Talkin’ Baseball…Money, Inflation and Baseball



There has been much joy in Cardinal Nation since Cardinals President of Baseball Operations John Mozeliak announced, “I think the good news is we anticipate our payroll going up next year. I know it will. Obviously, we had a lot of success at the game this year. So thank our fans for that. I definitely know that our payroll will go up.”


This is great news for a franchise that hasn’t made it past the first round of the playoffs since being swept in the 2019 NLCS. The fanbase is excited. What shiny new toys will be under the tree come Opening Day?


But this got me thinking. How much would payroll need to increase to truly reflect a renewed commitment from the front office to, at the very least, spend at levels it has been comfortable with in recent years?


Per Cot’s Baseball Contracts (with a little help from Fangraphs for 2022), below are year-end payroll amounts for the Cardinals since 2016.



As you can see, payroll increased steadily from 2016 – 2019. Excluding the COVID-shortened 60 game season, where player salaries were pro-rated, the team has spent less the past two seasons.


So if it felt to you like the Cardinals were spending less on player salaries in recent years than years past, you’re right! Even with Nolan Arenado (opted-in, yay!) and Paul Goldschmidt signed to long-term, big dollar deals, in recent years the Cardinals have relied even more heavily on their farm system to churn out MLB-caliber players on affordable deals, and savvy trade deadline deals, to stay in the playoff hunt.


Mo says the club plans to increase payroll in 2023. What does this look like? Well, in 2019 they committed nearly $179M to player salaries. Does this become the measuring stick for 2023? With Arenado’s opt-in, Adam Wainwright’s extension, an allocation for arbitration-eligible players, and other commitments, the Cardinals 2023 payroll stands at around $160M. Theoretically, with 2019 as the barometer, this leaves around $19M to spend. This doesn’t take into account the $10M Adam Wainwright deferred as part of his new deal, but does account for the $16M the Colorado Rockies will pay the Cardinals for taking Arenado off their hands (thanks chumps!).


But should $179M be the target?


There is another variable that I haven’t seen discussed much in the baseball world, even as it’s discussed ad nauseum otherwise. What impact has inflation had on the baseball world? I’ll save the discussion regarding the hows and whys of the 40-year high inflation the United States has experienced recently for those who enjoy yelling at one another on Twitter, but it would be foolish to discount its impact on baseball salaries. We all know that during periods of high inflation the purchasing power of money decreases. $1 in 2016 was worth more than $1 is today. The dollar is less valuable. Significantly so.


This is great for those with long-term debt, like a mortgage or any other long-term contractual commitment. These contracts were agreed upon at a time when the dollar was worth more. The current value of those contracts today is now less. (+1) for homeowners and owners of MLB franchises, (-1) for renters and MLB players on long-term deals.


What does the Cardinals spending on payroll in recent years look like when adjusted for inflation?


Take a look:



What I’ve done here is list the Cardinals actual year-end payroll, per Cot’s Baseball Contracts and Fangraphs (2022 only) and compared the amount the club spent to an inflation adjusted equivalent to what the club spent in 2016. That is, I’ve taken the Cardinals payroll from 2016, $153,738,117, and adjusted it for every subsequent year to what its equivalent value was for that particular year. What cost $153M in 2016, cost $157M in 2017, and so on.


As you can see the club actually saw a slight dip in spending in 2017, followed by increases for 2018 and 2019. Once again discounting the COVID-shortened season, since 2021, in real terms, the Cardinals have spent less on payroll than they did in 2016. For payroll in 2022 to have been on par with what was spent in 2016, the club needed to have spent in the neighborhood of $190M.


Yes, that’s a lot of wonky number talk. Is anyone still awake? And what’s the point?


Well based on this data, it is my belief that the Cardinals starting point for payroll in 2023 should be $190M. This is the break-even point, matching the value of today’s dollar to that of 2016. Any increase in commitment to payroll from the club would need to exceed $190M. Spending more in 2023, as Mo says, and spending to levels that the Cardinals have spent to in prior years aren’t the same. This off-season should be a wild ride. Let’s see how it plays out. Enjoy it!


Thank you for reading.


-PM

@Cali_Patrick_