Last week the U.S. Postal Service released its annual fiscal report. They were results that, quite honestly, could only come from a government-supported organization.
First, there was some good news. The USPS increased its revenues by more than $1 billion over last year. This stemmed from a 10 percent jump in revenues from shipping packages. Meaning my father-in-law’s conflicted views on Amazon will continue.
Unfortunately, there was a lot more bad news. Despite this growth, the company still lost $3.9 billion, which stems primarily from three areas.
First, very simply, there’s been a significant drop in postal volume – about 3.2 billion pieces of first class and marketing mail. This inability to adjust to lagging sales has led the USPS to run up a crushing amount of debt – $13.2 billion as of September.
But the USPS still has 634,000 employees, and although this is actually down about 10,000 workers from last year, 92 percent of these employees are covered by collective bargaining agreements administered by one of four unions. These CBAs ensure annual pay increases in some form. This leads to the USPS seeing an increase of $896 million in worker compensation, and it’s still on the hook for pensions and healthcare benefits for 495,000 retirees. This retiree coverage translates to more than $4.4 billion in operating costs.
So, basically, you’ve got a business that’s spending more on its workers and retirees than its’ products and services generate in actual work.
What’s confusing is that while packages are a growing part of the business, it’s also the most costly portion of it – meaning the profit margin is less than other areas that have traditionally supported the USPS. But packages are not a service being targeted for significant price increases.
The USPS is, however, raising prices on stamps and other mailing services that hope to bring in an additional $1.7 billion in revenue next year.
However, the larger impact of the is report is that it’s adding momentum to calls for privatizing the USPS. The major obstacles to such a move include the postal worker unions and that fact that the government would probably want to maintain some element of oversight, because government oversight and fiscal prosperity have always gone hand-in-hand.