The Post Office’s Problems Aren’t Its Employee Costs

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Mark of New Jersey

Mark is a Founding Editor of The League of Ordinary Gentlemen, the predecessor of Ordinary Times.

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31 Responses

  1. Avatar Trumwill says:

    Very well stated.

    It seems to me that the first question to be asked here, is “how much does the Post Office need to charge to remain solvent?” If it’s more than it would cost UPS/FedEx to do it, I think we need to re-evaluate the USPS’s existence (but I, like you, consider this somewhat unlikely). If it’s not as high as UPS/FedEx, but still something we would scoff at, then we need to ask ourselves what, precisely, we want from the post office. I can envision a more high-service USPS as they have in some other countries, though I can also envision a low-service one. Mail once a week, will call if you want it sooner, and if you want it delivered sooner to their house than you need UPS or FedEx.

    This is where the unions could be problematic because the end result would be a lot of layoffs. And a cost analysis would need to be done. How much would be saved by doing so? I think that this, combined with more post offices in other places of business and many others simply shut down, could reduce operating costs a lot. But I could be wrong.

    Incidentally, I’ve seen a whole lot of comments that the USPS is hit hard because it has to deliver everything while UPS and FedEx can cherry-pick. The places that the USPS delivers that FedEx and UPS don’t are actually pretty few. It’s not muleback delivers to the reservations that are making it unsolvent (though doing it daily, if they do, wouldn’t help). And as someone that lives in the sticks, I can tell you that UPS and FedEx do not gouge their rural customers (at least within the continental US). I recently did a price check on sending a package from Tampa to Glasgow, Montana (about as far as you can get from any major city) compared to Denver and Seattle and while it was marginally more expensive for some deliveries, it was actually cheaper for others.

    So how much of the USPS apparatus do we keep in place for the relatively few places that UPS/FedEx deliver? And how much do we keep in place to preserve whatever price difference exists between the USPS and what UPS and FedEx would be able to offer if given the chance?Report

    • Avatar tom van dyke in reply to Trumwill says:

      ^Trumwill again. MarkT, for decoding Freddie. This “plutocrat-adoring Republican” agrees with all of them. Even Freddie on the delivering-catalogues-to Montana point.

      OK w/USPS as a quasi-public entity, delivering to every home in the US, often where it cannot be profitable, so I’d be untroubled with some level of subsidy. FedEx and UPS do skim the cream.

      That said, do we need daily USPS delivery, esp Saturdays? In a word, no. Trumwill also points out the potential chafing point with the union—if layoffs/terminations were the mechanism to cut costs. However, early retirement offers and attrition are the usual method to achieve total workforce reductions. It’s difficult for me to imagine many USPS employess declining early retirement packages for love of the work.

      MarkT notes

      And, of course, this says nothing about the fact that the Post Office is the only entity, public or private, statutorily required to prepay retiree health benefits rather than paying as it goes.

      which is damned interesting. Both the gov’t and private sector business do not. Another coming tsunami above and beyond public union pensions. Which I must note here, are completely ignored in real terms when figuring in public union [teachers, cops, fire, etc.] compensation packages. A retiree at 55 with 30 years of service has on avg another 30 years drawing benefits.

      For calculation purposes, you could almost double the yearly salary figures for public employees, no? [Call it 50%-100% surcharge tacked onto the published salary, to keep in JasonK’s spirit of things.]

      Aesthetically, I have found postal workers a mixed bag of helpful and horrible, like the denizens of any low-margin business I can think of; but I have more marveled at the USPS’ efficiency in processing billions and billions of items than disappointed at the occasional screwup.

      I put it almost up there with McDonalds.

      😉Report

      • Avatar Michael Drew in reply to tom van dyke says:

        I’d be fine with no delivery Saturday too, so long as the entire process of delivery doesn’t shut down that day as well, adding a day to the delivery time of any mail sent Friday, Thursday, or likely Wednesday. Though for all I know that doesn’t even happen Sundays now. I’ve often wondered about that.Report

  2. Avatar Dan Miller says:

    “If it’s not as high as UPS/FedEx, but still something we would scoff at, then we need to ask ourselves what, precisely, we want from the post office.”

