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Targeting the Post Office

On Labor Day The New York Times ran a front page article that, through the lens of the United States Postal Service, simultaneously addressed two of our most burning issues: the condition of workers and our underfinanced government.  The Post Office has a deficit, and on its front page the paper of record listed the main reasons why: labor costs are 80% of total cost in the post office but only 53% and 32% at UPS and Fed Ex; health benefits are more generous at the post office than those offered to most other federal employees; and the USPS union contracts contain no layoff clauses.

A chill must have gone down the spine of post office workers upon reading that they are overpaid; they know firsthand that they are actually underpaid and they also know why the labor cost components in the various mail delivery services are different.  First class postal mail is delivered by foot, while UPS parcels are delivered by trucks and Fed Ex letters are often delivered by trucks (and airplanes) that travel great distances to deliver, in some cases, a single item.   The only meaningful comparison is of the actual wages themselves. According to the Federal Daily, a UPS delivery driver earns 15% more in wages and 59% more in benefits than a postal service letter carrier. Obviously it is not the low wages or low benefits that the USPS pays that explain why its labor component is so much higher than it is at UPS.  The pay of Fed Ex delivery drivers is lower than even that of postal service letter carriers, but that only means that Fed Ex workers are even more grossly underpaid and an article about these workers and the anti-unionization activities that Fed Ex engages in against them would have been both more interesting and more fitting for Labor Day.

The rest of the New York Times article continues from the front page to the Business Section, and those who bothered to keep reading would have found some of the real reasons for the deficit at the Post Office.  By law the post office cannot raise its prices beyond the consumer price index even though the increases in the components of its costs far exceed the increases in the consumer price index.  The post office often operates branches in suburban or rural communities where the number of customers is very small.  In addition, while because of the internet the volume of the mail has been decreasing, the number of addresses that it delivers to has nevertheless been increasing because of the growing number of households.  Neither of these increases in average costs is related to the consumer price index. And as we all know, the increases in the cost of health insurance far exceed the increases in the consumer prices index as well.  Yet in spite of these increases in costs, the post office has not raised the price of first class mail since May of 2009.  UPS and Fed Ex, on the other hand, have both raised their prices by 4.9% in 2011, though this comparison was not to be found in The New York Times.

And what about those no layoff clauses in the union contracts that the paper told us about on the front page?   Toward the end of the article readers learned, parenthetically, that over the last decade the number of workers in the post office decreased by more than 25%.  Thus no layoff clauses at most slow, rather than prevent, downsizing.

The attack on the USPS workers in The New York Times — by none other than their labor reporter — is a sad example of just how deeply the media has internalized the linked attacks on government services and labor.  The very discussion of a post office deficit is spurious because there is no reason why the post office should be profitable in the first place. Subsidies are an integral part of the post office.  Unlike UPS or Fed Ex, the post office charges the same rate for the delivery of mail regardless of distance or ease of access, and this means that when the post office is not subsidized by taxpayers, residents of high density places subsidize residents of smaller and more remote places. Without these subsidies there would be no post office. But subsidies should not be paid according to place of residence but according to ability to pay.  They should therefore come from taxes, as they did until 1982, and not solely from the price of postage.  And even though USPS workers are actually underpaid compared to workers who are doing similar jobs in the private market, we must still note that this comparison is also spurious. Why should the benchmark be other workers’ wages and not the compensation (for what?) of stock and bond traders or, for that matter, of CEOs?

The only immediate solution to the current crisis that our economy faces is to raise taxes and to use them to pay for what only the government can guarantee:  The provision of necessary goods and services and jobs that pay decent wages.  The United States Post Office is not the problem; the post office is part of the solution.

Moshe Adler teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College. He is the author of Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press, 2010).

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Moshe Adler teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College. He is the author of Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press, 2010),  which is available in paperback and as an e-book and in Chinese (2013) and Korean (2015) editions.

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