Has The New York Yankees Payroll Really Changed Much
By Michael A. Rice
It is impossible to pick up a newspaper sports section these days without reading about how the New York Yankees are paying too much money for players and that the fact that the Yankees have such deep pockets is bad for baseball. Not a week goes by without someone complaining that they can’t compete with the Yankees. Is this really true? If it were true, the Yankees percentage of the overall league payroll would be much greater now than at times in the past. Are the Yankees really spending that much more than other teams now than 25 or 30 years ago? To find this out, I used the data on Doug Pappas’s Business of Baseball website that has salary data for each team from 1977 to 2003. This is a good time frame, since this is basically the Free-Agent era of Major League Baseball. I will show that the Yankees are not spending any more money on player salaries relative to the rest of the league now than they were when the Free-Agent era started.
One way to look at Salary on a normalized basis is to take what the Yankees’ payroll was for any one season as a percentage of the total league payroll. This allows us to make an apples to apples comparison of team payrolls.
According to The Sporting News guide, in 1977 the New York Yankees had a payroll of $3,474,325 out of a total league payroll of $23,854,375. This was 14.56% of the total league payroll. According to the Associated Press, in 2003 the New York Yankees had a payroll of $149,710,995 out of a total league payroll of $952,938,250. This was 15.71% of the total league payroll. In both years, the Yankees were in the World Series and in the middle of a dynasty. It seems as if the Yankees aren’t spending more for players on a percentage basis of league payroll now then they were in 1977. A person might say, “Well, yes, it is true that the Yankees percentage of league payroll isn’t much different now than in 1977, but there are so many teams that have small payrolls that the distribution of the payrolls is much greater.” One way to look at this is to use standard deviation. The standard deviation is defined as the average amount by which scores in a distribution differ from the mean, ignoring the sign of the difference. The larger the standard deviation, the more disbursed team payrolls are. In 1977, the standard deviation for payroll in the American league was 3.05%. In 2003 the standard deviation was 3.45%. This means that while payrolls were more disbursed in 2003 than in 1977, they were not that much more disbursed. In 2001 and 2002 the standard deviation of league payroll was less than 3.00%, less than in 1977, meaning that payrolls were less spread out than in 1977. Here is the graph that shows the standard deviation of American League payroll from 1977 to 2003.
As the chart shows, the period of 1996-2003 and period of 1977-1982 were both times when the standard deviation of payroll was the highest in the American League. These periods both coincide with the last two Yankee dynasties. This leads to another question. Was the payroll of the Yankees really that much higher than the rest of league? If the Yankee payroll were significantly higher than the rest of the league, they would have a very high Standard Deviation Score. A Standard Deviation Score is how many Standard Deviations above or below the mean payroll the Yankee payroll is. As an example, in 1977 the average American League team had a payroll that was 7.14% of the total payroll for the league and the standard deviation for the payroll was 3.05%. The Yankee payroll that year was 14.56%, meaning that the Yankee payroll was 7.42% above the league average payroll. To find the Standard Deviation Score, divide 7.42 by 3.05. That number is 2.43. This means that the Yankee payroll in 1977 was 2.43 Standard Deviations above the mean payroll for the league. In 2003, the Yankee Standard Deviation Score was 2.47, or almost exactly the same as 26 years earlier. These are the two highest Standard Deviation Scores for the Yankees. What this means is that in 1977 and 2003 the Yankee payroll was the highest above the mean. On average the Yankee have had a Standard Deviation Score of 1.73. By means of comparison, the Los Angeles Dodgers have an average Standard Deviation Score of .86, with a high of 2.02 in 2001. Between 1981 and 1984, the Dodgers actually had payrolls below the league average, something that has never happened to the Yankees. The Dodgers even managed to win the World Series in 1981, but that is a topic for another paper.
Below is a chart showing the yearly Standard Deviation Score for the Yankees from 1977 to 2003.
During the past 27 years, Major league Baseball has changed a great deal. Teams have been added, historic records have been broken, and there have been bitter labor stoppages. During this time, there has been one constant. No matter how good or bad they maybe, the New York Yankees will have a high payroll that is substantially above the league average. If it wasn’t ruinous for baseball in 1977, there is no reason to believe that it will be ruinous for baseball in 2004 and beyond. While having a large bankroll is nice to have, it is no guarantee of success on the field.