    I think this is precisely right. The question is, who does the USPS serve? Their biggest clients are junk-mailers, not the citizens of the U.S.–in fact, I’d bet that there are a lot of people who would happily not get any mail service whatsoever, or receive only mail from a whitelist of approved people.Report

    • Avatar Trumwill in reply to Dan Miller says:

      Several years ago, people went ballistic over the possibility that Saturday services might be cut. Who would object today? For that matter, who would object to 3 deliver days a week if it meant postage increases wouldn’t go up (as much)? What about one day a week? I do actually favor there being some sort of regular delivery (subject to reconsideration on finding out what it would cost), but if UPS and FedEx can offer something reasonably priced (I’m thinking dollars here) for relatively quick delivery, I’m not sure why the USPS can’t be the option for when you don’t care all that much how long it takes.Report

    • Avatar Mike Schilling in reply to Dan Miller says:

      When I look at the outgoing mail tray at work, half of it is Netflix being returned.Report

  3. Avatar BSK says:

    I like that you touch on what I see to be a major issue with much of the anti-public-union backlash: many of what is being targeted are conditions of legally negotiated contracts. It’s one thing to say that, going forward, benefits or salaries need to be controlled. It is quite another to say that promised benefits or salary increases should be stripped away because the governments are in dire straights.Report

    • Avatar Trumwill in reply to BSK says:

      A couple observations about this.

      First, from a technical standpoint, how autonomous is the Post Office in dealing with its contracts. In other words, if the USPS were to fold altogether, would the US Government itself be on the hook? I had thought it was a little more on the autonomous side than that. If I’m wrong, see below. If I’m right, renegotiation may be in everyone’s interest.

      Second, I am personally loathe to ever go back on a contract or reneg on a pension. Even if the answer to the above question is “The post office’s agreements would not survive the post office itself,” I would want the Government to take care of it as best it can. That cuts both ways, though. This is why I question whether the government should ever, ever, ever make make those kinds of promises. Ever. The stronger the guarantee, the less comfortable I am giving it. So by arguing that “a deal is a deal”, you’re also strengthening the case against deals being made again and the case for saying “Anyone the government hires hereforth will have a defined-contribution plan or any defined-benefit plan we make will have an exit clause that probably means you should not rely on it coming to pass.”Report

      • Avatar BSK in reply to Trumwill says:

        As far as I’m concerned, that is the cost of doing business. If unions pushed for too much and the government caved too easily, then it is natural to assume that the next round of negotiations very well may swing the pendulum the other way. I’m a big believer in sleeping in the beds we made. Unfortunately, that is not exactly the American way.Report

  4. Avatar BlaiseP says:

    As I understand it, the USPS wants to close many small and inefficient post offices and it’s being held up in many cases by legislation which says they can’t. Congress does love its franking privilege, too. The USPS could have become a FedEx or a UPS once it was sorta-privatized, with a big central hub. But it wasn’t privatized enough.

    Vint Cerf, he of Internet founding fame, will be speaking at the PostalVision 2020 Conference. Many of these issues will be addressed. Something has to give: I don’t think I’ve used the US Mail in at least a decade now. Everything is FedEx.Report

    • Avatar Burt Likko in reply to BlaiseP says:

      The world of law is built upon the infrastructure of the USPS. State-level civil litigation would utterly collapse without the post office; federal-level civil litigation requires the post office for all litigants initially and any litigant who lacks a computer. If the cost of delivery of my work product jumped from $.44 to $5.40 for a two-day FedEx, that would have a significant impact on my bottom line and my clients would whine even more than they do now about my high bills. FedEx is for fixing things when deadlines get missed and I get upset when I have to use it.Report

      • Avatar James K in reply to Burt Likko says:

        But if the Post Office didn’t exist other low-cost, low priority providers would enter the market. And if no-one could offer you equivalent service at that price you’re effectively asking the government to subsidise your business.Report

        • Avatar Mark Thompson in reply to James K says:

          I’m not sure I can agree with this. Maybe over time, this would be the case; ie, if you got rid of the PO’s monopoly, alternatives might develop over time, in which case you could eventually shut the PO down. But if you just shut the entire post office down or even just phased it out without first giving an opportunity for replacements to develop, then I don’t see how other providers would be able to enter the market with any reasonable speed. We’re talking about a massive enterprise here requiring an amount of capital that could not conceivably be put together quickly.Report

          • Avatar BlaiseP in reply to Mark Thompson says:

            Burt’s problem isn’t just the cost: we do have market alternatives. The problem seems to resolve to notions such as Registered Mail and other scenarios involving the receipt of work product. Burt has to prove due diligence: the USPS is a trusted third party.

