Confused by strike issues? Read on, bring calculator

Dispute's sticking points are complex, but not new

August 28, 2002|By Peter Schmuck | Peter Schmuck,SUN STAFF

NEW YORK - Major League Baseball's labor dispute has entered a critical phase in negotiations, with the union's upcoming strike deadline threatening to wipe out Friday's games and perhaps the rest of the season. The issues at the heart of the conflict are both complex and troublesome, and what follows are questions and answers to help explain the situation.

Why do the periodic collective bargaining talks between the players and owners almost always lead to a strike or a lockout?

Because both sides historically have been in constant disagreement over how the revenue generated by the industry should be distributed and spent. In recent years, the owners have repeatedly attempted to place artificial restraints on the growth of player salaries, which has met with strong resistance from the players union.

What are the major issues this time?

The owners are pressing for dramatic increases in the amount of revenue that richer teams share with their low-revenue competitors. Management also wants to institute a heavy luxury tax on the game's highest payrolls to further balance the economic playing field. The players have proposed lesser increases in revenue sharing and a far less ambitious luxury tax plan.

Why does the players union have any input on how the owners share revenues among themselves? Why can't they just agree to do that?

Because virtually anything that affects the amount of money that ownership makes available for player salaries is a subject of collective bargaining, so the union must sign off on a revenue-sharing plan.

But why do the players even care what the owners do with their own money?

Because most of that money is spent on players and the large-market teams are far more inclined to use their revenues to buy high-priced talent. The union is legitimately concerned that money transferred to low-revenue teams would not necessarily be spent on better players to improve the quality of the teams.

What is a luxury tax and why do the owners want to institute one?

The owners want to impose a progressive tax (starting at 35 percent) on the amount of each team's payroll that exceeds $107 million over the next three seasons and $111 million in 2006. Management says it will force high-spending teams to transfer more money to low-revenue teams and promote competitive balance.

It sounds more like a New York Yankees tax, doesn't it?

Essentially, that's what it is. The ownership plan would affect seven teams, using last year's payroll figures, but the Yankees would be affected much more dramatically than any other team because of their huge payroll. The combined impact of the ownership luxury tax and revenue-sharing plans could force the Yankees to give up as much as $86 million in revenue the first year.

If a luxury tax only would have a major impact on the Yankees, why are the rest of the players in the union so against it?

Because the Yankees and a few other large-market teams drive the salary train and everybody else is along for the ride. If the luxury tax succeeds in discouraging the Yankees from bidding on high-priced free agents, it could push down salaries across the board. If all the large-market teams begin to use the luxury tax threshold as a payroll limit, it would act very much like a hard salary cap - something the players went on strike for 232 days in 1994-95 to avoid.

Are those the only issues standing in the way of a settlement?

Those are the most difficult and contentious issues. The players and owners still are trying to work out a steroid-testing program that would be acceptable to both sides.

Why would anyone be against testing for steroids?

A: No one in the baseball or union hierarchy has come out publicly against testing for steroids. The union, however, would like the random testing to end if the number of positive results drops below a certain percentage (2.5 percent is its current proposal). Management wants the program to last through the duration of the four-year labor agreement.

If the difference in the revenue-sharing proposals of the players and owners is $222 million over four years, why would the players risk more than $300 million in salary by going on strike for the final month of the regular season?

The easy answer is, they probably wouldn't go on strike if that were the only issue. The proposed luxury tax could significantly increase the total revenue transfer between rich and poor clubs, which could amplify the impact of the revenue-sharing program. And because revenue sharing likely would carry over into future labor contracts, the full economic impact is impossible to measure.

Why would workers who work less than nine months per year and earn an average $2.4 million per year even consider going on strike?

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