Postal Service expected to announce ‘significant changes’ – washingtonpost.com

“The U.S. Postal Service will release projections Tuesday that confirm for the first time the suspicion that mail volume will never return to pre-recession levels. In response, the agency is pushing anew for a dramatic reshaping of how Americans get and send their letters and packages.”

My brother John Garven and I were talking about this very topic yesterday; John mentioned (among other things) that wages and benefits for postal workers account for > 80% of total revenue, which seems rather high, but I am not a labor economist so I don’t know offhand what the total labor costs to revenue ratio typically is for comparable firms.

I did manage to find a dated (2002) study commissioned by the American Postal Workers Union online which compares labor costs at USPS with labor costs at UPS and Fedex; below, I reproduce my own version of Table 1 on page 2 from that study:

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The primary takeaway from this report is that that USPS clearly has (historically had) higher salary and employee benefit costs as a percent of operating revenues, operating expenses, and (adjusted) operating expenses (see the report for the details concerning that particular calculation) than its competitors.

I have a personal interest in this topic since I have family members who work or have worked for USPS. It amazes me that it has taken the USPS this long to come to the realization that it doesn’t make much sense to staff for a first-class mail world when consumers have so many close substitutes available (e.g., email, fax, alternative delivery via Fedex and UPS, etc.).  This is yet another data point in support of John Steele Gordon’s hypothesis that government can’t run a business.

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One thought on “Postal Service expected to announce ‘significant changes’ – washingtonpost.com”

  1. If the post office wants to cut costs, I would suggest eliminating the vast variety of stamp designs and denominations they produce. A few basic designs per year should suffice both for postage and for interesting collecting. For example, the basic First Class stamp, the .01 cent denomination, the .10 cent denomination, plus $1 and maybe $5 denominations would work for making up the shipping cost on most packages. Additional denominations would be in the form of the bar code system, which is already in use. These stickers are rather plain, ….but could have a better design that could change annually. Collectors could start collecting various postage amounts rather than just stamp designs. As a stamp collector myself, I love variety. But,…. I still have to admit that standard postage stamps need to be implemented in order to save cash. The closure of post offices and the installation of self-serve machines in stores would most likely lead to bar code postage on those packages. So why not do the same in ALL post offices.

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