            You’re right, insofar as the shoe is pinching. But can it be said the USPS is a monopoly? Strictly speaking, it never was a monopoly: a good deal of the financial industry uses couriers on bicycles and always did, going back to the foundation of the stock and mercantile exchanges.

            Another BlaiseP war story. For a while, I worked as a consultant at Bell Labs in an exceedingly minor role, configuring switches for various installations including the first big switch put into the city of Wu-Han. It’s a large market city and they’d never had telephones before. When the switch was installed, it was immediately flooded with calls which seemed to go on all day long. A telco switch is usually set up at a 10:1 concentration, presuming only one in ten phones will be off-hook at any given point. Parenthetically, that’s why they tell people not to call into a disaster zone, the switch will fill up.

            Why was this switch filling up so fast? It turned out companies in the marketplace would have one person relaying information back to the office. China has no shortage of people, so these guys would be on the phone all day long, whether or not they had anything to say. AT&T and the government had to put up billboards telling people, “Call when you have something to say, then hang up.” They simply didn’t have any experience with telephones.

            Our problem, these days, is much the same. We are used to the USPS model and the courier model. We haven’t worked out privacy and non-repudiation very well yet, and it’s a growing problem on the Internet. Certificate-granting authorities are a dime a dozen these days, and governments are demanding the right to snoop on private communications. Well, lawyers like Burt will take serious umbrage at that notion and refuse to communicate via such channels. Mercifully, there are people like me and many others like me who will help them find good strong encryption schemes and digital signatures which will stand up in court and secure delivery methods via third parties beyond repudiation.

            Da Vinci tells us though nature commences with reason and ends in experience it is necessary for us to do the opposite, that is to commence with experience and from this to proceed to investigate the reason.

            The USPS will survive in some form. If it has any sense, it will capitalize on its greatest strength, its status as a quasi-governmental third party for non-repudiation at a physical level.Report

            • Avatar Mark Thompson in reply to BlaiseP says:

              Blaise:

              I’m not sure if you meant to respond to me or to James with this, but for the sake of clarity I should mention that I was just responding to James’ claim that the elimination of the PO would lead to its replacement by some other carrier capable of offering the same services and, to the extent this would not happen, the PO amounts to taxpayer subsidy of the legal profession. I don’t think James’ assertion is correct, but agree entirely with Burt’s point (and, I think, yours).

              One other thing to add, which further supports your point: there is an entire legal structure built around the existence of the PO as a universally accepted quasi-governmental carrier. A very small example that I have to deal with every couple of months: in NJ, if someone is successfully evading personal service of a complaint, then the court rules require that the next step we take is to serve by certified or registered USPS mail, return receipt requested, with an additional copy by regular mail. If we get the return receipt, or even if the regular mail piece is not returned to us as undeliverable, then service is deemed complete once we file an affidavit with the court, attaching the return receipt if applicable. There’s really no other provision for serving a complaint, though technically you can file a motion with the court seeking an order for some other form of service (thankfully, I’ve never reached the point of needing to do this). If the USPS disappeared….yikes. We’d have to file motions every single time a defendant attempted to evade service – not good for judicial economy, which means not good for the taxpayers. Defendants would also be better positioned to challenge the effectiveness of non-personal service, even if made under a court order. Etc., etc.Report

          • Avatar James K in reply to Mark Thompson says:

            There would be transitional issues, but ideally major policies shouldn’t be enacted suddenly in any case.Report

      • Avatar BlaiseP in reply to Burt Likko says:

        Hmm. Interesting. Much of what I do is managed via digital signature and incontestable delivery via YouSendIt, (warning, stupid sales audio below that link).

        -obvious caveat: this is not to be construed as advertising or endorsement of YouSendIt or its services. It’s just what I use to solve this problem.Report

  5. Avatar Kolohe says:

    USPS finances are a dog’s breakfast all around and impossible to compare to their UPS / Fedex etc counterparts. In addition to everything that has been stated so far, a good portion of current USPS retirees are not on the balance sheet as they came in when the Post Office was a no kidding Cabinet department and/or before the pension system significantly altered in the 80’s – and so are either way on a regular civil service retirement system. They don’t have cargo planes but they do have a hell of a lot of vehicles (but which by now they are paying for themselves) and moreover land – which for the most part they are, iianm, not paying taxing on, and furthermore a lot of which was inherited ‘free’ from its legacy as a government agency.Report

  6. Avatar James K says:

    Let’s decode this, shall we? Because when Conor talks about expensive and inflexible labor force, what he’s talking about is that people in these jobs are well-paid and have job security. I know we’ve all been living through decades of plutocrat-adoring Republicans defining the political vocabulary, but you know, there was a time when workers expecting to be paid well and have some job security was considered a pretty elementary part of the social compact.

