The U.S. Postal Service has about 170,000 too many employees and pays them about 30% too much, according to four major mailers groups.
“The notion that the Postal Service operates at the frontier of efficiency—and can do nothing further to reduce costs—is refuted by the record,” they wrote in a joint filing with the Postal Regulatory Commission last week.
The Magazine Publishers of America, Direct Marketing Association, the Association for Postal Commerce, and the Alliance of Nonprofit Mailers are objecting to the Postal Service’s renewed attempt to get PRC approval for “exigent” (above-inflation) rate increases early next year. (See USPS Seeks Special January Rate Increases for more information about USPS's request.)
The four associations accused the Postal Service of “portraying itself as a pitiful, helpless giant, essentially powerless to reduce its non-exigent costs or deal with their causes.”
“The non-exigent circumstances that are the primary causes of the Postal Service’s recent losses,” the four told the PRC on July 25, “include (1) an oversized network of undersized and obsolete mail processing facilities; (2) a labor compensation premium of approximately 30 percent; (3) a workforce that is approximately 30 percent too large for the Postal Service’s workload; (4) the long-term migration of communications from mail to the internet; (5) the requirement imposed by PAEA § 803 [postal reform legislation] to prefund retiree health care obligations by over $5 billion per year; and (6) the overfunding of the Postal Service’s pension obligations.”
With more than 560,000 career employees, the Postal Service would have to cut about 170,000 to downsize by 30%. The mailers’ groups did not specify where the excess employees are, but in the past the industry has pointed out an overreliance on manual processing, the plethora of post offices and sorting facilities, and the many layers of supervisors and managers.
USPS management and postal unions agree with the mailers on points 5 and 6. But, unlike the postal people, the mailers also see a positive in the postal-reform law -- its inflation-based price cap that has spurred cost cutting the past few years.
“Regulated monopolies in the process of emerging from cost-of-service regulation typically claim (and often believe) that they are already at the cutting edge of efficiency. But they typically have not eliminated all avoidable [in]efficiencies, in ways that are hard for regulators to ferret out. That is precisely why index ratemaking has gained such appeal among regulators in recent years.”
They also quote PRC Commissioner Dan Blair’s statement last year that “Congress adopted a price cap system as a means of forcing the Postal Service to engage in more efficient behavior. Evidence of this more efficient behavior can be found in the Postal Service’s efforts to trim more than $6 billion in costs during 2009. Were it not for the discipline the price cap imposes, I doubt the Service would have achieved such significant cost reductions.”