Sports Economics: Current Research

By John Fizel; Elizabeth Gustafson et al. | Go to book overview

14 Baseball's New Collective Bargaining Agreement: How Will It Affect the National Pastime?

Daniel R Marburger


INTRODUCTION

Perhaps only the 1919 Black Sox scandal rivaled the cancellation of the 1994 World Series in damaging the image of the national pastime. To add insult to injury, the strike that caused the abrupt end to the 1994 season also delayed the start of the 1995 season. Fan reaction to the two-season strike was severe. Attendance plummeted once the game resumed, and baseball has yet to post attendance figures that rival its pre- strike level ( Major League Baseball, MLB@archives, WWW.majorleaguebaseball .com).

Yet strikes and lockouts are hardly new to Major League Baseball (MLB). Indeed, since 1972, no new agreement has been signed and ratified without the accompaniment of a work stoppage. Of baseball's six stoppages, however, none was as contentious as the 1994-1995 strike.

The 1994 negotiations were stalemated by management's call for a salary cap. The salary cap would fix league payrolls to an agreed-on percentage of baseball revenues. Eventually, the clubs succeeded in placing a substitute version of a salary cap, the luxury tax, into the bargaining agreement. Clubs whose payrolls exceeded an established threshold will have to pay a tax. The proceeds from the tax will be largely used to promote the game.

The 1996 agreement contains some other conspicuous changes. For the first time, revenue-sharing appears in the collective bargaining agreement, and the new scheme radically departs from its predecessor. The new agreement also calls for a temporary payroll tax to be assessed on players and a joint request by Congress to amend baseball's antitrust exemption.

The purpose of this chapter is to examine the 1996 collective bargaining agreement and to predict its effects on the game of baseball. Relying on the economics of sports

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