Sunday, September 26, 2010

Don’t Blame ‘Overpaid Postal Workers' for Rising Periodicals Costs

The U.S. Postal Service’s cost to deliver a magazine or newspaper has been rising twice as fast as inflation for more than two decades, but don’t blame employee pay levels. The real culprit is declining productivity, the Postal Service’s own numbers indicate.

“The tendency of Periodicals costs to increase much faster than inflation . . . has continued with few interruptions since FY1986,” postal expert Halstein Stralberg wrote recently. As a result, the Postal Service has repeatedly hit the Periodicals class with rate increases that exceed both inflation and those for most other classes, as it is trying to do again in the exigent rate case being considered by the Postal Regulatory Commission.

Stralberg blames “the ingrained Postal Service culture” for the Periodicals mess. “The machines they use have become more powerful and sophisticated over time; but the way that operational decisions are made, and the lack of awareness of cost attribution issues among those who make the decisions, has changed very little,” Stralberg’s wrote in his testimony on behalf of Time Inc. for the exigent rate case.

Using the Postal Service’s own data, Stralberg’s showed that USPS’s cost of delivering a periodical increased by 200% from 1986 to 2009 even though inflation was a bit less than 100%. (See Stralberg's chart above.) The Postal Service’s wage rate – calculated as total USPS wages and benefits divided by total hours worked – increased 140%.

For most of the period studied, in fact, changes in the USPS wage rate closely tracked the Consumer Price Index. After all, the Postal Service’s labor contracts generally peg cost-of-living increases to CPI (which is a good reason to limit price increases to changes in CPI as well). Only in the past decade, presumably because of benefits costs (including, perhaps, pension and retiree-benefits overpayments) did the wage rate start to diverge from CPI.

Although some mailers have blamed employee compensation levels for rapid cost increases, Stralberg’s analysis shows that the larger problem is productivity: The Postal Service requires more work hours today to deliver a certain number of periodicals than it did in 1986.

The Postal Service, Stralberg wrote, has never really addressed these “unexplained and anomalous Periodicals cost increases” that occurred during a period in which it “deployed several generations of new technology that were supposed to automate and sharply reduce the costs of flats mail and Periodicals in particular.”

The USPS can’t blame publishers, who during that time have implemented a variety of measures that were supposed to reduce Postal Service costs, such as dropshipping, shifting mail from sacks to pallets, and putting a larger proportion of copies into efficient carrier-route bundles.

Here are excerpts from Stralberg’s explanation of the Postal Service’s skyrocketing Periodicals costs:

For more than a decade, various studies have shown that “as processing of other mail classes was automated, Periodicals continued to be processed in a more manual fashion. Employees freed up by the automation of other mailstreams were kept busy handling Periodicals, whose costs therefore skyrocketed. Additionally, portions of indirect costs that previously had been borne by other mail classes were shifted to Periodicals by the Postal Service’s cost attribution system.”

“In recent years, the Postal Service has acquired enough automated flats sorting capacity, particularly with the recent loss of volume, to sort practically all flats to carrier route on high speed automated equipment. However, many facilities, unable or unwilling to change their traditional ways, or perhaps simply to keep employees occupied, have continued to process Periodicals manually.”

“There evidently are postal clerks … whose costs must be attributed to something, and as long as postal managers continue to send them Periodicals flats to be sorted, their costs will be attributed to Periodicals flats.”

For further reading:


Anonymous said...

Regarding Post Office boxes:
The periodicals must be rolled or bent into a "U"
shape with letters and other mail inside the "U".
Depending how stiff the periodical is you might
even have to give them a notice and "hold" out
the periodical for them to pick up at the window.
Periodicals actually DO take more time. The
Currently political flyers all need to be rolled
or put into the "U" as well. Multiply this by
multiple flyers for candidates/issues and every
registered voter. In reality It does require more
time per mailbox compared to a letter.

