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Photo of Marvin Miller.

Marvin Miller pioneered the “free agent” system. Photo: ThanksMarvin.Com.

2. How “free agency” helped lower the federal minimum wage

In 1966, a canny economist who’d worked for the big unions took over what was then one of the weakest and lamest unions ever: The Major League Baseball Players Association. Fast-forward to 2013, and Marvin Miller is gone (he died in 2012). But he left what is arguably one of the most powerful labor unions in the United States, with some of the best-paid workers in history.

Marvin Miller was a tough union guy who became head of the Major League Baseball Association in 1966. He got better deals for his top baseball talent, but unleashed myriad unintended consequences. These include a free agent star-powered system that has indirectly helped increase income inequality and depress the federal minimum wage. Photo from .

The average major league baseball player makes $3.2 million, according to ESPN . Unfortunately, The Houston (TX) Chronicle reports that minor league baseball players don’t do nearly as well: Players start at a measly $1,100 per month. Whoa, wait! If they’re working eight hours a day, five days a week, they’re not even making the federal minimum wage! ($7.25 per hour x 8 hours per day x 30 days per month= $1740 per month). Although minor league players only come to their work place (the stadium or baseball field) for practices and games, a professional player writes that during baseball season, players pretty much work 24/7.

Malcolm Gladwell explains income inequality and why stars get paid so much.

The economic journalist and author Malcolm Gladwell explains how Marvin Miller accidentally paved the way for income inequality, in an article for The New Yorker titled “ Talent Grab: Why do we pay our stars so much money? ” Back in 1966, players got signed for $5.00 and made around $125.00 per year. Even in 1966, this didn’t add up to the federal minimum wage (at $1.40 per hour, a player should have made $2,912 per year … or $1456 if he worked only half of the year). Meanwhile, the leagues raked in all the revenues for players’ photos and baseball cards, as well as games. Most of the players didn’t care, they came from modest backgrounds and were thrilled to appear on baseball cards, get cheered by stadium crowds, and have steak for dinner.

Marvin Miller set out to break the Major League baseball system and change all of that. During a visit to San Francisco, CA, he saw a little boy playing, and felt impressed. He told the boy’s father — a right-fielder for the Giants — that when the boy grew up, he’d make more in one year of playing baseball than his dad would make in his entire career . That boy grew up to be Barry Bonds, and guess what? Through tough maneuvering, negotiations, and strikes, Miller did win higher pay for his players … and extremely high pay for his top players. Soon, athletes from other sports, actors, recording artists, and … yes … CEOs started demanding mega bucks deals for themselves as well.

Since the team, record label, movie studio, and other business owners aren’t about to cut their own pay, these insane salaries come out of their workers’ hides. And if the federal minimum wage stays down, well, that’s even more money for them.

NEXT: Declining union participation.