Saturday, August 30, 2014

Old Cases, Not Recent Injuries, Are Driving Up USPS's Workers' Comp Costs

Most of the Postal Service's ballooning costs for workers' compensation result from injuries that are at least eight years old, according to a postal official.

"A majority of the workers’ compensation costs are attributed to employees who were injured prior to 2008," USPS spokesperson Darlene Casey wrote this week in a comment on Dead Tree Edition. She was responding to the article Are USPS Changes Leading to More Work-Related Injuries?, which suggested that recent changes in working conditions might have contributed to the agency's rapidly escalating workers' comp costs.

The Postal Service supports the recent Inspector General's report that describes why USPS workers' comp costs rose 35% from 2008 to 2013 despite a 19% decrease in the workforce, Ms. Casey said. Healthcare inflation has been a major factor, she added.

USPS also agrees with the IG's call for reforming the federal law that governs workers' comp at USPS.

The IG report showed that the number of new workers' comp claims per employee dropped drastically in 2009 but inched back up to 7 per 100 employees in 2013, the same rate as in 2008. No data have been released regarding changes in the type or severity of injuries.

Here is Ms. Casey's comment in its entirety:

The Postal Service appreciates the work of the Office of Inspector General (IG) highlighting the need to reform the Federal Employees' Compensation Act (FECA). The IG report describes many factors which contribute to the increase in the Postal Service's workers' compensation costs, including injury rates associated with a more mature workforce, reduced light/limited duty positions attributed to automation, and cost of living adjustments.

The cost of living adjustments mentioned in the report do not refer to employees’ salary adjustments, but rather federally mandated cost of living adjustments provided to federal employees on the Department of Labor (DOL) Periodic Rolls. For the years 2008 – 2013 those increases were 4.3 percent, 0 percent, 3.4 percent, 1.7 percent, 3.2 percent, and 1.7 percent respectively, which when compounded equates to an increase of 15.1 percent over the base period.

The Postal Service also strongly believes that healthcare inflation is a major contributing factor to the cost increases. Our average medical cost per case has increased 43.4 percent since 2008 far greater than the compounded 21.3 percent reported adjusted medical care cost increase reported by the Bureau of Labor Statistics. In comparison, the average compensation cost per case has increased 24.2 percent in the same time period.

We must reiterate the findings of the IG that these increases in expenses occurred during a time when claims filed with the DOL were less than the 2008 level; and a majority of the workers’ compensation costs are attributed to employees who were injured prior to 2008.

The IG has aggressively gone after fraud, having saved the Postal Service more than $289 million from future losses, and nearly $52 million in medical and disability judgments associated with fraudulent claims.

We agree with the IG's call for reforms to FECA and we will continue to work with Congress on reforms that will return the Postal Service to profitability.

Sunday, August 24, 2014

Are USPS Changes Leading to More Work-Related Injuries?

Letter carriers and other postal employees have been saying for several years that changes at the Postal Service would lead to more job-related injuries. A new report suggests they may be right.

"Despite the Postal Service’s efforts to decrease the number of employees [by 19% since 2008], its workers’ compensation costs have increased 35 percent,” the U.S. Postal Service Office of Inspector General noted in a report last week.

The OIG pointed out that USPS’s workers compensation costs per work hour are now 59% higher than those of comparable private-industry workforces. But it offered no data that would help explain the dramatic increases, which led to $1.3 billion in workers compensation claims from July 2012 to June 2013.

The report speculated as to the causes, but most of its guesses seem off the mark: Older workforce? (Nope, it’s not much older on average than it was in 2008.) Cost-of-living adjustments? (Average hourly pay at the Postal Service is up only 7% since 2008.) Workers compensation fraud? (You mean that didn’t exist in 2008?)

