USPS in Trouble

Here is the basic problem with federal government operating a business.  This article is all about the US Post Office, but it highlights clearly the issues.  USPS has been losing customers for years due to several factors.  One factor is competition from UPS and FedEx and another factor is technology that has enabled people and businesses to go Green by becoming paperless.

The paperless company has the ability to do Electronic Fund Transfers (no more mailing checks), emails, EDI (Electronic Data Interchange) which allows sales orders, Purchase Orders, Invoices, Shipping Documents etc. all to be electronically mailed rather then using USPS.  USPS has been losing volume for years and will continue to do so.  It's not like this was sudden or unexpected.

Competition is stiff among USPS, UPS and FedEx.  Competition leads to innovations and improvements in services as we see all the time with UPS and FedEx's commercials detailing new, cheaper services. They can make these changes to products and services rather easily, and bring these to market quickly.  The USPS cannot.  THE USPS needs an act of congress to enable change (and we all know how fast they can move...not).  By design, the USPS cannot be flexible enough to really compete.  So far, they have been able to get away with this because no other service delivers mail to the door because by law, the USPS has a virtual monopoly on this service.

Labor costs are literally strangling the USPS. 

"At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees. "

Let me repeat:  Labor represents 80% of the expenses.  How can the USPS compete or just survive with labor costs so high, and no ability to make any changes due to contract?  (Who in their right mind signs a no-layoff contract knowing full well the need to lay off workers?)  Obviously the labor issue is a political hot potato.  USPS needs to lay off workers for obvious reasons but unions will not allow it. 

So far, I've attempted to keep partisanship out of this to lay the foundations for the discussion.  Here are the points I wish to make:

1. How did labor get to be 80% of USPS costs?  As the NYT points out, "decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs."  This is what happens when a political party and a Public Sector Union get together in a cozy situation.  The unions get great benefits and great contracts and the political party gets untold support in money, organization, protesters, phone banks, gotv etc. to reelect members of that party.  It’s a vicious cycle that may benefit unions and the party, but it is extremely costly to 'We The People" who have to pay for it.  I know there is a need for Private sector Unions, but not for Public Sector Unions.  Like it or not, Scott Walker in Wisconsin fought hard to give the tools needed for districts to save money.  The results are clear that he did the right thing. 

2. This is an example of why government should not run an industry.  It cannot react fast enough to compete, nor can the business model change without an act of congress.   This applies to Obamacare, which is about to destroy the health insurance industry to replace it with Government run healthcare.  The very same issues that are happening to USPS will happen to Obamacare, except there will be no competition from the private sector  thus reducing any incentive to innovate or improve services.  How can a company compete against Obamacare  Inc. when Obamacare Inc. can just print more money?

3. As to what to do about the USPS, perhaps it is time to privatize it.  Let it operate as a stand-alone business with some congressional oversight, but allow it to make it's own contracts with unions, allow it to modernize, allow it to operate in a way it can make money again, and lastly, remove some of the restrictions about carrying 1st class mail that perhaps other companies can compete in this arena.  This is just a suggestion.  One thing is clear, we cannot just print more money to allow this situation to continue.  USPS has to get control over its labor costs, and it has to figure out ways to compete.  Otherwise, it will not survive, and believe me, I just can't wait for the next delivery of junk mail and bills.