Why the U.S. Postal Service Is in Greater Financial Trouble than Most Foreign Postal Services

April 9, 2012

Postal services throughout the world have lost sales due to electronic diversion, and suffered from the last recession and its after-effects.  Nevertheless, the majority of foreign posts in upper- and middle-income nations are profitable, while the U.S. Postal Service (USPS) remains consistently in the red, predicting even greater losses in the near future, says Michael Schuyler, a senior economist at the Institute for Research on the Economics of Taxation.

  • The USPS has run an annual deficit since 2007, and these deficits are expected to grow each year for the near future.
  • According to the Universal Postal Union (to which most middle-to-high income countries' postal services report data), the heavy majority of high-income countries' posts remained in the black throughout the period from 2007 to 2010 (2009 was lowest with 62 percent retaining profits).
  • Similarly, the Union found that even the majority of middle-income countries' posts were able to stay profitable through that period (the lowest was 52 percent in 2007).

The efficacy of foreign posts in staying financially solvent proves that mail delivery can remain profitable despite technological advances.  How, then, does the USPS manage to run such enormous and persistent deficits?

One crucial distinction between the USPS and foreign posts is the micromanagement of the U.S. federal government.  A number of provisions for reform, long adopted by other countries for their posts, have been put off by Congress.

  • USPS would like to move to five-day delivery, which it estimates would save $3.1 billion annually, but this move has repeatedly been blocked by Congress.
  • Layoffs, which have repeatedly been used by foreign posts to control costs, have not occurred rapidly enough at the USPS because many workers have no-layoff clauses in their contracts -- the work of congressionally-endorsed labor arbitrators.
  • Finally, renting out portions of preexisting buildings in order to close current brick-and-mortar post offices is a measure largely prohibited by Congress, which disallows closing an office simply because it runs at a deficit.

These measures have been widely implemented throughout the world, with great success for posts in keeping costs low and adapting to a new, low-volume economy.  Yet the USPS remains strangled and unable to adapt by a micromanaging government.

Source: Michael Schuyler, "Why the U.S. Postal Service Is in Greater Financial Trouble than Most Foreign Postal Services -- the Role of Government Micromanagement," Institute for Research on the Economics of Taxation, March 30, 2012.

For text:

http://iret.org/pub/ADVS-282.PDF

 

Browse more articles on Government Issues