NCPA - National Center for Policy Analysis


February 14, 2005

New technology, recently liberalized markets and competition are forcing post offices around the world to innovate, says the Economist.

Most postal services are mammoth enterprises:

  • Traditional postal operators represent roughly 1 percent of the labor force and 1 percent of gross domestic product (GDP) in developed economies.
  • Globally, national postal systems account for over $250 billion in revenue and employ 5 million people.

New technologies, however, are shaking up post offices, allowing some to operate at half the cost of their competitors. For example:

  • Automated sorting equipment can read addresses and then place the mail in the precise order for the letter carrier to deliver.
  • E-mail and online financial information (like monthly bills and bank statements) are reducing one of the post's last profitable areas.

As a result, politicians are opening markets and pressuring post offices to reduce costs, with some of the biggest changes occurring in Europe. By the end of the decade, there will be more than one postal operator per country in France, Britain, Germany and the Netherlands. The national post will no longer be run by government and may well be partially owned by another company or have publicly traded shares.

The authors note that change can significantly reduce labor costs:

  • In countries that have undergone reform and liberalization, such as Sweden, as much as 25 percent of postal jobs have disappeared.
  • Ten years after their post office became a corporation, New Zealand's system had reduced its staff by 40 percent, while handling 20 percent more business.
  • As a result of improved efficiency, the price of a letter fell significantly in real terms.

Source: "Pulling the envelope -- Post offices," Economist, January 22, 2005.

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