Sunday, September 25, 2011

Will Financial Woes Stamp Out U.S. Postal Service? (September 23, 2011)

It’s no surprise that the problems of the United States Postal Service (USPS) have become unmanageable over the last decade and have led to its escalating economic crisis. Despite the record 213 billion pieces of mail it processed just five years ago, “snail mail” struggles to compete especially electronically and, since then, its volume has dropped 22 percent and its deficit has ballooned.
Earlier this month, Postmaster General Patrick Donohue announced that the USPS was more than $12 billion in debt and, if Congress didn’t allow it to consolidate, eliminate Saturday delivery and borrow money, it would be “on the brink of default” by month’s end and possibly forced to shut down by next summer.
As the nation’s financial woes continue to get top billing, a federal bailout would not be too popular. And, with various alternatives to snail mail, public opinion might not accept such a bailout as practical.
Another problem is unprofitable post offices that continually take in less than they cost to operate. Consequently, almost 4,000 post offices have been targeted for closing, starting in January, including five of the 54 that serve Brooklyn.
On top of that, about a third of its workers (more than 120,000 employees) may have to be laid off. In fact, the USPS said that it would now have to examine half of it post offices across the nation and determine which ones to close over the next decade.
The USPS is reportedly already reaching out to convince local merchants to add a “village post office” to their business to replace some that close.
The USPS was established in 1971 as an independent, self-sustaining agency of the federal government, almost two centuries after Benjamin Franklin was named the first chief of the constitutionally-mandated Post Office Department. But, less than two years later, its first major competition began to surface when Federal Express was capable of faster package deliveries by ground and air. In 1975, UPS emerged and promised delivery service to every address in the continental U.S.
Within a few years letters and correspondence could be transmitted almost instantly via fax (short for facsimile), the transmission of scanned printed material (both text and images) via a telephone or other especially designed devices.
Meanwhile, as these new services and devices were being used more and more by businesses, the only changes at the post office were higher postage rates.
Modern technology gave USPS its toughest challenge and what may ultimately prove to be the knockout punch in 1993 via the quickly advancing Internet that allowed correspondence to be sent electronically in seconds or minutes depending on the capacity of the document.
Despite its independence, however, Congress still regulates the USPS and must authorize any changes. The agency’s operating expenses are derived solely from the sale of stamps, postage, products and services since it receives no tax dollars. However, its 560,000 workers are federal employees and, therefore, reap government medical and disability benefits, among other compensation, which is estimated to be 40 percent of the benefits paid annually by the government.
And the biggest outlay for Post Office goes to employees, which is the crux of its financial dilemma. According to the Wall Street Journal, the average postal worker earns more than $83,000 a year in wages and benefits. Postal worker compensation is much higher than that received by private workers, who also pay more for health benefits than postal service employees. That generosity is a result of poorly negotiated union bargaining. Now it’s time for the union to make drastic concessions or stand idly by as tens of thousands of workers get laid off. In this economy, that would not be a wise option; but it is necessary since almost half of the postal service’s debt is for retiree’s future pensions and benefits.
In recent years, the USPS has slashed billions of dollars and reduced its workforce by more than 125,000. But that obviously hasn’t helped.
It’s confounding that while the USPS cannot make changes without Congressional approval, how its union managed to bargain for such liberal employee benefits and contract terms, such as banning layoffs, regardless of its financial status.
Has anyone considered that perhaps federal legislators, with one eye constantly on the next election, deliberately ignored union demands since the recipients of that bounty, who could sway family and friends how to vote?
Despite the abrupt inconvenience, particularly for seniors who spurn technology and would suffer the most by its demise, the United States Postal Service appears to be headed for the scrap heap of concepts that couldn’t keep with up contemporary advances.
The Wall Street Journal once cited it as “the most inefficient monopoly” in the nation after the public school system.
That description is unlikely to change and, unless someone comes up with a pragmatic strategy to renovate it and make it more competitive for the 21st century and beyond, the Postal Service could vanish into history much like another extinct method of mail delivery the Pony Express.