With the United States Postal Service’s (USPS) $5 billion deficit driving Congressional action, Sens. Carper and Coburn have put forth a bill that protects a bloated union workforce and paves the way for consumer rate increases.
Rightsizing the workforce
Compared to the private sector, about 80 percent of the Post Office’s costs are labor related, while FedEx and UPS spend 20-40 percent less. For years the USPS has acknowledged its excess capacity, yet S. 1486 delays necessary attrition by placing a two-year moratorium on any further plant closures.
USPS employees are paid far above expected market rates: 34% more than their private sector counterparts. The average annual compensation (including benefits) of a postal employee is well in excess of $80,000. While S. 1486 allows the Postal Service to establish a new retirement plan for new employees, the legislation does little to address inflated employee wages. It is the combination of too many employees that are paid too much that is dragging USPS into the red. The solution to USPS’s self-identified problems is to address these labor issues head-on, not look for more revenue through rate increases.
Unable to save enough money through necessary cuts, the USPS will be forced to raise postal rates. S. 1486 changes and then permits complete elimination of the CPI based annual cap on postal rates. Without such a cap, USPS will have little incentive to reduce its workforce and rein in its costs. Instead of duking it out with the union, the USPS will likely raise rates on consumers. Ultimately, increasing postal service rates forces customers to prop-up the continued inefficient operations of the postal service.
Rate increases would only cause more customers to flee the mail system and could exacerbate the USPS’s most obvious problem – mail volume dropped by 25 percent from 2006 to 2013, from 213 billion pieces of mail a year to 158 billion pieces of mail a year. The legislation then permits the Postal Service to usurp rate-setting responsibilities from the independent oversight of the Postal Regulatory Commission to the USPS Board of Governors, the same entity that has overseen billion dollar losses year after year. ATR supports efforts to remove the problematic provisions on postal rates from the bill.
Instead of addressing its labor-induced problems, in the past USPS has attempted to offer consumers services outside its core competency of mail delivery. These forays into other services have consistently ended poorly. A conservative postal bill should prohibit the Postal Service from venturing into new non-postal areas for which it has no expertise or legitimacy.
The USPS has acknowledged that its problems lay in its excess capacity, including workforce and facilities. While S. 1486 takes some steps to address healthcare costs for USPS employees – no small achievement – it does not do enough to fix USPS’s unnecessary overhead. Burdening ratepayers with USPS’s labor costs is not only unfair, but could undermine the entire system by driving more users out of it.