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

In the “What Else Is New” category of blog posts, Freddie takes Conor Friedersdorf to the woodshed for blaming the US Post Office’s problems primarily on high labor costs and suggesting that this proves “the public employee problem…threatens the future of the whole progressive project.”

Freddie writes, in response:

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.  In fact, you might say, in this capitalist system of ours, that delivering higher wages and better job security to large numbers of workers was a fundamental part of the American dream, back when such a thing existed. But Conor, as is typical of his writing and conservative commentary in general, 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. At all. It’s as if the material conditions of these people’s lives—because, you understand, they are public employees, and are therefore Bad People—simply don’t matter to him at all.

In this basic critique, I think Freddie is right on point.  There is something odd and deeply wrong-headed with the conservative and, all too often, libertarian critique of public sector unions on the basis that they ensure public sector employees live higher on the hog than the private sector counterparts.  In this claim, as Freddie suggests, “high on the hog” in practice typically just means something more along the lines of “reasonably comfortable middle class existence with job security.”

To be sure, labor commitments hinder the Post Office’s ability to adjust its business model to a climate in which snail mail has been overtaken by e-mail, not to mention Facebook, text messaging, and smartphone technology.

But guess what? Those commitments have been made, for better or for worse, and what’s more, the postal service union had every right in the world to try to negotiate the best benefits possible for its members.  And let us not pretend that a non-unionized post office was anything other than an abysmal place to work.

It has also been legally required to be self-sufficient since the 1980s; prior to that, including prior to unionization, it relied heavily on direct taxpayer subsidies.  In other words, in the days before unionization, the Post Office actually showed a bigger operating loss even than the last several years when it has had to take out loans.

In response, conservatives and libertarians often like to point out that labor and benefits expenses for the USPS are dramatically higher as a proportion of total expenses than at sometimes-competitors UPS and Federal Express.  This is rather a silly comparison since UPS and FedEx focus primarily on the expedited delivery market, whereas the Post Office mostly does not – non-labor costs associated with expedited delivery and erratic routes are going to be far higher than non-labor costs associated with snail mail.  For instance, UPS alone owns 214 cargo planes and Fedex almost 700, which they must service and maintain; the Postal Service, by contrast, owns none.  Indeed, total compensation levels at the Post Office generally seem to fall somewhere in between UPS and Fedex, rather than being the exorbitant levels claimed by the “Blame Labor First!” camp.

This is not, however, to say that the Post Office’s problems are the result of anything other than its status as an arm of the government.  And it is here, unfortunately, where Freddie veers off-course, writing:

Here’s an alternative theory for Conor: the post office provides a service that cannot be provided through markets and the profit motive. Sort of like defending the country, researching orphan drugs, and providing health care to the old and sick. It might be true both that a) we need a service in this country where you can say “hey, take this Land’s End catalog to the guy on the remote mountain in Wyoming for less than a dollar” and b) that service can’t be made profitable. Just like, say, providing health care for those with Barth’s syndrome can’t be made profitable. The public has some legitimate interests that cannot be served profitably. My ideology has a solution for this. Conor’s does not. (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.)

My objection here is this: Freddie is suggesting that there is a need for the US Post Office to deliver mail, specifically including direct (“junk”) mail, at a particular price.  Even if this could be true in theory, it simply is not true in fact.

To be sure, I have little doubt that the Post Office is able to deliver snail mail at a far lower price and cost than UPS or Fedex could hope to anytime soon, even if its monopoly were removed or it were shut down entirely.  The Post Office has infrastructure to accomplish this feat which UPS and Fedex do not have, to say nothing of the irreplaceable institutional knowledge that comes with 300+ years of delivering non-expedited mail.*

Nonetheless, the Post Office needs to have the flexibility to set postage rates that are in line with changing economic and technological conditions.  The fact is that for at least the last 3 years, direct marketing mail has comprised the majority of mail delivered by the Post Office.  Commercial mail of other sorts (e.g., billing) can reasonably be assumed to comprise a significant portion of the remainder as well.  Given this, it can hardly be said that postal rate increases will or must of necessity disproportionately affect the poor – indeed, there’s no reason the Post Office can’t increase rates on “standard” and “non-profit” class mail only.

While it’s true that rate increases can sometimes reduce, rather than increase, profitability, there’s no reason to think that would happen here.  It’s certainly been claimed for years that “Direct Mail Is Dying” and is being killed by the internet.  This is, generally speaking, hogwash – as cheap as e-mail marketing is, it’s uniquely ineffective thanks in no small part to spam filters; as great a reach as TV may have, it’s notoriously difficult to track results; and the use of social networking sites such as Facebook and Twitter as a replacement for direct mail is probably still too nascent to be a credible threat.

But the Post Office lacks the flexibility to do this in a manner that adequately responds to economic changes.  Instead, any attempt to act as a rational entity would act must go through a “bi-partisan” commission of political appointees.

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.  This alone accounts for about half of the Post Office’s projected budgeting problems.

The point here is simply this: the Post Office’s problems are anything but a symptom of “”the public employee problem that threatens the future of the whole progressive project,” as Conor and far too many conservative and libertarian commentators have suggested over the years.  If conservatives and libertarians recognized this fact rather than using it as yet another weapon in the anti-union arsenal, they could actually offer solutions to the Post Office’s problems that would be wholly derived from conservative and libertarian thought and principles.  Hell, to the extent based on freeing the Post Office to increase rates on direct mail, such solutions would be an extraordinarily easy sell to most liberals (less trees killed! stop allowing corporations’ costs to be subsidized by Treasury Dept. loans!).

*Please note, however, that this does not justify the Post Office’s legal monopoly on regular mail; it’s just to say that eliminating that monopoly would not have much of an effect on the Post Office anytime soon.