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Age Old, Old Age Dilemma

Les Carpenter at Yahoo! Sports considers the tradeoffs for the Yankees with aging stars, Jeter and Posada:

Long ago, back when disco and punk pounded from the Yankee Stadium speakers, no one much worried about becoming a Yankee for life. There were no $15 million entitlements for broken down superstars clogging rosters and basepaths. Nobody survived the wrath of George Steinbrenner long enough to linger on the payroll. The Reggie Jacksons, Dave Winfields, Goose Gossages and Rickey Hendersons sizzled, brawled, bickered and moved on.

But the Yankees are heading into a place they’ve never known. They’ve never been confronted with lifelong members of the organization demanding to be paid like All-Stars just because, well, they once were All-Stars. Nor have the Yankees ever been confronted with having to give out more than $50 million over the four years just to ensure a legend like Jeter will get his 3,000th hit in a Yankee uniform.

These topics emerged, albeit a bit more muted, during the Jeter-Yankees negotiations in the offseason.  Jeter and Posada will make about $28 million this season.  If selling their wares on the open market with only their prior couple of years of stats along with their ages, they might have pulled $5-$7 million, maybe (Posada as a backup catcher in the $1-$2 million range and Jeter as a $4-$6 SS or 2B hitting  6th-9th in a lineup).

A few observations.

1.  Delicate Dilemmas: diminishing performance with age represents one of the real sensitive issues in our society and in organizations; on one level, we all recognize the effects of age -- there's a reason Viagra is popular!  We can observe the decline in athletic performance.  Ray Fair provides evidence on this on his website.  It shows up in academic output and managerial performance also (Skip's research; my own).      In spite of the obvious, many people don't like the idea of "giving in" or, often, even to acknowledging diminishing.  It creates dilemmas for teams.  The guy used to hitting somewhere between 2 and 5 in the batting order bristles at hitting ninth even with his batting average below 200.

Such resistance by aging workers creates even trickier dilemmas in settings where performance measurement is not so glaring, where longtime friendships and alliance exists, and where public policy placed the bar very high by first wiping away the blunt tool of mandatory retirement ages and then initiating anti-age discrimination rules.  Even Posada-esque levels of flagging performance may be tolerated but with negative consequences for the "team."  Ironically, in areas of life where skills matter and costs of diminishing skills are very high in terms of risk of lives (for example, airline pilots), nobody quibbles much about mandatory retirement.

2.  The "Yankee (Salary) Premium: I've presented a few pieces in TSE about this premium  -- the sizable amount of the Yankee revenue advantage that ends up merely as higher salaries, not better players.  Jeter and Posada represent a case study.  Other teams in the league might pay a couple million over market to keep aging franchise players around.  The Yankees have forked over in excess of $20 million.  It's a bit more complicated than this because of Jeter approaching 3000 hits this season.  That milestone would raise his market value at least for this season.

3.  The Post-Steroid Reversion: rather than 37 and 39-year olds just hitting their prime, all of a sudden the late thirtysomethings in baseball are beginning to look like the thirtysomethings of the 1960s, 70s, and 80s.  As a counter-point, Art DeVany has a recent Economic Inquiry piece questioning the influence of steroids (SSRN cite; working paper version), but there's a lot of data analysis still to be done on this.  I would note that the high achieving 40-somethings have rapidly vanished from MLB with the onset of even modest substance testing.