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Wednesday, December 24, 2014

Final 2014 MLB payroll shows Beltway boom; D-backs & Rangers collapse

Awhile back, I conducted research on MLB opening day payrolls and the team winning that season. I found that salaries and winning in the regular season were loosely correlated, but even a mathematical correlation doesn't necessarily mean there is one (association as causation).

In the prior posts, I used opening day payroll as my X-variable. However, now that the season is over, we have the official ending payrolls of teams. I was able to find values for ending payroll from 2000-now, using three different sources. These values are used for luxury tax purposes and accounts for things like salary dumps and midseason acquisitions, along with the rest of the 40-man roster.

The expected win percent is based purely on payroll figures from 2000-14, adjusted for inflation in salaries. From the 2014 season, the Orioles (+9.8%), Nationals (+8%), Angels (+7.8%), Pirates (+7%), and Royals (+6.4%) were the top performing teams relative to their respective ending payrolls, while the Rangers (-10.2%), D-backs (-9.7%), Red Sox (-9.1%), Phillies (-8.8%) and Rockies (-7.8%) all severely underperformed. 

TeamFinal 2014 payrollWin %ExpectedDifference
Orioles$112,707,105 59.3%49.5%9.8%
Nationals$141,803,228 59.3%51.3%8.0%
Angels$164,059,717 60.5%52.7%7.8%
Pirates$78,379,602 54.3%47.3%7.0%
Royals$97,747,983 54.9%48.5%6.4%
A's$91,615,851 54.3%48.2%6.2%
Cardinals$121,003,590 55.6%50.0%5.6%
Indians$83,697,546 52.5%47.7%4.8%
Mariners$108,957,206 53.7%49.2%4.5%
Tigers$173,291,085 55.6%53.2%2.3%
Marlins$52,518,799 47.5%45.7%1.8%
Giants$165,138,449 54.3%52.7%1.6%
Brewers$110,299,643 50.6%49.3%1.3%
Mets$92,856,260 48.8%48.2%0.5%
Blue Jays$135,435,701 51.2%50.9%0.3%
Rays$77,085,054 47.5%47.3%0.3%
Padres$85,467,063 47.5%47.8%-0.3%
Dodgers$257,283,410 58.0%58.5%-0.4%
Braves$114,699,457 48.8%49.6%-0.8%
Astros$54,689,189 43.2%45.9%-2.7%
Reds$115,358,029 46.9%49.6%-2.7%
White Sox$92,472,106 45.1%48.2%-3.2%
Cubs$93,196,617 45.1%48.3%-3.2%
Yankees$218,457,904 51.9%56.1%-4.2%
Twins$91,071,286 43.2%48.1%-4.9%
Rockies$97,975,929 40.7%48.6%-7.8%
Phillies$183,456,686 45.1%53.9%-8.8%
Red Sox$168,178,367 43.8%52.9%-9.1%
D-backs$108,124,871 39.5%49.2%-9.7%
Rangers$145,707,196 41.4%51.5%-10.2%

As you'll notice in the chart below, the Orioles, Royals, and Pirates historically underachieve. So maybe there was market correction in 2014 when those three were in the top five?

To account for the change in salaries over time, I made the CPI variable which tracked movement of average salaries, which more than doubled from the observed time period (2000-14). Basically, all the prior year salaries are converted into 2014 dollars and the multiplier factor depends on the year. Just because a team spent more in 2014, it doesn't mean the team spent more relative to the rest of the league.

TeamAvg. PayrollAvg. Baseball CPIWin %ExpectedDifference
A's$60,544,004 $83,567,393 54.5%47.7%6.9%
Cardinals$98,614,830 $137,731,557 56.2%51.0%5.1%
Braves$93,834,408 $134,321,294 55.2%50.8%4.4%
Angels$110,794,460 $149,960,153 54.8%51.8%3.0%
Giants$100,745,839 $137,427,530 53.2%51.0%2.2%
Twins$68,242,531 $91,232,713 50.3%48.1%2.1%
Marlins$45,570,320 $63,841,758 48.2%46.4%1.8%
White Sox$88,480,236 $120,549,965 51.2%50.0%1.2%
Indians$68,402,902 $98,310,102 49.8%48.6%1.2%
Phillies$114,403,870 $152,476,630 52.6%51.9%0.6%
Red Sox$139,499,156 $192,832,987 55.0%54.5%0.5%
Reds$71,297,800 $96,345,542 48.7%48.5%0.3%
Rays$50,316,371 $70,050,346 46.9%46.8%0.1%
Blue Jays$81,281,310 $111,203,841 49.4%49.4%0.1%
Padres$59,493,766 $84,221,474 47.6%47.7%-0.1%
Dodgers$129,173,887 $176,603,329 53.4%53.4%-0.1%
Yankees$193,117,372 $266,992,063 58.6%59.1%-0.5%
D-backs$79,074,909 $113,736,684 49.0%49.5%-0.6%
Rangers$93,331,986 $129,456,919 49.9%50.5%-0.6%
Brewers$70,293,258 $94,151,612 47.5%48.3%-0.9%
Nationals$66,072,385 $87,443,184 46.9%47.9%-1.0%
Mariners$91,926,390 $129,143,148 49.3%50.5%-1.2%
Rockies$72,909,516 $101,887,560 46.4%48.8%-2.4%
Astros$76,821,338 $110,186,206 46.9%49.3%-2.4%
Tigers$102,008,140 $135,648,943 48.4%50.9%-2.5%
Pirates$50,339,521 $69,588,533 44.1%46.8%-2.6%
Mets$111,941,990 $158,703,919 49.3%52.3%-3.0%
Cubs$102,876,289 $142,688,975 47.5%51.3%-3.8%
Orioles$80,747,533 $113,373,868 45.6%49.5%-3.9%
Royals$58,585,331 $79,056,701 43.4%47.4%-3.9%

Going into this research, I was expecting teams to have vastly different win% expectations using ending payroll instead of beginning. However, most teams were expected to win about the same amount of games. On average the two models differed by 0.16% (about one-fourth of a win per season). 

The A's (+6.9%) are still the highest performing team relative to payroll, while the Cardinals (+5.1%), Braves (+4.4%) and Angels (+3%) round out the top four. Although in a slightly different order, the bottom five remained the same from the last model. The Royals (-3.95%), Orioles (-3.93%), Cubs (-3.8%), Mets (-3%) and Pirates (-2.6%) all have not performed relative to how much each club spent on payroll, but as I mentioned earlier, three of them shined last year. 

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