In 2003, Alex Rodriguez, one of the greatest baseball players ever, tried to take less money to join a winning team. At the time, Rodriguez was among the world’s best paid athletes, making over $20 million a year playing for Major League Baseball’s Texas Rangers. But his colleagues were not particularly good. The Rangers regularly lost more games than they won.
Due to his high salary, and the team’s mediocrity, the Rangers decided they wanted to trade Rodriguez. Since Rodriguez’s contract had a clause stipulating that he could not be traded without his consent, Rodriguez was involved in choosing his next team.
The Boston Red Sox wanted Rodriguez, and Rodriguez wanted to join them. The catch was that they wanted to reduce his salary by $4 million a year. Rodriguez was game. He would make the sacrifice in order to win.
Ultimately, he didn’t join the Red Sox. The baseball players’ union would not allow Rodriguez to take the salary cut, arguing it would set a bad precedent to have a contract not fully paid out. Rodriguez would later join the New York Yankees keeping his full salary. But other players routinely make the type of decision Rodriguez tried to make when he sought a trade to the Red Sox.
According to recently released research (pdf) by economist Thomas Zimmerfaust of the University of California Santa Barbara, baseball players will take about 10% less money to be part of a team that is expected to win around 5% more of their games. The research, published in the journal Economic Inquiry, is based on hitters who signed with teams from 2008 to 2010, and takes into account each player’s skill level, age, and star power.
The study doesn’t definitively link the salary sacrifices to the desire to work alongside winning colleagues. Zimmerfaust thinks it is the expected winning that causes players to take less money, but it might be another factor he did not include in his analysis. For example, players might sacrifice salary to be in bigger cities, and that just happens to be correlated with winning. (Zimmerfaust’s work does account for city population size.) It’s also possible that people take less money in the short term to be part of a winning team because they think it will increase their own long-term value, meaning it’s not the good colleagues they care about, but the financial benefits.
Still, Zimmerfaust’s study is interesting evidence for a challenging economic problem.
Economists have long known that people demand more money for bad working environments—the economics term for this premium is the compensating wage differential. Research shows jobs with higher risk of injury and fewer amenities have higher salaries. But it has been difficult to show the impact of coworker quality on pay. This is because, in most fields, the quality of a worker is hard to measure. It’s tough for economists to put a number on the caliber of accountants and nurses, for examples.
But baseball is the perfect setting for assessing how much less salary people will take for great colleagues, writes Zimmerfaust. The quality of baseball player is relatively easy to quantify, as is the quality of any given team. Also, players often say they value playing with better teammates. For example, the Chicago Cubs’ Ben Zobrist claimed the opportunity to win was one of the reasons he chose to take a lesser offer to sign with the team.
The evidence from this one field, where people are easily able to assess their colleagues, suggests that people will trade a lot of money to work with people who are better at their job. To varying degrees, that trade is probably one most of us would make.