By Edward Hudgins
On August 8, Postmaster General Louis DeJoy will report to the U.S. Postal Service Board of Governors on his progress implementing his 2021 Delivering For America ten year plan to revamp USPS. If the governors are true to their duty to review USPS practices and conduct long-range planning, Dejoy will have some serious explaining to do.
He has ignored his own plan, which seeks to eliminate billions of dollars in budget deficits and to make the USPS flexible and streamlined for a fast-changing techno-economy.
The Postal Condition.
USPS’s Plan projected it would break even this year. That’s not going to happen. The financial update this month will likely show USPS will lose billions of dollars this year. One of the reasons is that revenues from first-class mail, it’s historic cash cow, have fallen from $37 billion to deliver 97.6 billion pieces of mail in 2006 down to only $24 billion to deliver 48 billion pieces in 2022. This drop, obviously, 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 ecommerce boom has been a boon for the Postal Service and for private shippers, notably Amazon, FedEx and UPS, which also contract with USPS to handle some of their packages. However, even here package volumes are stabilizing.
Economies and markets are volatile. New technologies can upend established business strategies in a few short years, so business flexibility is crucial for fiscal success. And herein lies DeJoy’s first big fail.
The number of career USPS employees peaked at around 800,000 in 1999 and dropped to some 495,941 by 2020. In that year, USPS had 148,092 temporary employees. But now DeJoy 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, or technological conditions change. Of note, over the past decade, even with new technologies and attempted reforms, labor costs have continued to account for over 70 percent of USPS expenses.
Central to DeJoy’s plan is to build over 100 new Sorting and Delivery Centers (S&DCs) to consolidate postal facilities. 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 under-utilized local facilities. And perhaps to mollify postal labor unions, DeJoy has promised “There will be no employee layoffs as part of this effort.”
In 2006, the last year USPS balanced its budget, a stamp cost 36 cents. The price in January, 2023 was 60 cents, and today it is 66 cents. As stamp prices rise, first-class mail volume and, thus, revenues decline as customers are driven away, thus leading to more price increases to replace lost revenue, thus leading to further drops in volume and revenue. Is this DeJay’s plan? Or is it empire building? Expand the workforce and facilities and then look for new tasks to justify the billions in taxpayer handouts?
The USPS Board of Governors should demand that DeJoy 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 postal prices 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?”