On Friday the list of Super Two players came out, with an unprecedented low cut-off of two years and 122 days used to determine Super Two status. I noted that this could cause a potential problem, as Andrew McCutchen will have two years and 123 days of service time after the 2011 season, putting him at risk of being a Super Two player. In short, my theory was that by being a Super Two player, McCutchen could eventually make as much as $10 M more than he would have under a normal arbitration scale. Matt at Pittsburgh Lumber Company had a great look at the topic, and raised an issue with my conclusion. Before you read any further, I suggest you read those two articles in order, if you haven’t already.
Through some great research, Matt noted that Super Two players during the 2008/2009 off-season received 21.8% of their 2008 FanGraphs Wins Above Replacement value (fWAR). There is a guideline for what players should expect to receive during their arbitration years. The guideline is based on a player’s “free agent value”, which is basically his WAR, multiplied by $4 M. The guideline is that a player receives 40% of his value in year one of arbitration, 60% in year two, and 80% in year three.
The question brought up is: how does this apply to “Super Two” players? Do they start year one with 40%, giving them 100% of their free agent value in year four? Or do they start lower than 40% in year one, then continue the 40/60/80 scale in their normal years? That’s what Matt addressed, noting that Super Two players in the specific timeline were closer to the 20% mark.
That’s when I found something interesting. Matt’s projection of McCutchen’s Super Two schedule (under a 20/40/60/80 scale) had McCutchen making the following amounts:
2012: $3.5 M
2013: $6.4 M
2014: $9.6 M
2015: $12.8 M
Those are almost the exact same numbers I came up with for McCutchen. I didn’t use the 40/60/80 scale. I used player comps, looking at Andre Ethier and Nick Markakis, and what they received through arbitration in the last few years. Here is the summary:
Ethier got $17.85 M for his first three arbitration years, while Markakis got $20 M. Both ended up in the $9-10 M range for their third arbitration year. Looking at these contracts, we get an idea as to what McCutchen could earn through arbitration. We can assume that McCutchen would at least receive the $18-20 M for his first three arbitration years, with the third year being in the $9-10 M range. That’s where the Super Two status becomes an issue.
If McCutchen becomes Super Two eligible after the 2011 season, he would reach his fourth arbitration year in 2015, and would most likely be due a raise over his $9-10 M salary. That could put him in the $12-15 M range, depending on his performance at that point. The most important thing is that the Super Two status for McCutchen could easily cost the Pirates $10+ M extra in the long run, as they would be paying an extra arbitration year, with that extra year being the most expensive fourth year.
Notice the similarities here. Matt has McCutchen making $19.5 M in his first three arbitration years. I have McCutchen making $18-20 M. Matt has McCutchen making $9.6 M in year three, with a raise to $12.8 M in year four. I have McCutchen in the $9-10 M range in year three, with a $12-15 M range in year four. Matt used a 20/40/60/80 scale, and a projected 4.0 fWAR for McCutchen over those four seasons. I used real life arbitration results. We both came up with the same result.
Where we differ is the non-Super Two approach. In that scenario, Matt has the 40/60/80 scale, with McCutchen starting at $6.4 M in year one. I have year one as the same amount, regardless of Super Two status. Matt did a great job showing that Super Two players receive close to 20% in their first of four arbitration years. There’s no question that Super Two players received 20% of their free agent value, at least during the 2008/2009 off-season. That’s when a thought occurred to me. How accurate is the 40/60/80 scale?
My thought was that players receive the same amount in their first year of arbitration, regardless of whether those players have two more or three more years of arbitration following that first year. The only thing to counter this is the idea that players in year one (or year two for Super Two players) get 40% of their free agent values. That’s the rule of thumb, but how accurate is it? I decided to find out.
Using the same rules as Matt, I went through the players in the 2008/2009 off-season to see what normal first year arbitration eligible players (excluding Super Two players) received in relation to their free agent value. I only looked at players with 3.000-3.171 years of service time, and removed any player who met the following requirements:
-Super Two players in their second arbitration years
-Players who had less than a 0.5 fWAR in 2008
I excluded the players who were eligible for Super Two status previously for the obvious reason that I wanted to focus on non-Super Two players who were arbitration eligible for the first time. I also removed closers, as saves tend to be over-valued in the arbitration process. That left me with 35 players. The result was that first year arbitration eligible players received 26.49% of their 2008 fWAR value (you can view the results here). That’s not much higher than the 21.8% that Matt came up with for Super Two players in the same year.
My original theory was that Andrew McCutchen would earn the same amount in his first year of arbitration, regardless of whether he was a Super Two player or not. That meant he could be due for a big difference in salary, as a Super Two eligibility would replace his third league minimum year with his fourth arbitration year, giving him as much as $12 M extra. Matt disagreed with that, based on the 40/60/80 scale for a normal arbitration schedule. However, my research showed that first year arbitration players, under a normal schedule, received closer to the 21.8% that Super Two players received, rather than the 40% rule that is frequently used.
There are several disclaimers here. First, this is all based on a small sample size of one year. Second, the arbitration process is based on a body of work, and not just the previous year. In my chart above you can see players like Scott Olsen making 70% of their free agent value, or Kelly Shoppach making 14.77% of his free agent value from 2008. That’s because Shoppach had a breakout year in 2008, but was paid based on his body of work, rather than just assuming that one year was legit. Olsen had a down year in 2008, but was paid based on his success in previous years.
That said, this rough estimate shows that a player under a normal arbitration schedule and a Super Two player should both receive about the same amount in their first arbitration year, all in relation to their free agent value. So rather than assuming McCutchen would be under a 40/60/80 scale in a non-Super Two situation, it’s safer to assume he would be closer to a 20/40/60 scale.
The only question I’d have from there is whether players actually received the remainder of the 40/60 scale. The assumption was that players who were first year arbitration eligible under a normal scale received 40% of their free agent value. That number turned out to be closer to 25%. Tomorrow I will look at the 2008/2009 off-season to see what players in their second and third arbitration years received, in relation to their free agent value.