The future of this system is already uncertain.
Salary caps are a system that many professional sports leagues have adopted to restrict player salaries. The Korea Baseball Organization is imposing a fine (a kind of “luxury tax”) on players who exceed the upper limit and penalizing rookie nominations. It is classified as a “soft cap” because it is softer than a “hard cap,” which sets a standard that can never be crossed.
The ceiling is 11.4 billion won (14.24 million U.S. dollars). The average was calculated after summing up the annual salaries of the top 40 players in the 10 teams (excluding foreigners and rookies) between 2020 and 2021, two seasons before the implementation of the system. 120 percent of this average is the ceiling. It will be applied in common from 2023 to 2025.
However, critics say that the government should revise the system after the first season. An executive committee meeting was held in Busan in December last year, attended by the heads of 10 teams. At the meeting, several teams including the 2023 season champion LG discussed the issue of salary cap. At the executive committee meeting, which will be held again in January, heated debate is expected over improvement and abolition of the system.
In conclusion, it seems inevitable that the salary cap of the KBO League will be drastically changed as soon as possible. The answer is the salary of the top 40 players in each of the 10 teams that the KBO unveiled on Dec. 20 last year. All of the teams did not exceed the cap last year. However, Doosan, the No. 1, was close to falling short of the cap by 244.63 million won. Even KT, which ranked eighth, had only 1.943.38 billion won (approx.), less than a single superstar’s salary.
It is hard to say that the upper limit itself is very low. The salary cap of the KBO League benchmarked the luxury tax system in the Major League. The upper limit of luxury tax in the Major League in 2023 was 233 million dollars, which was 120.8 percent of the average of 30 teams in the year. In the KBO League, there was no big difference at 116.2 percent compared to the average salary in 2023, not the average for the 2020-2021 season.
However, there is a decisive difference. There is a statistic called the coefficient of variation. This is the standard deviation divided by the average. It is used to compare distributions of different sizes and units. Last year, the coefficient of variation in the combined annual salary of the top 40 players in the KBO League was only 14.4 percent. The Major League Baseball recorded 36.5 percent, more than 2.5 times. In other words, while the total annual salary of each KBO league team is closely related to the average, there is a big difference between rich and non-rich teams in the Major League.
The basic framework of the luxury tax system is to penalize teams that spend heavily and benefit teams that do not. No one wants to be disadvantaged. A team that is disadvantaged or is more likely to be disadvantaged wants to abolish the system. However, the system can be maintained by the existence of profitable teams. Among the 30 major league teams last year, 15 teams had higher annual salaries than the league average and 15 teams had lower annual salaries. Since 2003, when the current luxury tax system was implemented, only 2.9 teams have paid luxury tax annually. This accounts for less than 10 percent of all teams.
In contrast, the total annual salary of seven teams (based on 40 players) exceeded the league average in this year’s KBO League. Among the three teams that fell short, the gap was only 350 million won (318,400 U.S. dollars). Under the current system, 70 to 80 percent of all teams are at higher risk of having to pay sanctions. Therefore, it is reasonable for many KBO league teams to insist on easing or abolishing salary caps.
The history of salary regulation is ‘a history of failure’
Salary caps are a hot topic in the history of professional sports where the pros and cons have been fiercely opposed. The longest strike in Major League history from 1994 to 1995 was caused by the team’s attempt to introduce salary caps. In the KBO League, where the parent company or its affiliates account for a large portion of a team’s sales, there is a strong need to curb excessive spending. “In terms of the sustainability of the professional league, salary caps are inevitable,” said Jeon Yong-bae, a sports management professor at Dankook University. However, he pointed out that the decision to adopt too strict standards from the beginning raised calls for a change in the system.
Another problem is that KBO maintains the same amount as the upper limit of salary cap until 2025. Considering inflation, the upper limit is practically lowered. Major League Baseball also applied the same upper limit of luxury tax for a three-year period in the 2010s, but it has changed to raise the amount every year since 2017. Under the current system, the average annual increase rate is 3.3%.
This is the result of clubs being obsessed with the desire to “reduce player salaries.” However, the history of professional baseball shows that this desire has almost always been fulfilled. Even before salary caps, the KBO League had various types of salary regulations.
In 1982, players were divided into five grades to set the maximum amount. In 1983, the annual salary increase cap was set at 25 percent. From the following year, the annual salary cap for rookies was set. In 1999, the annual salary for foreign players and free agents was set. All regulations excluding the annual salary for rookies failed to take effect and disappeared. To sum up, the history of annual salary regulation was history of failure. Clubs, which had tried to lower their performance by spending money, took the lead in breaking down regulations that they had created by themselves.
The salary cap system is the result of labor-management compromise in the KBO league. The KBO and the Korea Professional Baseball Players Association agreed in 2019 to introduce salary caps instead of shortening the duration of their FA qualifications by one year. In addition, the association dropped the Fair Trade Commission’s lawsuit regarding baseball regulations. “Players protested strongly against salary caps,” said Kim Sun-woong, secretary-general of the association. “Based on the practice so far, I convinced the clubs to change their salary caps on their own,” he recalled. 스포츠토토