Postal Problems: the Role of Government Micromanagement

Postal expert Michael Schuyler has released a follow-up to his January paper that compared the recent financial performance of the U.S. Postal Service to foreign postal service providers. Not surprisingly, the USPS has fared relatively poorly in comparison to its foreign counterparts. In his new paper, Schuyler looks at the role government micromanagement plays and finds that “Foreign posts have much more flexibility than USPS to adjust operations to keep costs in line with revenue.”

The following are some key points:

  • Foreign governments intervene in their postal markets, but “foreign governments often temper their demands and grant their postal services substantial operational discretion, in order that they not undermine their posts’ financial viability.”
  • The USPS has reduced headcount by 29 percent since 1999, but in comparison to foreign operators, it has less flexibility when it comes to managing labor costs. For instance, “there have been few layoffs because contracts with postal unions contain no-layoff provisions that protect the jobs of most career postal workers…Although the reduction the Service accomplished through attrition and buyouts has been skillful, it has not been sufficient to bring the workforce into balance with reduced mail volume.”
  • While many foreign operators have moved to five-day mail delivery, Congress continues to insist that the USPS deliver mail six days a week. Given the continuing – and permanent – decline in the demand for mail, the case for cutting back on delivery is getting stronger. Regardless of whether the USPS should move to five day delivery, the “requirement shows how the U.S. Postal Service is hamstrung in its ability to rein in costs through operational adjustments, compared to many foreign posts.”
  • Congressional meddling makes it harder for the USPS to downsize its retail network to better reflect financial reality. When the USPS tries to close post offices and other facilities, “members of Congress often object vigorously to proposed closings within their jurisdictions and occasionally threaten to introduce legislation to block proposed changes.” As a result, the USPS usually backs down.

I’ll conclude by making my standard pitch for liberalization of the U.S. postal market, which would ideally lead to privatization of the USPS. The word “privatization” scares a lot of people, but it shouldn’t. If one were to spend a couple of years working in the U.S. Senate, as I have, there’s a good chance that he or she will conclude that continuing to allow 535 politicians to manage a business is a whole lot scarier.