The U.S. Postal Service is on track to lose more than $7 billion this year. Mail volume keeps dropping — and that decline is accelerating: 9.5 billion fewer pieces in 2008 than the year before, and this year another 28 billion fewer pieces are expected.
The causes are as clear as the bell on the first-class Forever stamp, which recently went up 2 cents in price, to 44 cents. People are communicating online — with each other, the office, clients, banks, brokers and retailers. They send photos and orders and recipes and invitations via e-mail. They keep in touch on Facebook and Linked-In and Twitter. They just aren’t sending as many letters, bills and memos through the mail anymore. This recession also has curbed some business mailing. But even if boom times returned tomorrow, that societal shift away from tucking paper into envelopes won’t reverse.
The Postal Service proposes to react by closing or consolidating 700 post offices, cutting hours at hundreds more — and, most controversially, cutting first-class mail delivery one day a week. In short, it would reduce customer service in ways that would only accelerate its decline.
As a stopgap measure, the Postal Service also proposes to delay paying $5.4 billion into a fund for retiree health benefits. A couple of years ago Congress insisted that payment be accelerated. Granted, delaying it would give the Postal Service some breathing room. But here in Illinois we suffer from ballooning deficits caused in large part by public entities deferring retiree costs. It’s a terrible practice that leads to higher expenses later.
The Government Accountability Office last month placed the Postal Service on high-risk status because of its deteriorating financial condition. Most ominously, the GAO noted that the Postal Service’s own projections over the next five years show continued revenue and volume declines. That affirms that these woes won’t end with the recession.
The heart of the problem now facing the Postal Service: Employees represent 80 percent of its costs, says the GAO, and their union contracts limit the Postal Service’s ability to respond to changing conditions.
The organization has shed more than 150,000 employees in the last decade, yet last year’s annual report shows it still employs more than 765,000 people (663,238 of them permanent workers). That’s more workers than Alaska, North Dakota, Vermont or Wyoming have residents. If the Postal Service were a state, it would have two senators and a representative in Congress.
It needs all those workers to staff 36,723 offices, stations and branches and deliver mail six days a week to 150 million homes and businesses. But it rewards workers even more generously than other federal agencies do, according to the GAO, paying 80 percent of health benefit premiums (compared with 72 percent at those agencies) and 100 percent of life insurance premiums (compared with 33 percent). Federal budget figures for 2009 show that average Postal Service wages were nearly $57,000 and benefits added another $26,000, for a total average cost of $83,000 per employee. Some economists believe those figures are 20 to 30 percent higher than comparable pay for similar work — partly the result of compulsory arbitration.
Predictably, most public outrage this week has been directed at the prospect that mail delivery may become less frequent. But the Postal Service’s finances and prospects in an online world are similarly bleak: Going from six days to five won’t be the end of service cuts if drastic change doesn’t come soon. The business model just doesn’t work anymore.
Is there a better way to deliver the mail than the expensive, plodding, unimaginative Postal Service way? Nobody else has been able to give it a try because the Postal Service has a monopoly on handling first-class mail.
That needs to end. Open mail delivery to competition.
Chris Edwards of the libertarian Cato Institute points out that such competition has led to lower costs, increased productivity and new business opportunities in New Zealand and Germany. Belgium, Great Britain, Denmark, Finland, the Netherlands, Sweden and Japan are privatizing their mail monopolies, and the European Union plans to bring competitive mail service to all 27 of its member countries.
Competition transformed the onetime monopolies of telephone service and package delivery — to the benefit of consumers who wound up with lower prices and more choices. Let’s see what it can do for the mail.
