An Introduction to Determining Arbitration Salaries: Starting Pitchers

My name is Rich Rieders and I am a 2015 graduate of Rutgers Law School. Over the winter, I participated in Tulane University’s 9th Annual Baseball Arbitration Competition and we finished in 2nd place overall out of 40 teams.

In order to prepare for the competition, I created a database (going back to 2008) consisting of all arbitration awards and players who signed 1-year contracts avoiding arbitration along with their respective statistics. Using regression analysis, I was able to determine which statistics correlate most with salary. In turn, I have created a projection system that can accurately predict arbitration salaries. My projections are more accurate than the ones featured on MLBTradeRumors.

I will be releasing my 2016 projections once the season is over and all awards are announced.

The goal of this article is to properly explain how arbitration salaries are determined and how to choose the best comparative baseball salaries (comps) as outlined in Article VI, Section E, Part 10(a) of the CBA. You can think of the comps as legal precedent. The closer the comps are to the player’s stats, the more comps you have and the more recent those comps are, the stronger your argument.

First and foremost, the purpose of the arbitration process is to compensate the player for his actual results on the field, not to give him a salary based on what we expect he will produce in the upcoming season. We concern ourselves with only the traditional stats. I know this is a complete departure from the way we normally think here on FanGraphs, but salary arbitration is a completely different animal. In essence, arbitration salaries are determined by the accumulation of traditional counting stats.

For our purposes, there are six types of players who are up for arbitration in a given offseason and each type has its own separate valuation. The six types of players are:

(1) First-year-eligible SP

(2) SP who have previously been through the arbitration process

(3) First-year-eligible RP

(4) RP who have previously been through the arbitration process

(5) First-year-eligible position player

(6) Position players who have previously been through the arbitration process.

I will explain, in detail, how to properly choose player comps for each of the six group of players. In this segment, we will focus just on the starting pitchers.

For a SP who is arbitration eligible for the first time, here are the statistics that correlate most with eventual salary:

Platform IP: 60.83%

Platform GS: 57.59%

Platform SO: 54.41%

Platform W: 53.12%

Career IP: 50.56%

Career SO: 47.45%

Career W: 42.76%

Career GS: 37.10%

When initially looking for player comps, these are statistics we are going to focus on. Keep in mind that although ERA is not listed, it is nonetheless important as ERA is still one of the default statistics during a hearing and the first basis for comparison. Note that rate stats almost always have a very low correlation since rate stats do not take into account playing time.

Let’s use Atlanta Braves starter, Shelby Miller, as an example of a first-year-eligible SP.

Shelby Miller is arbitration-eligible for the first time going into 2016 with 3 years and 30 days of service time (3.030). In his platform season (2015), Miller made 33 starts recording 6 wins, 171 SO with a 3.02 ERA in 205.1 IP. Over his career, Miller has compiled 575 IP, 32 W, 483 SO with a 3.22 ERA in 96 GS. The objective here is to find the players who avoided arbitration by signing a 1 year contract with statistics that are most similar to Miller’s. The more recent, the better. The best way to do that is to set a floor and a ceiling and then work your way towards the middle.

From Miller’s perspective, let’s look at Miguel Gonzalez’s 2014 platform season. Like Miller, Gonzalez posted a low win total despite a very strong ERA. Gonzalez made 26 starts, recorded 10 wins, 111 SO with a 3.23 ERA in 159 IP. Over his career, Gonzalez compiled 69 starts, 30 wins, 308 SO with a 3.45 ERA in 435.2 IP. Although their ERA and win totals are extremely close, Miller bests Gonzalez in all the most important categories and has significantly more playing time and strikeouts. Therefore, we can definitively state Miller should receive more than Gonzalez did. As such, Gonzalez’s 2015 salary of 3.45 million should be the floor.

From Atlanta’s perspective, let’s look at Chris Tillman’s 2014 platform season. Like Miller, Tillman pitched a similar amount of innings and games with a pretty low ERA. In his platform season, Tillman made 34 starts recording 13 wins, 150 SO and a 3.34 ERA in 207.1 IP. Over his career, Tillman compiled 45 W, 680.1 IP, 511 SO with a 4.00 ERA in 118 GS. Although Miller has the better ERA, Tillman is superior in all the other major categories. Hence, we can conclude that Miller will receive less than Tillman. We can use Tillman’s 2015 salary of $4.315 million as the ceiling.

