Is the U.S. Post Office Broken Beyond Repair?

Is the U.S. Post Office Broken Beyond Repair? September 14, 2011

The US Postal System has made its way into the news once again and its problems just seem to get bigger with each month that goes by.  Unless a solution passes Congress, these issues will leave the USPS broke and jeopardize the nationalized mail system altogether.

US Post Office Problems

  •  Congress micromanages the post office.  A surefire way to run a bureaucracy into the ground is to make it so that changes are difficult to implement.  When decisions have to come from the top (that is, passed by congress) you can bet that it will take a while and that the solutions will come much later than needed.  Flexibility is why small businesses (like UPS and FedEx) are able to adapt to changes in the marketplace; the lack of flexibility is one of the reasons why the U.S. Postal Service has so many problems right now.
  • According to PBS, volume is down 22% from five years ago.  This caused the Postal Service to face losses of $8 billion for the second year in a row.  Losses like this aren’t sustainable; especially if you don’t make efforts to change the way you do business.
  • The USPS is in risk of defaulting on their $5.5 billion payment that is due on September 30.  This payment is to pay for future health care for retired postal workers, and unless Congress ‘takes action’ (i.e. lend money from some other resource or reverse the 2006 bill that required pre-payment on future health care benefits) they will technically default on this bill.  This isn’t something that will cause the mail to stop in its tracks, but if the lack of capital continues to be a problem, the USPS will have problems meeting payroll.
  • Speaking of payroll, this is one of the most expensive problems for the Post Office.  Currently , the USPS spends about 80% of its budget on labor expenses.  Compare this to the 53% that UPS spends as well as 32% Fed Ex spends on its labor.  It’s clear to see that making a cut in this part of the budget means that people will lose jobs, and see decreases in pay as well as other benefits in order for the USPS to stay solvent.

Proposed Solutions for the US Postal Service

The postmaster general, Patrick Donahoe said that the USPS is trying to push measures through Congress that will help to address these issues.  Donahoe proposed a series of measures that would cut costs for the USPS, hopefully cutting its projected $9 billion deficit this fiscal year.

Eliminating Saturday Mail Delivery – This is estimated to save the USPS $3 billion dollars.  It’s a solutions that needs to be passed in my opinion.  We can all live with one less day of mail pickup.  If someone needs to send out mail on Saturday, I don’t see why driving to the Post Office would be a problem.  Cutting Saturday delivery saves billions and should be passed by Congress soon.

Closing Up to 3,700 USPS locations – The proposal by Mr. Donahoe suggests that the USPS close 3,700 branches in smaller towns, replacing them with automated centers that are operated from local businesses.  It makes sense to cut the less profitable and smaller branches, but it will be inconvenient for those residents who have to talk with a machine rather than an actual person.

Laying off 120,000 workers – Donahoe also suggested to Congress that 120,000 USPS workers should be laid off and that an additional 100,000 jobs absorbed through the years to come.   With over 650,000 employees in the USPS, the proposed labor cuts represent a 33% drop in employment.   This would bring the total employment below 450,000 or nearly half of its size when compared to a decade ago (900,000 employees).

How would you solve the problems?  Would you be OK with one less day of delivery?  How would you feel if your local post office was replaced with an automated machine?

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