The OIG put forth one plausible explanation – “the reduced number of light/limited duty positions available because of automation and lower mail volume.” But it didn’t consider several other possibilities, most of which have been put forward by front-line employees:
  • Increased street time: Delivery-point sequencing of letters – and, for some areas, flat mail – have meant carriers spend less time in the office sorting mail and more time delivering. That’s likely to lead to repetitive-strain injuries, especially on walking routes, for carriers who are delivering to more addresses than ever. 
  • Longer hours: The proportion of overtime hours is up 80% for mailhandlers and 30% for letter carriers so far this fiscal year versus the same period in FY2008. That may also lead to more repetitive-strain injuries. 
  • Night-time deliveries: Reports of carriers working their routes after dark, especially during the winter in northern parts of the country, have grown dramatically in the past couple of years. That seems to be a combination of longer routes and of mail arriving at the delivery units later than in the past. In any case, having carriers negotiating icy sidewalks at night is a prescription for more slips, falls, and fractures. 
  • More uninsured employees: USPS has reduced its costs the past few years partly by replacing retirees with lower-paid, often younger non-career employees. Such employees are more likely to report a pinched nerve or sore knee as a work-related injury, since many have little or no health insurance. 
  • More parcels: Letter volume is declining, but postal employees are handling and delivering more packages than ever -- often using delivery vehicles not suited to the purpose. The higher proportion of heavy and oversized mail pieces may be causing more injuries.
The Postal Service can’t address the troubling workers compensation trend without understanding the causes. And the way to get at the causes is not with speculation but with actual data – for example, trends in injuries by occupation, age, and type.

To be fair, the OIG report does offer viable ways for USPS to manage its workers compensation costs better and for overhauling the relevant laws. It notes that the agency is paying workers compensation to two “active” employees who are more than 100 years old – certainly a sign that something is amiss.

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Wednesday, August 6, 2014

Is Print Really Killing Publishers?

A commentator I respect, Joe Wikert, published a piece last week headlined “How Print Is Killing Publishers” that at first struck me as completely wrongheaded and backwards. But what we have here is failure to communicate.

“Print is a publisher’s silent killer” because publishers are relying on print “even at the expense of digital transformation and growth,” Wikert wrote for Book Business magazine. “The crazy part is we all know it's a big problem and yet very few publishers are taking evasive action.”

Publishers’ biggest problem, Wikert claimed, is when their brands are “directly associated with print” – that is, “when consumers hear your brand name [and] all they can think of is a print product” and see “no association with digital whatsoever.”

“Joe, were you flash frozen in 2008?” I said to myself. “That’s the kind of bass-ackward thinking that decided ‘The Daily Beast’ was a stronger brand name than ‘Newsweek’ simply because Newsweek was in print.”

I thought of publishing brands like The Atlantic and The Christian Science Monitor that are thriving on the web without having to disown their century-plus print legacies. And I recalled the web-savvy colleague who said, “Having a print publication can do wonders for a web site’s brand image.”

It was hard to think of any U.S. magazine publishers that are not trying to become less dependent on products that have to be delivered by the U.S. Postal Service or the newsstand system. The only notable exceptions are digital-native brands like Allrecipes.com, Politico, and the new Newsweek that decided to build cache by putting some ink on paper. (How’s that for not worrying about being “directly associated with print”?)

I was wrong
Then I realized the fundamental error in Wikert’s thinking – and that I was making the same mistake: Any generalization about “publishers” is bound to be wrong, especially when it centers on the vague word “digital.”

Taken out of context, the word “publisher” means so many different things to different people that it ceases to have meaning. When newspaper people say “publishing,” they mean newspaper publishing. To magazine people, “publishing” means mostly magazine publishing. And for folks in the book industry, “publishing” means, believe it or not, book publishing.

There is no such thing as "the" publishing industry, only publishing industries.

“Digital transformation” is a chameleon term in the publishing industries. It can be about web sites, digital editions, apps, e-newsletters, or shiny new object of the week.

For book publishers, digital transformation refers to the once-seismic, now-glacial shift to e-books. Or people buying printed books from e-stores instead of bookstore. Or even the growing reliance on digital presses to reduce inventory costs via “print on demand.”

