By Daniel Adler
We’ve hit the big-time…an article in the Wall Street Journal (the real deal–print edition!). The article looks at whether increasing payroll leads to more wins. The short answer: no.
The following graph uses a 9.37% rate of inflation so we can compare change in spending across the past 19 seasons. Wins for the strike shortened 1994 and 1995 are adjusted to full season levels. The r2 level is very low and the p-value is insignificant. Payroll data is courtesy of the USA Today salary database.
More analysis after the jump…
Looking at last season, the ten teams with the largest increases in opening day payrolls fared a total of 77 games worse than in 2008. Of the ten largest payroll gainers, only the Marlins and Phillies improved and it was by a total of four games. The Yankees did win 14 games more after committing $423.5 million to CC Sabathia, Mark Teixeira, and A.J. Burnett last off-season, but the team’s opening day payroll actually dropped since the high priced contracts of Bobby Abreu, Jason Giambi, Carl Pavano, and Mike Mussina came off the books.
It is still true that a larger payroll does predict a higher winning percentage (more on this to come), but since the teams that increase payroll are often coming off a stronger record, it may appear that spending more is not actually that helpful. In some cases, teams that increase payroll (like the 2009 Rays) may not actually improve their team, but rather “tread water” and pay a lot of money to retain their players.
A future post will look at whether spending more is helpful when you control for previous wins (i.e. if two teams both have 85 wins and team A increases payroll by X and team B decreases payroll by Y, how does this impact their chances?). My guess is that when controlling for previous wins, spending more will actually be a predictor of winning more.
Special thanks to David Biderman at the Journal (or Michael Scott likes to refer to it, “The Wall”) for working with HSAC on this article.