In Support of the MLBPA's Proposed Arbitration Inflator

As I covered in looking at the diverging economic interests within the MLBPA, the median salary amongst all MLB players has experienced remarkably limited growth over the past decade. This is particularly true for arbitration-eligible players.

MLB Median Salary (2007–2026)

Median Salary of MLB Players on Opening Day Rosters by Service Time (2012–2026)

This is perhaps not surprising given the criticism of the arbitration system coming from players, agents, and commentators. Sheryl Ring's analysis on FanGraphs does a good job of breaking down some of the main flawed aspects of the arbitration system. Two particularly notable aspects of Ring's coverage are, at a high level, that: (i) the MLB has greater cohesion and shared interests in terms of strategically coordinating arbitration offers in order to minimize inflationary arbitral precedent awards; and (ii) the categories of admissible evidence in arbitration proceedings.

The MLBPA has proposed numerous measures aimed at the arbitration system. Perhaps most notably, the MLBPA has proposed a $3 million minimum tender for arbitration-eligible players, essentially setting a minimum salary for arbitration-eligible players that is not much lower than the median salary at the start of 2026 for this group of players. However, there is another aspect of the MLBPA proposal which I think may actually be more impactful and highlights an underdiscussed aspect of the current arbitration system. The MLBPA is reportedly proposing that past arbitration awards be adjusted higher by 20% (up to a maximum of $20 million) for the purposes of being used as a comparator in subsequent arbitral proceedings.

Examining the potential impact of this proposal and the flaw that it addresses requires an understanding of three parts of how MLB arbitration works:

First, under the current CBA, one of the criteria for an arbitrator in determining whether to choose the player or team's offer is the comparative salaries of other players in the league. However, other than for players with 5 years of service time or more or who have a "special accomplishment", the CBA says the arbitrator should "give particular attention, for comparative salary purposes" to players who have no more than one more year of service than the player in arbitration. This means that a player with three years of service who is in an arbitration hearing should be compared primarily to players with four years of service or less (unless that player is Tarik Skubal or someone similar). According to this article by Jeff Monhait in the Harvard Journal of Sports & Entertainment Law, this wording around service year comparators came in the 1985 CBA, and was intended to "limit the inflationary effect of free agent salaries upon arbitration salaries."

It is not hard to see the appeal of this structure for the teams. Inflation has undoubtedly hit free agent contracts, with these contracts growing substantially in both nominal and real value over the last twenty years. However, the current system almost isolates the arbitration system from this inflationary effect elsewhere in the league, as it limits the appropriate group to be overwhelmingly made up of arbitration-eligible player contracts. This creates the potential for an insular, feedback loop of comparator contracts that don't adjust to the market conditions affecting free agent valuations. Two other aspects of the arbitration system reinforce the development of this insular system.

The second notable aspect of the arbitration system is the admissible evidence at arbitration hearings. The rules for admissible evidence in these hearings are targeted at the specific criteria on which the arbitrator makes their decision, which are the player's contribution to the team during the past season, length and consistency of the player's career contributions, the player's past compensation, comparative salaries, "physical or mental defects" on the part of the player, and the recent performance of the club. There are no criteria focused on economic conditions impacting either the economy generally or the league in particular, and in fact some related types of information are explicitly excluded as admissible evidence. Players and teams are not allowed to put in evidence that relates to: (i) the financial position of the team or the player; or (ii) salaries in other sports or occupations. As such, the player has very limited avenues through which to make an argument based on more general economic considerations, such as a potential increase in team revenue or significant increases in salaries of free agents. One could even question the weight of evidence related to general macroeconomic trends, such as inflation, within this evidentiary structure.

Third, almost all arbitration-eligible players never go to an arbitration hearing. Instead, the player and team settle in advance. According to Associated Press reporting, there were only 9 contested arbitration hearings in the 2024/2025 offseason and only 12 in the 2025/2026 offseason. This very low frequency of contested hearings is a feature of the MLB arbitration system, but also means that there are few opportunities for players to make arguments regarding the appropriate valuation of arbitration-eligible players.

Taken together, these three factors structurally disconnect the compensation for arbitration-eligible players from the free-market compensation of post-arbitration players and from macro-level economic trends affecting the league. This is a persuasive explanation underlying the stagnant growth in the MLB median salary and in the compensation for arbitration-eligible players.

It is also directly addressed by the MLBPA's proposal for arbitration. The 20% upward adjustment for indexing past arbitration awards, which is admittedly a fairly artificial adjustment, would provide a good counterbalance to the artificially restrictive arbitration valuation system, and could go some way to facilitate much-needed growth in the compensation for arbitration-eligible players.