Tag: North America

Brace yourself. Postal rates are about to go up again – by a whopping 7.6 percent, on average, in May. First-class stamps will cost 41 cents. Despite all the cheering over postal reform legislation signed by President Bush in December, Congress failed to address the most glaring weakness of the Postal Service – its out-of-control labor costs.

And so the cost of stamps will continue its upward spiral.

Fortunately, the Postal Service doesn’t need a second round of congressional horse-trading to solve its problem. The service is perfectly capable of restraining its labor costs without the help of Congress. But will it?

Just look at the recent contract negotiation between the Postal Service and its largest union, the American Postal Workers Union, which represents close to 300,000 workers. The union has done an excellent job of securing generous wages and benefits for members, while management has done a poor job of holding the line against these cost increases.

Postal Service employees are paid significantly more than their private-sector counterparts. In 2005, “the average annual pay and benefits for career bargaining unit employees was $62,635,” according to the Postal Service’s 2005 comprehensive statement on postal operations. Consequently, labor costs represent about 80 percent of all Postal Service expenses.

Last week, the Government Accountability Office, Congress’s chief investigative body, removed the U.S. Postal Service from its list of “high-risk” government agencies. For the first time in recent memory, the Postal Service is back on solid financial ground.

The Postal Service has also taken the first step towards reform – a process which could ultimately lead to granting employees ownership of USPS through privatization.

Each year, the GAO lays out those agencies at risk of becoming unable to “economically, efficiently, and effectively perform their missions.” The Postal Service had been on the list for over five years. But it has recently had considerable success in reducing costs, repaying outstanding debts, and increasing productivity, all of which contributed to the GAO upgrade.

The most critical reason behind the Postal Service’s new financial outlook was a recent congressional law that set up a dedicated stream of cash to pay the USPS’s unfunded liabilities, which exceed USD80 billion. These debt obligations largely represent future healthcare costs for postal workers.

At the insistence of the Bush administration, the new law requires the Postal Service to use dedicated income, which has resulted from an over-calculation of USPS pension obligations, to pay its remaining liabilities responsibly.