Today’s news brought notification that the U. S. Postal Service (USPS) reports losses of $5.7 BILLION for the first 7 months of 2011.a Reduction in the number of delivery days is planned soon. The Postal Service blames much of its deficit on the Congressional mandate to pre-fund pension and disability benefits. The Postal Service explains that this overpayment is funded, not by tax dollars, but by rate payers who undoubtedly pass on higher costs to those who use their products and services: read “tax-payers.”
Officials seek to have this mandate recinded, using the savings to fund postal workers’ health care benefits. Legislation introduced by Senators Susan Collins and Tom Carper to eliminate this requirement and forbid no-bid contractual arrangements with retired postal workers was noted in a Wall Street Journal b article. The WSJ reported that more than 2000 postal workers, age 70 and over, receive workers’ compensation at 75% of their salary—tax free—instead of less costly retirement benefits.
The USPS has been bleeding dollars for decades. In 1990 the difference between income and expenses was ($835,054,000), partly reflecting the loss of tax dollar funding. In 2000 USPS made a profit of $1,548,000,000. In 2007 losses reached ($5.1 Billion); ($2.8 Billion) in 2008; ($3.8 Billion) in 2009; and ($8,374,000,000) in 2010. How can they operate that way?
Post offices have been closed, nearly 2000 fewer since 1990. The delivery process relies heavily on labor-saving automation. A FY2002 report in the Postal Reporterc reveals that 94.5% of letters were distributed using automated equipment in that year. “Letter mail productivity in processing plants improved nearly 50% from 1993-2001. Production in time devoted to sorting allowed the Postal Service to reduce the number of city delivery routes by 4100 from 1995-2001, while simultaneously absorbing about a 4% increase in the number of delivery points.”
[I can personally attest to the reduction of delivery routes. We lost our reliable 10:35 am delivery by the same mail carrier for over 25 years. Now our mail is delivered any time after 4:30 pm by a different person each day. It is not uncommon to receive our mail—often our neighbor’s mail—after 6 pm. The mis-delivery record is 8:20 p.m.!]
Use of the U. S. mail is on the decline because of the Internet. Pieces of Mail Handled numbers have fallen since 2001, yet the Pieces Handled per Employee ratio has continued to rise every decade, up 11% between 2000 and 2010, thus validating the Postal Service’s investment in automation. Mechanization began in the 1950s. Zip codes were introduced in the mid-1960s. Zip plus 4 began in 1983. Each innovation was made possible by the introduction of a variety of Optical Character Recognition capabilities. Multiple Optical Character Readers (MLOCRs) read the entire address and spray an 11 digit barcode (the zip +4 + the last two digits of the delivery address) onto the envelope and sort materials at a rate of 9 per second. Images that cannot be read automatically are sent to Remote Encoding Centers (REC) to create a bar code. In 2003, there were 11,000 part-time, non USPS employees, processing 6 billion images at 20 REC Centers. The Postal Reporter states that in 2003, “Barcoded letter mail can now be sorted at speeds of up to 34,650 letters per hour on sorters requiring 4 people to operate.” Automation makes it possible to face, read, code, sort, and put in walking order today’s mail quickly and accurately. Yet the USPS reports record deficits.
A National Journal Daily articled quotes James Miller of the Postal Service Board of Governors, “The system is biased in favor of labor and against management.” The American Postal Workers’ Union is one of the country’s largest labor unions. While the newest labor agreement freezes some salaries, the latest agreement raises the salaries of more than 200,000 employees. Increased workers’ health insurance contributions do provide a savings of $3.8 billion. The National Journal Daily quotes California Congressman Darrell Issa “We have deep concern that some of the provisions of the contract might in fact be the wrong direction toward less flexibility, less ability to trim the work force, and less ability to make the kind of investments for the future that we need to make.”
Payscale.come reports that the average (carrier) postal worker’s salary range is between $37,214 and $58,859 in the Midwest. At least 60% of the workers have 10 years or more experience. The USPS is the second largest employer in the country.f Union membership guarantees employment security and vigorously protects habitual “light duties” and “disabled” workers. The previously mentioned no-bid contract system of retirees being rehired at 75%, tax free games the system.
[Our assigned mail carrier has been off work and on “disability” for the better part of two years, non-consecutively. Apparently she is a bit "accident prone." It delights me no end to learn that one of our erstwhile mail carriers is being handsomely rewarded for continuously talking on the phone, rudely interrupted only the necessity of placing junk mail in my box. Perhaps I should apologize to her?]
[Our assigned mail carrier has been off work and on “disability” for the better part of two years, non-consecutively. Apparently she is a bit "accident prone." It delights me no end to learn that one of our erstwhile mail carriers is being handsomely rewarded for continuously talking on the phone, rudely interrupted only the necessity of placing junk mail in my box. Perhaps I should apologize to her?]
