Most Foreign Postal Services Are Profitable

January 24, 2012

The U.S. Postal Service has come under severe scrutiny and criticism in recent years because of its record-breaking losses (the agency has lost $25 billion in five years).  Running billion-dollar deficits, advocates of the agency point to numerous factors that have compromised the postal service's revenues, says Michael Schuyler, a senior economist with the Institute for Research on the Economics of Taxation.

  • The economic recession, though technically over in 2009, has been followed by an anemic recovery that has seen demand for advertising mail drop rapidly.
  • Electronic diversion has stolen significant traffic away from traditional mail: while American households paid 75 percent of their bills by mail in 2002, this figure fell to 47 percent in 2010.
  • The Postal Accountability and Enhancement Act of 2006 forced the postal service to set aside revenues to cover unfunded liabilities for retirement benefits for workers.

However, it bears mention that two of these three factors are worldwide events, and that many other postal services should be running large deficits as well if these factors are truly to blame.  A recent study compared 30 high-income nations' postal services with data furnished by the Universal Postal Union:

  • Nine percent saw losses in 2007, 25 percent in 2008, 38 percent in 2009 and 36 percent in 2010.
  • The U.S. Postal Service reported losses in each of those years ($5.1 billion, $2.8 billion, $3.8 billion and $8.5 billion, respectively).
  • Of the 30 reporting nations, only two saw losses in all four years: the United States and Macao.

This data presentation must be tempered by acknowledgment that different postal services have differing accounting methods, and therefore direct comparison ignores some important information.  Additionally, there are idiosyncratic components for each postal service such as tax liabilities that further complicate comparison.

Nevertheless, the primary fact to be drawn out of the study is that the heavy majority of high-income nations have postal services that are capable of running profits, riding over the effects of the recession and electronic diversion.  This news is encouraging insofar as it suggests that a traditional mail system is capable of remaining profitable despite electronic diversion, but disheartening because it also makes clear that thus far, the U.S. Postal Service has been unable to keep up with these international standards.

Source: Michael Schuyler, "Most Foreign Postal Services Are Profitable; the U.S. Postal Service Lags," Institute for Research on the Economics of Taxation, January 13, 2012.

For text:

http://iret.org/pub/ADVS-281.PDF

 

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