June 5, 2011

US Postal Service Nears the Edge


“The USPS is a wondrous American creation. Six days a week it delivers an average of 563 million pieces of mail — 40 percent of the entire world’s volume. For the price of a 44¢ stamp, you can mail a letter anywhere within the nation’s borders. The service will carry it by pack mule to the Havasupai Indian reservation at the bottom of the Grand Canyon. Mailmen on snowmobiles take it to the wilds of Alaska. If your recipient can no longer be found, the USPS will return it at no extra charge. It may be the greatest bargain on earth.

and yet …

The problems of the USPS are just as big. It relies on first-class mail to fund most of its operations, but first-class mail volume is steadily declining — in 2005 it fell below junk mail for the first time. This was a significant milestone. The USPS needs three pieces of junk mail to replace the profit of a vanished stamp-bearing letter.”

A first-class stamp costs 44 cents. That’s far too cheap for the service it guarantees. Raise that to one dollar. At the same time, there’s just no good reason why junk mail, er, direct-mail marketing, should get a break on postage. Direct mail marketing makes up the majority of the mail stream, so it generates the majority of operational costs. Even if only 20% of the USPS budget is spent on operations (it’s in the article), raising the price of junk mail postage has got to help offset the cost of carrying mail that almost no-one wants. Raise the first-class rate to something resembling market pricing (compared to what Fedex or UPS would charge for similar service) and cut the junk mail discount, and the USPS’s problems will abate.

The other aspect of the problem, of course, is labor costs. The other 80% of the USPS budget is spent on pay and benefits. I’m a union man and expect a worker to be paid a fair wage and fair benefits. The trouble is, we have too many post offices, and therefore too many people manning them. Raise the junk mail postage and see how much of the junk dries up. At the same time, set a large jurisdiction size per post office and begin closing those that aren’t needed. Perhaps we need to build or lease new facilities, larger buildings to handle a larger jurisdiction. There’s got to be savings in consolidation.

Much of our population has shifted to email and electronic bill paying. That number will only increase. What can’t (or won’t) be handled electronically can be consolidated into larger and more efficient post offices and carrier routes, financed by everyone paying their fair share.

Or maybe it’s time to admit something new since 1775: we don’t need the government to provide reliable mail delivery anymore.