning. Here is a table of team wins for 2002 and what each win cost that team in 2002 payroll:

The Yankees are not first and are only about 50% higher than the average. Also note that playoff calliber teams are scattered throughout with the A's-surprise!-getting the best bang for their buck.

Now let's look at the numbers based on 2003 projected wins and the ESPN payroll numbers:

If the season ended today teams that are numbers 1, 7, 10, 13, 14, 17, 19, and 30 in payroll per win would make the playoffs. In 2002, teams number 2, 7, 10, 15, 17, 23, 29, and 30 made it. So much for the Blue Ribbon Panel's postseason research by payroll quartile. That translates into an average payroll position of 13.875 for 2003 playoff teams and 16.625 for 2002 playoff teams. This is an extremely small sample, but it is possible that teams spending more money are now more likely to make the playoffs. Also the standard deviations for the two year's playoff team positions have shrunk (10.18 in 2002 to 8.66 in 2003) meaning that the playoff teams are clustering nearer to the average.

It should be noted that the standard deviation for payroll dollars per win overall increased significantly, from $266 K in 2002 to $317 K in 2003. Even if you remove the anomalous Yankees from the equation, there is still a large increase ($257 K to $283 K). So if you are expecting the Billy Beane revolution to take hold throughout the game, you may have to wait a bit.

If you look at the standard deviation for team payrolls it increased overall from last year to this year, ($25,692,726 to $29,124,676). However, again ignoring the Yankees returns a slight decrease ($22,925,727 to $22,512,263), meaning that the team payrolls outside of the Bronx may be converging.

So what do I think it all means? Way back in the negotiating process for last year's CBA, the owners started bandying around ideas that sounded pretty close to a salary cap. Even in the final agreement, there were many, including yours truly, who called the new system a de facto cap.

I think that given the indicators above there is some validity in that claim. Payrolls aside from the Yankees have grown much more slowly and they are tending to converge. However, the approach taken varies per team. Therefore, what teams are paying per win has diverged.

So if anyone is concerned with the homogenization of baseball that a cap would engender, it doesn't appear to be an issue. Teams like the A's and Jays who spend wisely will still win for less money and teams like the Rangers and Mets (at least in Steve Phillips' day) who overspend for marginal talent will still get a bad return on their investment.