Wikert’s company, Olive Software, creates XML editions of publications for many leading newspapers (and other organizations). Perhaps he is genuinely frustrated by clients who cling to outmoded ways and the once-a-day publishing cycle. Perhaps print -- or, rather, the failure to embrace other media -- really is killing some of those publishers.

A galaxy away
If so, the publishing industry Wikert experiences is a galaxy away from the one in which I toil during the day (and write about at night). Not many magazines can say they have figured out the “digital transformation,” but most have moved beyond print-versus-digital thinking and are working to ensure their brands are relevant in multiple media. (Because, God knows, no one medium can bring in enough scratch to keep the lights on.)

Wikert might be horrified to know that some publishers in my industry consider Olive-type editions to be “print” because they are often outgrowths of printed products -- sharing the same content, advertisers, ratebase, and P&L. For those publishers, “print” has come to mean “paginated content” that doesn’t necessarily involve dead trees, while “digital” means such un-paginated content as web sites and e-newsletters.

There is no single “digital transformation” in any of the publishing industries. E-books dominate romance fiction but have hardly touched the world of art books on coffee tables. The web has wiped out much of the weekly newsmagazine business, but glossy fashion titles seem as healthy as ever.

Regardless which publishing industry you’re in, shibboleths (whether “print is dead” or “print rules”) and simplistic solutions will end in disaster. Sorry, folks, there are no one-size-fits-all answers in this business.

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Monday, August 4, 2014

Donnelley May Have Acquired EPA Trouble

Barely a month after doubling the size of its office-products business, printing giant R.R. Donnelley was cited for selling office products with “unregistered pesticides.”

On May 8, the company received a notice from the U.S. Environmental Protection Agency alleging that its ”distribution and sale of certain office products involving antimicrobial properties violated the Federal Insecticide, Fungicide, and Rodenticide Act (‘FIFRA’) because they constituted unregistered pesticides,” the company revealed last week. “The EPA is seeking civil penalties for the alleged violations.”

Esselte sells a line of antimicrobial file folders.
The revelation, buried on page 57 of the company’s quarterly financial report, said Donnelley “anticipates having discussions with the EPA regarding a potential resolution” of the issue, which “is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.”

On March 25, Donnelley completed the acquisition of Esselte, which makes office and stationery products, including some “antimicrobial” products that resist mold and mildew. As a result, Second Quarter office-products revenue for the U.S.’s largest printing company increased 141%, to $158.6 million, over the same period in 2013.

Donnelley’s statement does not indicate exactly which office products are involved in the EPA complaint or whether they are part of the Esselte division. Nor does it indicate whether the EPA singled out Donnelley or is investigating other companies as well.

“Antimicrobial products kill or slow the spread of microorganisms,” says the National Pesticide Information Center. “If a product label claims to kill, control, repel, mitigate or reduce a pest, it is a pesticide regulated by the U.S. EPA.”

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Thursday, July 31, 2014

Frenemies: The Love-Hate Relationship Between UPS and the Postal Service Blossoms

The rise of online purchasing is boosting the partnership between United Parcel Service and the U.S. Postal Service – and fueling their rivalry as well.

Volume for UPS SurePost – lightweight parcels that are typically handed over to the Postal Service for final delivery to residential addresses – were up more than 60% in the past year, UPS announced this week.

UPS also revealed a coup of sorts: “During the quarter, a retail customer upgraded its catalog distribution to UPS Ground from the U.S. mail, contributing to our ground growth,” CFO Kurt Koehn said during the company’s quarterly earnings call. He didn’t name names, but only a large customer could cause meaningful growth in the company’s $6.2 billion quarterly revenue for domestic ground shipments. (Update: Several readers pointed out that the customer was Restoration Hardware, which recently shipped 17-pound multi-catalog bundles via UPS.)

The big shipping company is also wary of the Postal Service trying to steal market share with its recent proposal to slash prices on some commercial parcel shipments. (See FedEx Cries Foul Over Postal Service Price Cuts for more on why USPS's competitors are trying to block the proposal.)