    I think Freddie is overdoing the distributional analysis here. While there’s nothing wrong with examining the effect of post office pay on the post office staff, there are other issues that might make high pay a concern. If post office staff are being paid more than they could obtain in the private sector then that means either the financial health of the post office is being threatened or postage is higher than it needs to be. I would have thought that anyone who felt that the post office was important enough to be a government activity would be concerned at either outcome.Report

  7. Kevin Drum: “The Democratic Party has largely abandoned the working class,” unions, more.

    Via Instapundit, heh heh, and you know who you are.

    😉

    Aside from predictably partisan cant, a lot of good history and fact there. Drum’s research is always solid.

    Money quote:

    [Larry Bartels] also found that Republicans don’t respond at all to the desires of voters with modest incomes. Maybe that’s not a surprise, either. But this should be: Bartels found that Democratic senators don’t respond to the desires of these voters, either. At all.

    Surprised? Welcome to the real world, Mother Jones.

    http://www.alternet.org/rights/151108/why_the_democratic_party_has_abandoned_the_middle_class_in_favor_of_the_rich/?page=entireReport

  8. My observation would be that the Post Office should simply raise their rates until they are self-sufficent. The public will determine if the work they do remains worth funding. Isn’t that the simplest solution?Report

  9. doesn’t even bother to weigh the social value of the high standards of living for these public employees. He doesn’t seem to recognize that the fact that these people have a mechanism for a better life is a good at all, nor does he bother to wrestle with the consequences of firing and cutting the wages of thousands of people.

    As is typical of Freddie, he looks at only half the equation. While he’s delighted that this group is getting paid well, he doesn’t ask where that money comes from. If that work can be done at less cost, then the public being served by the Post Office are being asked to pay more than necessary–how does that play into his analysis?

    Because in the end, we can’t make everyone more well off by paying more. Sure, everyone’s pay would go up, but so would the cost of everything they pay for, leaving them no better off in terms of the goods and services they can command. All that can be done through this method is to improve the well-being of some at the expense of the other. Freddie seems to either ignore the other or assume they have some kind of duty towards the some.

    Conor mentions UPS and FedEx, which is always a sign of funny business when discussing USPS; neither provides anything remotely like the necessary daily, bulk, non-time dependent mail-carrying ability of the postal service.

    UPS and FedEx are prohibited by law from offering first-class mail service, so it’s a bit odd for Freddie to criticize them for not doing so. If I may be a little harsh, it’s easy to make an argument if you’re careless with the facts.

    the post office provides a service that cannot be provided through markets and the profit motive.

    There may in fact be some services that ought not be provided by markets, but it’s iffy to claim that they cannot. a) That type of statement is very analogous to creationists’ claims that “this adaptation” couldn’t possibly have evolved; a claim that is inevitably empirically refuted by further research (e.g., Michael Behe’s bacterial flagellum). b) Max Weber, in “Politics as a Vocation,” noted that government cannot be defined by its ends (but only by its means) because there was nothing government did that was not done by other political organizations. Granted those other political organizations don’t necessary equal markets, but his point should be taken as a warning that a wise person is cautious about claiming that “only government can do X.”Report

    • Avatar Trumwill in reply to James Hanley says:

      UPS and FedEx are prohibited by law from offering first-class mail service, so it’s a bit odd for Freddie to criticize them for not doing so. If I may be a little harsh, it’s easy to make an argument if you’re careless with the facts.

      This is often said, but I’m not sure entirely how it works. What, precisely does the government do to prevent FedEx and UPS from stepping up? Is it just that they can’t use mailboxes? That they can’t call it “first-class mail”? Does the government actually prevent UPS from going house-to-house? I have trouble thinking of any ways that FedEx and UPS could get around this, if they were so inclined.Report

      • That’s a good question, methinks. If I have time, I’ll do some digging on it later today.Report

      • Avatar James Hanley in reply to Trumwill says:

        That is a good question, and a complete answer isn’t easy to find, but here’s a (long) overview of . The USPS does have a “mailbox monopoly,” which means nobody else can legally stick anything in your mailbox (even though it’s your own private property), a law that was passed explicitly because in the 1930s it was becoming common for companies to have “their circulars, statements of account, etc., delivered by private messenger, and
        have used as receptacles the letter boxes erected for the purpose of
        holding mail matter,” which was (in addition to sometimes overstuffing people’s mailboxes) “depriving the Post Office
        Department of considerable revenue on matter which would
        otherwise go through the mails…” (There’s the advantage of being a government-owned business–you can prop up your revenues by denying competitors the right to compete.)

