NCPA - National Center for Policy Analysis

What's Wrong With The Postal Service?

January 11, 2001

After five years of operating in the black, the U.S. Postal Service is once again losing money -- $199 million in the fiscal year ending September 30, 2000, with projected losses of $1.2 billion this fiscal year.

And the recent postal prices hikes won't help much. While the price of a first-class stamp just increased by 1 cent -- or 3 percent -- the cost of mailing periodicals jumped 9 percent on Sunday, and churches and charities are having to pay 18.3 percent more for sending out some of their nonprofit mail.

Analysts say USPS is facing its most serious crisis since it was restructured in 1970 -- and they identify labor costs as the prime culprit.

  • Some 80 percent of USPS costs are labor related -- compared to a generally less than 60 percent for private firms.
  • Although the USPS payroll had been on the decline prior to 1993, it jumped almost 10 percent under President Clinton.
  • And although it has spent $26 billion on capital improvements and labor-saving devices in recent years, the agency's productivity grew by just 0.4 percent a year over the past decade.

Many experts are convinced that privatization is the only way to pull the organization out of its woes.

Source: John Berlau, "Post Office Is Under Fire from Critics as Red Ink Grows, Rates Keep Rising," Investor's Business Daily, January 11, 2001.


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