In Canada, when postal workers went on strike because of wage cut proposals, many people were saying, “Who Cares?”
In the U.S., Hallmark and Amazon have said that they do care about the future of the Postal Service. If asked, approximately 650,000 postal service employees would have agreed.
The problem is money. Last year, the USPS lost $5.1 billion. And that total would have been double if Congress had not postponed retiree prefunding payments that were due.
The USPS is a huge business. One of the largest US employers, they run more than 32,000 post offices and target 150 million points of delivery. And yet, the US Congress makes their big decisions. Just to decide the fate of Saturday mail delivery, a Senate bill has required 2 years of studies. (How long would FedEx have pondered the issue?)
Here, here and here, other econlife posts discuss USPS problems.
The Economic Lesson
As Deputy Postmaster for the Colonies, Ben Franklin 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.
Crucial for U.S. economic development, the information infrastructure that Ben Franklin initiated was only the beginning. For a history of The Information, this James Gleick book is superb. Also, this Teaching Company lecture (#28) ideally conveys the issues.
An Economic Question: Why are USPS cutbacks such a dilemma?
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?