One of the "core economic issues" that's driving MLB's ongoing owner lockout is the structure of salary arbitration moving forward. To be sure, the current labor kerfuffle isn't reducible to a single matter -- unless that matter is "money and how it's divvied up" -- but the structure of salary arbitration is perhaps the most active battleground.
In general terms, the players and their union want major leaguers to be eligible for salary arbitration sooner than they are at present. Owners, in contrast, would very much prefer things to stay the way are since the status quo is working quite nicely for them.
For the uninitiated, salary arbitration is the process by which players who have between three and six years of MLB service time (in rare instances, between two and six years) and are not under a pre-arbitration contract extension have their salaries determined. This is achieved by the player and his team exchanging salary figures for the upcoming season and then presenting their respective cases to an arbitration panel. The panel then selects one figure or the other – either the team's proposed salary for the season in question or the player's figure. There's no splitting the difference or coming up with their own number. This approach, sometimes referred to as "final offer arbitration," in essence forces each side to make a serious, plausible offer and then marshal a data-driven argument for that offer. The system has the intended consequence of fomenting negotiation between the two sides, and the vast majority of arb-eligible players settle with their clubs (or, increasingly, are non-tendered) before it gets to the point of a hearing before the panel.
For the players, arbitration eligibility is a key career threshold because it marks the first time that teams are obligated to pay more than the MLB minimum salary, which last season was $570,500. Reaching that threshold can mean life-changing money for the young player and less desperate to sign a vastly below-market extension.
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This plays into what the union primarily wants from these negotiations on a new collective bargaining agreement (CBA). Namely, the union wants address its shrinking share of league revenues by altering the economic structure of the game to get young players paid more and paid sooner. Teams are leaning more and more on those young players in large measure because they're so grossly underpaid in their pre-arbitration and pre-free agency years. From the union standpoint, the clearest path to address that imbalance would be one toward a significant increase to the minimum salary while at the same time angling to lower the bar for arbitration eligibility to two years rather than three. Owners, meantime, are anything but inclined to cooperate.
At this point, however, it's worth noting that arbitration eligibility used to begin after two years of service time, which means the players want to restore those origins rather than venture into the unexampled. At least somewhat ironically, it was the owners who advanced the idea of salary arbitration. They did so because they both feared and loathed the player holdout and were particularly cowed by the dual Sandy Koufax-Don Drysdale holdout of 1966. Owners saw the arbitration process as a way to prevent holdouts, but they failed to see the larger implications of the process. Specifically, they failed to see that the binding, final-offer nature of the process would drastically increase player salaries even before free agency ever came along.
In the winter of 1973-74, MLB owners approved the plan for salary arbitration with just two nay votes, and the players with the foresight of pioneering union head Marvin Miller eagerly agreed. Salary arbitration went into place that offseason for players with at least two years of MLB service time. Furthermore, no limitations were placed on how many times a player could go through salary arbitration. That timeline – at least two years of service time for eligibility – persisted for the first 11 years of the existence of salary arbitration and through three separate CBA negotiations.
Finally during the negotiations that would lead to the 1985-89 CBA, then-commissioner Peter Ueberreroth pressed to push the onset of arbitration eligibility back to three years. At the conclusion of an August 1985 players' strike that lasted two days, the union agreed to that request in exchange, broadly, for increased pension payments, elimination of the free-agent draft that had prevailed for some time, and the removal of ownership proposals to cap team payrolls and arbitration rewards. That three-year bar for arbitration eligibility has been in place ever since then with one small wrinkle beginning in 1991. Now known as the "super-two" clause, that wrinkle allowed players who ranked in the top 17 percent of those with between two and three years of service time to be eligible for an extra year of salary arbitration. For the last several years, it's been the top 22 percent, but otherwise only those with at least three years of MLB service time can partake in salary arbitration.
From the players' standpoint, the reality is that MLB for years operated with arbitration eligibility after two years without collapsing (and indeed thriving), so there's a strong precedent for their current position. Owners, though, aren't going to give up territory already conquered, at least not without a fight and without concessions elsewhere. Given that the union has thus far proved more willing to alter its bargaining positions, perhaps they shift to expanding (by a sizable margin) the percentage of those eligible for super-two status, but there's strong historical justification for insisting on two-year eligibility for all. As noted, such a restoration would directly address the under-compensation of those young players.
Owners, of course, are free to resist these efforts, but they can't pretend as though it's an unreasonable position.
