Baseball, Hot Dogs And Income Inequality

From Nick Colas of Convergex

Income inequality can be a pretty theoretical construct, but today we’ll bring the topic “Home” with a look at how it affects the price of a baseball ticket in America. The United States already has the highest level of income inequality of any advanced country (according to the CIA’s World Factbook), but particular cities within the country display a considerably higher level than the national average.  And among cities with Major League Baseball teams, the inequality that exists regarding ticket prices directly correlates with the level of inequality in those urban areas.  New York City, for example, is the most unequal in the nation, and so is Yankee Stadium.  The most expensive seats this season cost almost 59 times more than the “bleacher seats,” while the spread for tickets to a Minnesota Twins game is just 5.4 times.  Minneapolis/St. Paul, coincidentally, is among the least unequal metro areas in the U.S.  But before you storm the baseball barricades, consider that the lowest priced tickets in highly unequal cities is $17, only $3 more than the more equal ones.  The inequality actually comes in the form of higher prices for the good seats - $206 in the more egalitarian areas and $501 in the cities with more inequality.  Score it as “Real Fans: 1, Oligarchs 0”.  

We all know that income inequality exists in America, but today we’ll show that it has permeated the nation’s pastime as well.  Yes, income inequality exists in Major League Baseball (MLB) stadiums around the country, and while low-end tickets are still affordable, the high end gets crazy as every stadium tries to work out how to capture the excess economic “Rents” at the upper echelons of the socioeconomic spectrum.  Additionally, inequality in baseball stadiums is correlated to the respective city’s relative level of inequality versus its peers.  Before we detail our findings, below is an overview of inequality in America, with particular focus on metropolitan areas containing more than a million residents.

  • The Gini index for the United States as a whole is 0.467.  Gini coefficients are a measure of statistical dispersion intended to capture the income distribution of a nation’s residents and range in value from 0 (representing perfect equality) and 1 (perfect inequality).  For the sake of comparison, Denmark typically has among the lowest Gini index in the world – its coefficient recorded 0.247 most recently – as do Japan (0.249) and Sweden (0.250).  At the other end of the spectrum stand countries such as Namibia (0.639), South Africa (0.631) and Haiti (0.592).  The CIA Factbook has a complete listing of every country’s index, and we’ve included a link at the end of this note to the site.
  • Within the United States, the Gini coefficient for specific metropolitan areas differs substantially.  For example, the Bridgeport/Stamford/Norwalk, CT metro area has a Gini coefficient of 0.537 – the highest in the U.S. and on par with that of Thailand (0.536).  On the other hand, Ogden/Clearfield, UT has the lowest in the U.S. at 0.389, and in fact only four other domestic metropolitan areas have inequality levels below 0.400 – Fairbanks, AK (0.399); Monroe, MI (0.398); Appleton, WI (0.395); and Sheboygan, WI (0.393).
  • Among metropolitan areas containing more than one million residents, New York City has the highest level of inequality, with a Gini coefficient of 0.502.  Miami (0.493), Los Angeles (0.484), Houston (0.478) and Memphis (0.478) round out the top five, while San Francisco comes in at number seven overall with a coefficient of 0.473.  We note San Francisco, as it is one of the top five unequal cities that is host to a MLB team (more on this shortly).  The bottom three large metro areas in terms in inequality include Salt Lake City (0.417), Virginia Beach (0.421) and Minneapolis/St. Paul (0.430).  In addition to Minneapolis/St. Paul, the remainder of the bottom five that are host to a MLB team include: Kansas City (0.433), the District of Columbia (0.433), Seattle (0.440) and Baltimore (0.445).

And now, on to baseball.  We began by scoping out the most and least expensive tickets currently available for sale for ten MLB teams across the country – those within the top five most unequal large metro areas in the country and those within the top five most equal cities.  To be as similar as possible across schedules, we chose a home game on a Saturday early in May.  Our findings are as follows and in the table accompanying the text. 

  • Among the top five most unequal areas, tickets to a New York Yankees game range from $17 to $1,000 while home seats to see the L.A. Dodgers range anywhere from $25 to $1,000.  The Houston Astros ticket spread is the narrowest in this group – from $25 to just $70 for the best available seats.  Rounding out the group, the price range for the Miami Marlins is $15 to $245, and tickets to see the San Francisco Giants run the gamut from $19 to $190. 
  • Notably, there is a relative wide spread between the most and least expensive “cheap” seat in this category – it costs 2.5 times as much for a low-end Dodgers seat than for a similar Astros seat.  Meanwhile, the average “cheap” seat is $17 compared with $501 for the average highest-end ticket, translating to an average multiple of 26.4 (i.e. the typical expensive seat costs more than 26 times more than the typical cheap seat).
  • Among the top five most equal large cities, the Washington Nationals ($15 to $350) and the Seattle Mariners ($12 to $440) have the largest spreads.  Completing the category are the Minnesota Twins ($18 to $98), Baltimore Orioles ($10 to $56) and Kansa City Royals ($13 to $84).  The average cheap seat for the group is $14, versus $206 for the average high-end ticket, translating to an average multiple of 15.5.

The concept of inequality on America seems to hit closer to home when it is apparent in the nation’s greatest pastime.  Indeed, the most expensive tickets to a MLB game in the most equal cities in the U.S. cost 15.5 times more than the cheapest seats to the same game.  Among the most unequal cities in the country, the spread is significantly larger at 26.4 times.  Going to a baseball game is uniquely American, and the good news is that the low-end tickets are still affordable.  Prices for high-end seats, however, are skyrocketing as franchises build new stadiums with state-of-the-art amenities when and where they know they can charge exorbitant rates – and this is most evident in cities where inequality is higher than the national average.
 
On the plus side, baseball itself is still a home run since it’s affordable for its core constituent – middle class American families – as it is the roughly same price as other forms of entertainment, such as a trip to the movie theater.  And it’s even cheaper than most live entertainment (undesirable lawn seats for major concerts cost a minimum $50 these days).  However, MLB’s businessmen clearly have their eyes on the wallets of the 1%.  They pay more – often much more – in cities where they are abundant, particularly where a team has the opportunity to take advantage of a newer, more glamorous stadium.  While these new stadiums allow MLB franchises to charge more for not only tickets but beer, food, t-shirts, etc., so far they’ve managed to refrain from pricing out the middle class constituent that has faithfully supported America’s pastime for decades.  Let’s hope it never comes to that.

Sources:

http://www.theatlanticcities.com/jobs-and-economy/2012/10/high-inequali…
http://www.newgeography.com/content/003921-inequality-largest-us-metrop…
http://www.census.gov/prod/2011pubs/acs-16.pdf
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2…