MLB Payrolls and Cost of Living

A dollar isn’t worth the same everywhere you go. Not even in the United States, the dollar’s home turf. Differences in cost of living are enormous across the country due to variable housing supply, housing demand, gas prices, tax laws, and dozens if not hundreds of other factors.

This is fairly common knowledge, but it’s a real pain to take into account when making broad comparisons about things like, say, the payrolls of major league baseball teams, or, more consequentially, federal minimum wage laws. So, often, we just ignore it.

So how about, for a few minutes, we don’t ignore it? I’m not here to talk about wage policy, though the idea there is fairly straightforward, and cost of living applies much more directly to those impacted by wage laws than professional baseball teams. Instead, I’m here to adjust MLB payrolls based on the cost of living in each team’s metropolitan statistical area.

Now, this isn’t a great reflection of how much players’ salaries are worth. Lots of players spend their offseasons, and take more of the big expenditures in life, in locales different from their employer’s base.

It also isn’t a great reflection of how stingy or aggressive a team’s ownership is. There are investments to be made beyond payroll when it comes to running a baseball team, and the size of a particular market has more to do with a team’s cash reserves than the cost of gas in one city.

Mostly, it seemed interesting, and I’d already started grabbing the data for this when I realized it wasn’t all that meaningful, so full steam ahead.

To start, let’s look at what the Living Wage is in each metro area that has an MLB team. I took these, with one exception, from MIT’s Living Wage Calculator (the exception is Toronto’s, which came from taking the figure in this CBC article and multiplying it by the American/Canadian exchange rate I found on Google). Living Wage isn’t the only way to measure Cost of Living, of course, but it expresses the phenomenon in an understandable and meaningful manner.

Here they are, from most expensive to least expensive:

Next, let’s look at each MLB team’s 2019 payroll, taken from Spotrac. These are unadjusted for cost of living.

Next, we’ve got the adjusted payrolls, where I multiplied each by the average living wage among the metro areas, then divided by the living wage within the team’s metro area. This is best expressed as the payroll in terms of local purchasing power.

Finally, we have where every team ranks in each:

Again, all of this is pretty useless information when it comes to baseball teams. But, the variability in cost of living across even metro areas large enough to support professional baseball is more present in your mind now than it previously was. And that, I’d venture, is useful.