Over the past 10 seasons the average MLB player salary has risen by 4.39% per season. This number is always changing depending on the economic climate (since 1990 salary inflation averages 9.46% per season, but in the past 5 years it's at 3.18% per year and last year's rise alone was 4.10%). However, it's safe to say salaries tomorrow will almost always be worth less than salaries today. We can use this logic to help justify a long-term deal for David Wright (or any other player, for that matter).Let's use that 4.39% number, and pretend that over the next 8 seasons the average MLB salary and payroll rises by 4.39% per year. Now for the big assumption - we have to give David Wright his extension. The $15MM is locked up for 2013, and let's assume he gets an $18MM/yr, 7-year extension ($126MM total extension). To keep things simple, Wright gets paid 15 million next season, and 18 million each season after that through 2020.Using the present value economics formula
, we can calculate what each year's salary would be worth today:
| $ 14.4|| $ 16.5|| $ 15.8|| $ 15.2|| $ 14.5|| $ 13.9|| $ 13.3|| $ 12.8|
Every year once the extension starts, the value goes down because the average salary of players rises. So making $18MM in 2020 doesn't mean as much when the new top dogs are getting $30MM/yr salaries (just an example, no math there).BOTTOM LINE: Add all those up and divide by the 8 year total deal, and we're looking at an average salary of $14.5MM for 8 years of David Wright. You have to admit, that sounds way better than the $17.6MM/yr he'd be getting without using the present value formula.(Side notes: I messed around with how much he would make per season, because in reality it probably wouldn't be 18/yr every year. So if it starts with $15MM in 2014 and goes up to $25.5MM in 2020, the present value is $14.4MM/yr for the total 8 years - not a huge difference. In another attempt, I changed the inflation to 3% per season for the skeptical folk, and the average present value salary per year became $15.1MM for the total 8 years).