Given the above, Shelby Miller is likely to receive somewhere between $3.45 million and $4.315 million. Now that we have a range, let’s find someone towards the middle.

In 2011, Justin Masterson made 33 starts with 12 W, 158 SO, 3.21 ERA in 216 IP. Over his career he made 87 starts, with 28 W, 485 SO, 3.92 ERA in 613.2 IP. Those numbers are quite similar across the board with Miller having a better ERA, but fewer IP. Masterson’s 2012 salary was $3.825 million. Alex Cobb ($4.0 million in 2015),  Travis Wood ($3.9 million in 2014) and Steven Strasburg ($3.975 million in 2014) are all good comps as well.

As for my model, Miller projects to receive $3,859,816 +/- $145,351 which is perfectly in line with the comps above. MLBTradeRumors projects him at $4.9 million, which is not only significantly higher than the above comps, but would beat the record for a first-year player by nearly 600K.

For a player who has already been through the arbitration process before, the valuation is completely different as career statistics are no longer used the 2nd, 3rd, 4th, etc. time around (except in a few rare cases). This group of players are the most difficult to project since we use fewer variables due to the exclusion of career stats and how there are fewer SP across the league than relievers or position players. Nonetheless, we can still get a pretty good idea what their eventual salary will be.

For an SP who has previously been through the arbitration process, the stats that correlate most with eventual salary are:

(1) Platform W: 69.12%

(2) Platform RA9-WAR: 64.04%

(3) Platform SO: 60.97%

(4) Platform fWAR: 58.93%

(5) Platform IP: 58.34%

(6) Platform GS: 49.75%

For example, let’s look at Angels SP Garrett Richards who is arbitration eligible for the second time going into 2016. As a Super-2 going into 2015, Richards received a $3.2 million salary. That figure includes everything he had done in his career up to that point. Thus, when determining his 2016 salary, we don’t need to focus on previous seasons. We need only determine what his 2015 season was worth and give him a raise. In his platform season (2015), Richards made 32 starts recording 15 wins, 176 SO, 3.65 ERA, 2.5 fWAR and 2.8 RA9-WAR in 207.1 IP. We want to find the players whose stats are most similar to Richards.

First let’s discuss Matt Garza’s 2010 platform season (a bit old, but still useful) where he made 32 starts recording 15 wins, 150 SO, 3.91 ERA, 1.9 fWAR and 2.8 RA9-WAR in 204.2 IP. Other than the strikeout numbers, we have a virtually identical season. As such, Richards is likely to receive a raise higher than Garza’s $2.6 million raise going into 2011. We can consider a raise of $2.6 million to be his floor.

Next let’s look at C.J. Wilson’s 2010 platform season (again old, but useful still) where he made 33 starts recording 15 wins, 170 SO, 3.35 ERA, 4.1 fWAR and 5.1 RA9-WAR in 204 IP. Wilson has the same amount of wins and virtually the same number of SO although Wilson has a clear advantage in fWAR and RA9-WAR with a slightly better ERA so it’s pretty safe to say that Richards is likely to get a raise lower than Wilson’s $3.9 million raise. The $3.9 million should be the ceiling.

Homer Bailey’s 2012 platform season is a great final comparison. Bailey made 33 starts recording 13 wins, 168 SO, 3.68 ERA, 2.7 fWAR and 2.8 RA9-WAR in 208 IP. Both players are virtually identical statistically. Bailey received a raise of $2.925 million so Richards is likely to receive a very similar raise himself. Shaun Marcum ($3.1 million in 2011), Jordan Zimmerman ($3.050 million in 2011) and Max Scherzer ($2.975 million in 2013) are all good comps as well.

Therefore, we can be certain that Richards will receive a raise somewhere between $2.6 million and $3.9 million. As for my model, Richards projects to receive a raise of $2,923,484 for a total salary of $6,123,484+/- $336,500 and, unsurprisingly, that is perfectly in line with the comps above. MlbTradeRumors is projecting a raise of $3.6 million for a total salary of $6.8 million which I think is a bit generous given the comps we have at our disposal, but not unreasonable.

Next up: Relief Pitchers.