With the United States Postal Service’s (USPS) $8 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, over 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 plant closings.
If the Postal Service is to become profitable, it will need to reduce labor costs. Unfortunately, S. 1486 kicks the can down the road by perpetuating excess postal labor that the USPS can no longer afford. Additionally, the bill claws back private sector work sharing language that could reduce Postal Service costs.
Overpaid workers
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.
Raising rates
Unable to save enough money through necessary cuts, the USPS will be forced to raise postal rates. S. 1486 changes and then permanently removes 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 2012, from 213 billion pieces of mail a year to 160 billion pieces of mail a year.
The legislation then shifts 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.
Conclusion
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.
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