The qualifying offer is a burdensome tax on baseball’s middle class


We’re only a few short weeks from pitchers and catchers reporting and yet Howie Kendrick, Yovani Gallardo, Dexter Fowler and Ian Desmond are all still free agents. As Buster Olney notes in his column today all of them are valuable players but teams are shying away from them because of the draft pick compensation attached to them by the qualifying offer system. Valuable, yes. So valuable that teams will give up a first round pick in order to sign them, apparently not. These guys are baseball’s middle class and they’re getting squeezed.

In case you’re unaware, the system works like this: free agents who played with only one team the previous year are eligible for the qualifying offer. The qualifying offer is a one-year deal worth the average of the top 125 salaries in MLB. This year that works out to $15.8 million. If a team makes the player a qualifying offer and the player does not accept it, the offering team is eligible to receive a compensation draft pick if the player signs elsewhere.

The supposed purpose of the qualifying offer/compensation pick rule is to compensate a team for losing a valuable player as long as they were willing to spend at least some substantial amount on them to begin with (i.e. that $15.8 million deal). In theory it’s Major League Baseball’s way of helping out teams who may not be able to offer six-year, $100 million deals but, dadgummit, are at least trying to be competitive.

But intents and outcomes can be very different things. The outcome of the qualifying offer — and quite possibly its original, less-publicized intent — has been to depress free agent salaries by building in a substantial cost to the price tag of any free agent. Want to sign a good player for three years and $48 million? Well, it’ll cost you three years, $48 million plus a high draft pick who will be under your complete control for at least six years. Which is a really, really big price to pay.

As we’ve seen in practice, this process does not hinder the price of true superstars. It only hinders the price of the middle class of free agents who are not themselves franchise players but who have shown that they are good enough to stick in the bigs and good enough to contribute enough to where they’re worth a one-year $15.8 million deal. And by depressing the salaries of those guys — of whom there are quite a lot — it in turn hinders the salaries of those players who are like them but are not yet to free agency, lowering the figures they can point to as comparables when negotiating contract extensions and the like.

Put differently, this is a much bigger problem for many more players than any one year’s version of Howie Kendrick, Yovani Gallardo, Ian Desmond and Dexter Fowler. It affects a huge swath of players and pushes down salaries for everyone apart from the small handful of elite free agents who can still command exorbitant deals. To use a political analogy, it’s a big, big tax on the middle class.

The MLBPA and the league will enter into negotiations for the next Collective Bargaining Agreement after this season. If I were a member of the MLBPA or in its leadership, I would make chucking the qualifying offer system one of my top priorities heading into those negotiations. It’s the single biggest factor depressing salaries in the game right now.