During dinner this evening, my friend said that she loves her local post office. A very small branch in a teeny building, they know her name, her needs, and are a neighborhood institution.
But, is it worth $1 billion a month?
During the first 3 months of 2012, the USPS lost $3.2 billion. First class mail volume is down and their retiree expenses are massive.
Changes have been proposed and opposed in Congress. Close 252 mailprocessing facilities? Lose jobs and still 235 remain. Stop Saturday deliveries? Let’s gradually do it during several years. Close my friend’s post office and hundreds of others in rural communities? Just let them remain open for fewer hours. Change the rules for prepaid pensions and maintain pension benefits? Attrition might work.
My bottom line: I keep returning to the Congressional oversight that makes innovative leadership impossible. Maybe we should just say that the USPS is such a valuable institution that we are willing to accept the huge expense and mediocre business model.
After all, I really would hate to lose the small and friendly post office near my home.
The Washington Post’s “Federal Insider” is a perfect source of information on the USPS as the issues evolve.
You’ve got mail? Maybe not on Saturday. As explained in a Teaching Company lecture (#28), the U.S. Postal Service (USPS) faces competition from UPS and FedEx, from email, faxes, and texts. Their salaries average 30% higher than the private sector, they have massive pension and retirement obligations, and their productivity lags behind national averages. Hemorrhaging money, they have to cut back.
Recently, Bloomberg Businessweek explained the plight of the USPS. Providing amazing service, the USPS delivers mail by pack mule to the Havasupai Indian Reservation in the Grand Canyon and by snow mobile in parts of Alaska. During 2010, its revenues were $67 billion. But it spent much more.
What to do?
Close post offices for economic reasons? Prohibited by federal regulation. Fire employees? Union contracts say no. Eliminate Saturday mail delivery? Congress has to say yes. Union concessions? A new contract with 250,000 postal workers includes a no-layoff provision, a 3.5% raise during 4 1/2 years, and 7 uncapped cost-of-living increases. Soon, 3 other postal unions will be negotiating. Innovate like Sweden (letting customers use mobile phones to create individualized postcards) and Germany and other foreign services? The USPS has resisted digital creativity.
And finally, have any public postal systems solved the same problems? Yes, Sweden, Finland, Germany, Switzerland.
The Economic Lesson
While we have had postal services since the 1600s, Ben Franklin transformed the system. Appointed Deputy Postmaster for the Colonies by the British, he established our first home mail delivery system, diminished to a single day the letter delivery time between New York and Philadelphia, and to 6 days between Philadelphia and Boston. When the British fired Franklin for his rebellious political activity, the postal system was making a profit.
An Economic Question: How might incentives for government agency leaders and private business CEOs differ?