Income Inequality: Babe Ruth vs. Alex Rodriguez

In 1927 when Babe Ruth hit 60 home runs and set the single-season record that lasted until 1961, he made $70,000 playing for the New York Yankees.  That would be equivalent to a salary in today’s dollars of only $911,000.  In 1930 and 1931, Babe Ruth was paid $80,000 by the Yankees, which was the most he earned in a single year, and equivalent to only slightly more than $1 million today.

In contrast, the average major league baseball player’s salary was nearly $3.1 million this year, or three times more than super-star Babe Ruth made at the peak of his career, adjusted for inflation. Is that unfair or not?
And isn’t that evidence of rising income inequality over time that average players now make more than the superstars of the past, and today’s highly-paid superstars like Alex Rodriguez make salaries ($32 million) that are more than 30 times higher than a superstar of the 1920s and 1930s like Babe Ruth?  And it’s highly likely the share of baseball payrolls going to the top 1, 5 or 10% of the players has also increased over time, as incomes have become more concentrated among the top players. For example, Alex Rodriguez’s salary represented 16% of the Yankee’s $202 million payroll this year as the highest paid player, and in 1988 the highest-paid Yankee, Jack Clark, earned a salary of $2 million that  represented only 11% of the team’s $18.9 million payroll that year.  Baseball’s “rich” (top 1%) just keep getting richer and richer?
Just ask yourself this question: As a superstar with world-class athletic ability, would you rather be marketing your talent in 1930 America like Babe Ruth, or in 2011 America like Alex Rodriguez?  Clearly Alex Rodriguez has the advantage of selling his superstar abilities in a much larger (greater ticket sales), much more globalized sports marketplace with increased competition from talented players around the world, along with much higher salaries to reflect the realities of modern MLB.
As part of both society’s 1% and “MLB’s 1 percent,” Alex Rodriguez deserves to make more income today than Babe Ruth made in the 1920s and 1930s when he was part of the “MLB 1 percent” of that era.  But it’s also the case that MLB’s lowest-paid, average-paid players, and in fact “the entire MLB 99%,” are also better off  today in terms of income than their counterparts of the past.
Maybe there’s a lesson here about rising income inequality.  Whether it’s in professional sports or in society as a whole, perhaps rising income inequality over time is a natural and expected outcome of increasingly competitive labor markets and the expanded opportunities that come from larger and increasingly competitive global markets.  And those same competitive forces that lead to greater income inequality in both the MLB and the overall economy over time also help to make all MLB players and all Americans better off year after year, just not at exactly the same rate.

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About the Author: Mark J Perry

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