        But the USPS seems to have interpreted this–it’s not clear how correctly–as giving them a monopoly on all first-class type materials; anything that can be classified as a letter (a fairly broad category, actually). But an exception was created for “urgent” letters, which is what allowed private delivery businesses to develop (an innovation that the USPS challenged, on the grounds that it would result in more lost revenue for them).

        I think part of the lesson here is that the USPS–while providing an important public service, to be sure–has, for a long time focused more on its own benefits than what benefits its customers, and if it had fully had its way it would have resulted in greater financial harm to them. I think Freddie doesn’t take this kind of activity into account when he wants to emphasize protecting the laborers in a particular business–that their attempts to gain at others’ expense may be little more than an extension of their employers’ efforts to gain at the expense of captive consumers.

        I think it’s a good question whether first-class mail has, or is becoming, nearly obsolete due to technological change. The bulk of what the USPS delivers now is not first-class mail, but advertising media (third-class, I think). Perhaps the best policy would be to eliminate the USPS’s monopoly on first-class mail, let the market sort out the most efficient arrangement, but require the USPS to take up the slack in those areas where competition fails (if it does), such as very remote areas. After all, isn’t that really government’s job, to be a source of “last resort” help?Report

    • I agree that Freddie is mostly ignoring the other half of the equation, and this post is in no small part an attempt to look more closely at that other half of the equation. However, Freddie was responding to a piece by Conor that itself only looked at that half of the equation. Freddie is essentially saying that if Conor is only going to look at the labor half of the equation, then he ought not be valuing the well-being of labor at “0.”

      UPS and FedEx are prohibited by law from offering first-class mail service, so it’s a bit odd for Freddie to criticize them for not doing so.

      Here, Freddie is responding to a claim made by Conor in which Conor compared the USPS unfavorably to UPS and FedEx. He’s not criticizing UPS and FedEx for not offering first-class mail service, he’s saying that one-to-one comparisons of the USPS with UPS and FedEx are worthless because of the different types of services offered.

      There may in fact be some services that ought not be provided by markets, but it’s iffy to claim that they cannot.

      I agree with this, and the remainder of your last paragraph, wholeheartedly.Report

      • Avatar greginak in reply to Mark Thompson says:

        Don’t UPS and FE contract out to the USPS for some services they can’t or don’t want to provide? I think i read that somewhere.Report

        • Avatar Trumwill in reply to greginak says:

          They do some of that in Alaska, and I think some remote tribal reservations. But we’re talking about a very small number of people. In the event that we let the USPS go under, we’d have to make sure that they’re accounted for, but they’re not really what ails the post office.Report

      • Avatar James Hanley in reply to Mark Thompson says:

        Freddie is essentially saying that if Conor is only going to look at the labor half of the equation, then he ought not be valuing the well-being of labor at “0.”

        OK, I get your point there, but I still think it shows that Freddie begins with a basic misunderstanding of, well, everything, because he treats labor’s well-being as consisting of its wages and bennies, which essentially is to fall for the money illusion. Lower prices on goods benefit labor as well, because all laboring folks are consumers, and lower prices mean they can afford more stuff. So focusing on keeping goods and services at market prices, rather than subsidized prices is not, in fact, only looking at half the equation. And failure to subsidize one person’s wages is not to unfairly harm them, while it is to unfairly harm those who have to pay the subsidy.Report

    • Avatar Robert Cheeks in reply to James Hanley says:

      Bravo, Prof. Hanley!
      I do agree with your analysis. Now, can we expand that to describe, in the case of state (and fed?) employees, the idea of a money laundering scheme where the ‘union’ members receive excellent wages/bennies which the ‘public union’ siphons off in the guise of union dues? All of which is paid for my the hapless citizen-taxpayer, a ‘group’ long used as a milch cow, and a group who seem to be fighting back during the current depression?Report

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