Postmaster General Louis DeJoy is ignoring the intent of his own 2021 Delivering For America ten year plan to revamp the U.S. Postal Service. That plan seeks to eliminate billions of dollars in budget deficits and to make the USPS flexible and streamlined to meet the challenges of a fast-changing techno-economy. Yet DeJoy is doubling down on failed past practices, leaving USPS inefficient and inflexible, setting the stage for more deficits that could foist higher prices and even bailouts on the customers and taxpayers.
The Postal Condition.
USPS is supposed to cover its expenses by charging for its services. Yet it has not balanced its budget since 2006. A major reason for these deficits is that revenues from first-class mail, it’s historic cash cow, have fallen from $37 billion to deliver 97,617 pieces of mail in 2006 down to only $24 billion to deliver 48 billion pieces in 2022. This drop is because electronic communications now are the dominate modes for businesses and individuals.
By contrast, revenues from package deliveries, only a few billion dollars in 2006, reached $31.3 billion in 2022. The explosion of ecommerce over the past decade has been a boon for the Postal Service and to private shippers, notably Amazon, FedEx and UPS, which also contract with USPS to handle some of their packages.
But economies and markets are volatile. New technologies can upend established business strategies in a few short years. In our times, business flexibility is crucial for fiscal success. And herein lies DeJoy’s first big fail.
Market challenges have led Amazon to lay off 27,000 employees, 8 percent of its workforce. Of course, as markets change, Amazon can hire more workers if needed.
The number of career USPS employees peaked at around 800,000 in 1999 and dropped to 495,941 by 2020. In that year, USPS had 148,092 temporary employees. But since then, DeJoy himself explained that “We have stabilized our work force by converting over 125,000 employees to full time status, thus increasing employee availability and reducing overtime requirements.”
“Stabilized?” He should say “Locked in as a permanent expense” since it will be virtually impossible to lay off or fire permanent unionized employees when economic, market, or technological conditions change. Of note, over the past decade, even with new technologies and attempts at USPS reform, labor costs have continued to account for nearly 70 percent of USPS expenses.
A central part of DeJoy’s plan is to build over 100 new Sorting and Delivery Centers (S&DCs) to consolidate postal facilities. This seems a smart move. You’d think that S&DCs are meant to replace less efficient or underperforming facilities. After all, that’s what FedEx is doing by closing or consolidating 27 of its facilities, with layoffs as needed.
But here’s DeJoy’s second big fail.
The second-year progress report on the USPS ten-year plan states that “As new S&DCs are opened, customers will see no changes to their local Post Office retail operations. No Post Offices will be closed.” This misses the whole point of consolidation. S&DCs would simply duplicate functions currently performed by local, under-utilized local facilities. And perhaps to mollify postal labor unions, DeJoy has promised “There will be no employee layoff as part of this effort.”
DeJoy and USPS have a mammoth reform task on their hands. And the pace of technological and economic change likely will accelerate, making the future even less predictable and perhaps making the planned USPS reforms outdated before they are implemented.
What is really going on? Has DeJoy succumbed to the classic Washington D.C. disease of empire building? Expand the workforce and facilities and then look for new tasks to justify the billions of investments? The Postal Service is a government agency and like the rest of the government should be small as possible to accomplish the task. The Delivering for America plan can never succeed if the USPS brings more work inhouse to feed excess labor and capacity.
That’s why DeJoy needs to maximize flexibility and reduce costs, as Amazon and FedEx are doing, by cutting redundant staff and shutting antiquated facilities. Otherwise, he could leave customers to bear the likely costs of reform failures through higher prices for postal service and taxpayers footing the bills for billion-dollar bailouts.
Edward Hudgins, Ph.D., is founder of the Human Achievement Alliance and the editor of The Last Monopoly: Privatizing the Postal Service for the Information Age and Mail @ the Millennium: Will the Postal Service Go Private?”