Anonymous said...

not all periodicals come as palletized drop shipments. home time newspapers, ny times , usa today come in sacks or loose from larger mail processing centers. inserts and adds are loose or papers are to thin to be machine processed. acceptance regulation need to be tighter.

Giles Habibula said...

Generally, when one prints a graph that one wishes understood, one labels it properly; while it is possible to discern the meanings of the three lines from the text it should not be necessary to do so.

And you'll note the increase in the wages/rates vs inflation ratio started in the Bush administration, when the manipulations of the COLA numbers became even more egregious than before. Perhaps you'll publish a revised graph, one showing, not bogus COLA numbers, but the cover costs of periodicals. And the pay - with benefits - of the CEOs of companies that produce them.

Anonymous said...

With publishers trying to pinch every penny, and the post office trying to process everything with automation. The shippers use cheaper plastic and strapping to secure their products, and the postal service dumps all this poorly secured bundles on automation equipment not designed to process it,if it breaks open. And way to many bundles break open, which creates havic on automation equipment . They then want to know what the problem is with their NUMBERS. They constantly run these machines with half the people they were designed for, and again want to know what is the problem with their NUMBERS.
Most Postal employees really care about Service. Blame the unions for keeping the ones that don't, and thank the unions for the very good and deserving wages all of them are paided.
So like everything in life there are two sides to the story. we have to stop trying to please EVERYONE, and someone MUST change to conform to requirements.

dryMAILman said...

Did anyone else become infuriated when the postal pricing economist said that carrier route flats got gouged (9% vs. 5%) to discourage MAILERS from excessive processing? We already have private walk-sequenced flats. ECRLOT is one example. Somebody should be tweeting about who's doing the excessive processing. The culprits are Northrop Grumman and the USPS. :(

D. Eadward Tree said...

To Giles Habibula: Thanks for pointing out the flaw in the chart. The mistake was mine, not Mr. Stralberg's. I have fixed the chart to make it clearer.

Anonymous said...

At my P&DC we're still processing periodicals on the AFSM 100 (FSM 1000 have been discontinued a few years back) while still awaiting the delayed implementation of the new FSS. We do not use a manual "bull pen" to keep employees occupied. If there are excess employees available, they are sent to other units to cover mail volume, priority and capacity. Although "safety stand-up talks" have been discontinued in order to improve productivity, employees are mandated to attend periodical "corrective meetings" regarding flats productivity.


Anonymous said...

take out the salaries of those in upper level management who don't touch the mail, and then do the chart. I assure you that the ones moving the mail, are not overpaid. "work-moving matter from point A to point B".

Anonymous said...

Yeh, blame it on the executives...wait till you read this:


Senator Collins: OIG Audit Shows Stunning Evidence Of Excessive Postal Execs Perks - The U.S. Postal Service pays 100 percent of health insurance premiums for 835 of its top employees, an expensive perk that occurs at no other federal agency, Senator Susan Collins said, The findings of the [OIG] audits illustrated stunning evidence of contract mismanagement, ethical lapses, financial waste, and excessive executive perks that cost the Postal Service more than $800 million a year in unnecessary costs.

Anonymous said...

What about the pallets of CR flats that use to go straight to the station, now have to be run through the machine because the actual CR at the station keeps on changing due to the shrinking mail volume that have a carrier doing more mailboxes in a day. Not all the mailboxes will have mail waiting to be stuffed, they will be bypassed until the day mail is available. Lots of overtime for the P&DC clerks ad mailhandlers to process the CR pallet.

Anonymous said...

Here is a shot in the dark: Because Periodicals volume is so proportionately low (3.8%) in comparison to other mail volumes, attributed work hours are not easy to manage. Small swings in manpower/hrs can impact cost loads. Management efforts need to be scaled to the measured throughput of Periodicals volume, not in aesthetic proportion to other processing volumes, i.e. 5 of 100 workers processing Periodicals may be 1.2 too many at the plant level.