Sharing customers
“We work very closely with the post office,” said D. Scott Davis, UPS’s CEO. “We appreciate their universal service mandate where customers of theirs are customers of ours, but there is some concern as we go forward and how they price competitive products and there is some concern about cross-subsidization.”

Both UPS and FedEx contend the Postal Service has shifted too much of its cost burden to “market-dominant” mail classes like First Class and Standard, which enables it to keep package prices artificially low. The company, Davis said, will continue fighting that battle at the Postal Regulatory Commission, which will rule soon on USPS’s proposal to reduce many parcel rates by 30% and some by 55%.

“At the same time, we’ll go out and compete with the post office,” he added.

But the Post Office is also being urged to be more competitive with UPS.

“The Postal Service’s mix of packages generated a relatively low revenue per piece of $3.37,” the independent USPS Office of Inspector General wrote in a recent study. UPS and FedEx each earn more than $9 per package.

“While the Postal Service has long served low revenue market segments such as lightweight packages very well, customer demand has created opportunities to offer value-added services and enter the higher revenue per piece segments,” the report said.

“The Postal Service cannot afford to be the provider of last-mile delivery only when the revenue is low and the cost is high. Such ‘cream skimming’ will harm the Postal Service’s package revenue and its ability to fund universal service.”

Saturday, July 19, 2014

FedEx Cries Foul Over Postal Service Price Cuts

Poor FedEx.

The market for delivering items purchased on the Web is growing, but the U.S. Postal Service isn’t playing fair, FedEx complained this week. The big delivery company is trying to stop USPS from cutting prices to deliver certain types of packages.

For the record, FedEx stock is worth north of $43 billion. USPS is consistently unprofitable and basically insolvent.

“What USPS is proposing is an aggressive push to gain market share in the fast-growing business of e-commerce distribution services,” FedEx told the Postal Regulatory Commission. “To this end, USPS is proposing reductions of 30 to 55 percent in prices for commercial shippers in the weight categories most used by e-commerce. Price reductions of such magnitude will substantially affect competing service providers and the market as a whole.”

Consumers would pay more, businesses less
The Postal Service wants to restructure Priority Mail rates. Prices would increase for retail customers – individuals who drop off packages at a post office counter – by an average of 1.7%. But some prices for commercial shipments would decrease, a Postal Service attempt to attract more ground shipments weighing 6 to 20 pounds.

Postal regulations are supposed to ensure “that USPS does not derive an unfair advantage from legal or governmental privileges when it competes with private sector companies,” FedEx wrote.

It asked the PRC to make sure “that prices for USPS’s package services correctly reflect costs, so that the ‘playing field’ for e-commerce distribution services remains as a level as possible.”

$2 billion in profit vs. a $5 billion loss
“Packages delivered by USPS benefit from an exclusive right of access to mailboxes and clusterboxes, a postal operator privilege that does not exist anywhere else in the world,” FedEx wrote. The postal monopoly also gives USPS “economies of scope” that bear some of the costs of package delivery.

Translation: Because USPS has to deliver to every home six days a week, it can deliver a package to that home cheaper than FedEx, which only delivers to that home when it receives enough profit to do so. Maybe that’s why FedEx earned more than $2 billion in profit last year while USPS lost nearly $5 billion.

Like UPS, FedEx complained that secrecy surrounding USPS’s “Competitive Products” makes it impossible to prove that USPS’s proposal is contrary to law.

“One-time price cuts of as much as 55% raise serious questions that the mailers in the mid-weight categories are getting subsidized by someone – what FedEx cannot tell the Commission for sure is, by whom,” FedEx wrote. “Largely left behind in this price-cutting frenzy is the ordinary retail customer who brings his package to the local counter.”

UPS and FedEx also agree that USPS’s Competitive Products should bear more than 5.5% of the agency’s institutional costs now that they represent nearly one-fifth of the agency’s revenue.

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