What is my Swiftian “Modest Proposal”? It is NOT to privatize the Postal Service. Privatization causes Democratic masses to swoon while Republican businessmen salivate. What possible advantages might accrue if the USPS as we know it today were to be dissolved? However can the universality and privacy of mail delivery be maintained if services escape the incompetent Postal Service? It is a little known fact that the USPS tried to make a grab for email in the 1980s—the good old days of telnet and ftp.g Fortunately that benefit did not ensue for the USPS which already received the benefit of monopoly, partial immunity from competition, no tax payment requirements, and federal taxpayer dollars paid into the postal infrastructure for more than 200 years, through 1982 to be exact.
Privatization has already been employed by the Postal Service. The 2003 Postal Report stated that, “Research and Development efforts were moved out of the Postal Service and to the companies that would ultimately become the original equipment manufacturers.” In the 1980s conversions to newer Optical capabilities, “The new approach sought out multiple suppliers in a competitive environment.” In the past decade the Postal Service has reached agreements with delivery services like FedEx to cooperate in the delivery of parcels. Private contractors have maintained service in the very profitable rural delivery routes for years. Part-time, non-postal employees work at REC sites. These incursions into the private sector have worked well.
I seek a different solution. Postal services should be franchised. The NEW USPS would be the Franchisor. Revocable franchises will be licensed in accordance with postal legal protections. Businesses, small and large, would compete for delivery and handling licenses at the local (probably large section or all of an MSA area), regional, national and/or international levels. Networked levels would provide for a regulated continuity of service. Small business would be given incentives for local job creation. Franchisees would pay taxes. Franchisee fees would include the right to use postal automation equipment, the rights and responsibilities pursuant to protecting the privacy and integrity of the mail, and access to the institutional infrastructure appropriate to the level of service level. Royalties would be paid annually. Franchises can be terminated for failure to meet strictly defined performance standards. Ingenuity and creativity will be encouraged.
The Franchisor will retain its postal “trademarks” and the exclusive right to print postage stamps. It may need to retain some autonomy over equipment like MLOCRs, leasing time to franchise providers. Economies of Scale can be shared with franchisee. The Franchisor will provide regularly scheduled training, access to technology, affordable facility insurance, and expert assistance. It will set minimum days of service requirements and enforce uniformity in privacy standards, services, and equipment. Enforcement of standards and operational oversight will be the responsibility of the Franchisor. Reasonable rights of petition and review would protect franchisees.
Franchisees will create competitive structures whereby consumers contract for mail delivery while maintaining choice in dispatching services. Franchisees will retain the right to innovate within the parameters of service standards set by the Franchisor. End user fee structures can be set by franchisee and may be contractually varied, e.g. some may opt for daily delivery while others choose fewer delivery days; others may wish to save money by picking up mail at the point of service. Franchise agreements must run for a reasonable amount of time but can be rescinded if performance falls below certain expectations.
Why would Revocable Postal Service Franchises work? The legal force of the USPS would be maintained, ensuring privacy and universality. Licensing would be competitive but various levels would be statutorily networked to insure continuity and conformity of services. Franchises would be independently owned and operated. Innovation, especially in electronic delivery, will be encouraged and rewarded. Hours of operation can be tailored to the convenience of users. Private sector franchisees can choose which type of mail it will handle, or contract to deliver all types—letters, flats, and parcels. Different organizations can choose to operate within areas of various complexities—local, regional, national, or international.
Postal employees will use their experience as a positive attribute. They can be given preferences in franchisee hiring for a limited time. Their termination from the USPS would result in the conversion of their retirement benefits into 401Ks, thus awarding them autonomy in controlling their futures.
The USPS can divest itself of nearly all physical property. Instead of applying the cumbersome process of right of first refusal from a long list of federal and state organizations, the real estate can be put up for sale in a timely manner, returning tax revenue to the community. The USPS, relieved of all disability, pension, and health care financial burdens responsible for today’s deficits will be able to pay its own way. What would emerge is a lean, focused Expert Organization with regulatory powers. Royalties and licensing fees will cover much of its administrative costs, relieving taxpayers and end-users of punitive expense. Research and Development would benefit from new customer bases and challenges. Consumers would receive better service. What’s not to like?
Your comments are welcome. I do not expect that this conversion would be easy or quick. I do think it’s worth a try. Sources consulted include: a) “Postal Service Delivers Red Ink” Daily Herald 6August2011, p.3.1; b) “The USPS Needs Fairer Pension Rules, Not a Bailout” (Anon) Wall Street Journal 19May2011 p16; c) “Distribution Technology in the Postal Service: Past, Present and Future” Thomas Day, USPS Vice-President, Engineering. (circa 2003) www.postalreporter.com/usps/dist_tech.htm; d) “Postal Service is Latest Battleground for Public Unions and Government” Ben Terris, National Journal Daily, PM Update 5April2011; e) Payscale.com “Salary for Employer: U.S. Postal Service (USPS) 15July2011, www.payscale.com/research/US/Employer=U.S._Postal_Service_(USPS)/Salary; g) “Competition Policy and Comparative Governance of State-Owned enterprises” D. Daniel Sokol, Brigham Young University Law Review 2009.6 p.1753 ProQuest Document ID: 194366995; and, finally, some statistical and technology information is from the Historian of the Postal History section of the USPS website, www.usps.gov .
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