Payroll, performance and realignment in MLB

As a new baseball season begins, the idea of realigning the MLB divisions to promote greater competitive balance has gained momentum. In an article for Sports Illustrated, Tom Verducci described how a 14-person committee organized by MLB Commissioner Bud Selig has discussed the topic.

The idea goes something like this: Teams like the Baltimore Orioles and Toronto Blue Jays have been oppressed by the dominant resources of the Boston Red Sox and New York Yankees. Given that MLB does not have a salary cap, smaller markets like Toronto never earn the shot at the playoffs they might have if they were in, say, the National League Central.

The idea of mixing up the divisions basically acknowledges the disparity created in baseball when the top team has over five times the financial resources of a competitor. By entertaining the notion of divisional restructuring, MLB officials are acknowledging two points:

1. There is a competitive disparity created by having a league with no payroll limits.
2. Setting limits on payroll, such as a salary cap, isn't going to happen.

All this talk has occurred at the same time that the NFL, often considered the bastion of parity in professional sports, has eschewed its salary cap for the 2010 season.

So the obvious question is: How much do these payroll disparities actually impact the sport?

One way to measure how much unchecked payrolls impact baseball would be to compare how its teams fare in the regular season and playoffs with football. Since the NFL has a salary cap, it serves as a baseline for what to expect in a league with payroll limits.

In MLB, 23 of 30 teams have made the playoffs at least once from 2000-2009. Of those 23 teams, 14 have played in a World Series and eight have been champions.

By comparison, the NFL has seen 27 of its 32 teams make the divisional round of the playoffs. The divisional round is a better benchmark here because eight of the 32 teams make it, which is more comparable to the eight teams out of 30 that make the MLB postseason. Of those 27 teams, 14 teams have made the Super Bowl and seven have hoisted the Lombardi Trophy.

From those numbers alone, it would seem as though payroll limits don't have a huge impact on parity. After all, over the past decade, 14 different teams have played for a championship in both sports, and only one more team has won it all in baseball.

Maybe the nature of the two sports and their playoff structures is obscuring some key information here though. Perhaps in the NFL, certain teams like the Colts and Patriots are able to take advantage of the salary cap rules better than others, such that their skill at handling the parity mechanisms leads to playoff appearances year after year.

Similarly, any correlation between regular season wins and postseason success in MLB is dubious at best. In a New York Times column, Joe Sheehan detailed some of the reasons, including using a short series (best of five or seven games) to determine the difference between teams that have earned playoff berths over 162-game seasons.

As Oakland Athletics general manager Billy Beane said, "with the best-of-five format, random events can determine who goes on to the next round."

Essentially, the randomness of postseason play may lead to more teams playing in the World Series, even though the number of teams with no shot at making the playoffs at the beginning of the season is more than in the NFL.

While it's unclear how to address these questions directly, one way to better illuminate the impact of payroll on performance in MLB is to look at the payroll ranks of teams that have made the playoffs and World Series.

The following table shows the mean payroll rank (1-30) of the teams that have made the MLB postseason from 2000-2009.

If payroll had no impact on team performance, the overall mean would come out to about 15. The fact that the mean payroll rank is basically 11 reveals that payroll plays a significant role in determining a team's playoff chances, but at the same time it isn't the be-all and end-all factor some make it out to be.

But does payroll influence how teams perform once they have made the playoffs, or is everybody really on equal ground in the short series' that dominate MLB postseason play? How much of an advantage do teams like the Yankees have over teams like the Rockies once they make the dance?

The following table shows the payroll ranks for the World Series champions of the past decade.

Even though teams like the '03 Marlins occasionally make a great run all the way to the title, the fact that the payroll rank of World Series winners over the past decade is noticeably higher than that of the teams that make the playoffs shows that spending those extra bucks can help aid deep playoff runs once the postseason has begun.

It isn't an earth-shattering revelation that spending more money helps teams win more.

That being said, there are three noteworthy observations.

First, simply looking at the number of teams that have played in the World Series and Super Bowl over the past decade masks the disparities between MLB and the NFL. Even though 14 different teams have played for championships in both sports, the teams with higher payrolls have greater representation in the MLB playoffs and World Series. So just because the same number of teams have played for a World Series as have played for a Super Bowl in the formerly salary-capped land of the NFL, that doesn't mean that payroll limits are unrelated to performance.

Second, the degree to which money impacts postseason performance is significant, but not overwhelming. While the odds of winning a World Series diminish significantly for teams in the bottom half of the payroll rankings, teams in the 8-15 range have won half the titles this millennium. The Phillies, for example, have averaged the ninth-highest payroll in MLB over the past six years.

Third, given that the payroll rankings of World Series winners is higher than the payroll rankings of teams with playoff berths, any plans by MLB officials to realign the divisions probably won't have a huge impact on which teams take home hardware. Sure, the Orioles might find themselves with a better chance of making the playoffs, but there is still a significant resource disadvantage to overcome if and when they face the Yankees in the postseason.

Ultimately, the uncontrolled payrolls of MLB teams affect the competitive nature of the game. Whether you think it is a problem that the top-15 highest salaried teams are the only ones with a realistic shot at a title is a matter of personal preference.

So if something is going to be done to address the parity of MLB, it will have to address the issue of payroll disparities head on, rather than just turn to realignment.

Ben Singer is a graduate of Brown University and a Philly.com Sports intern.