Unlike other federal employees, postal workers have the right to negotiate wages through collective bargaining. This special status was granted by the 1970 Postal Reorganization Act. Today, 90 percent of the Postal Service’s 707,000 career employees are paid according to contracts that are negotiated between one of four unions and USPS management.
This arrangement has been a lucrative one for mail carriers – who Americans like and give good customer approval marks to – and for other postal employees as well. The upshot of these labor negotiations is that Postal hires receive, on average, a 28.4 percent wage increase from their previous jobs. In 2003, the average pay and benefits for career bargaining unit employees was $57,051 per year, excluding corporate-wide expenses. Consequently, labor accounts for nearly 80 percent of USPS costs.
These excessive labor costs – which now threaten the Postal Service’s ability to remain self-financing – stem directly from flaws in the collective bargaining process.
One of the primary flaws is that regional differences in cost-of-living are not factored into wage negotiations. The resulting one-size-fits-all salary contracts defy efficient business practices and common sense alike. A mail clerk earning $50,000 per year in Albuquerque would have to earn $95,000 to support an equivalent lifestyle in Manhattan. Their salaries should reflect such a dramatic difference.
It should be noted that a small number of USPS employees in remote areas – such as Alaska, Hawaii and Guam – receive cost-of-living allowances (COLAs). But this is not a factor for the vast majority of USPS workers.
If the Postal Service adopted a regional pay scale for all new employees, it could save billions of dollars, and lower the likelihood of a future force reduction. Indeed, armed with a congressional mandate requiring new-hire compensation to reflect such cost-of-living differences, Postal negotiators could dramatically reduce labor costs in a fair and equitable manner.
Another key problem with the current arbitration process is that proper consideration is not given to private-sector pay comparability. The 1970 Postal Reorganization Act specifically states that postal pay should be comparable to private sector pay.
Pay comparability is a hotly contended issue. The Postal Service has documented a 20-30 percent wage premium and presented the evidence at every wage arbitration since the early 1980s. Meanwhile, the unions dispute that such a premium exists.
Part of the disagreement lies in the fact that pension and retiree health benefits are not part of negotiations. As a result of the Postal Reorganization Act, benefits are essentially set by statute. Congress could easily clarify the matter by requiring that benefits be included in the collective bargaining process.
According to the President’s Commission on the U.S. Postal Service, “The 1970 Act denies negotiators and arbitrators alike the ability to factor the entire wage/benefit package into the agreement. By amending the 1970 Act to include a broader range of benefits in the collective bargaining process, negotiators and arbitrators will be better able to ensure private sector comparability across most wage and benefits components.”
The Commission also wisely recommended that the 1970 Act be amended so that a comparability standard serves as a “ceiling over the negotiation and arbitration process.”
Finally, the collective bargaining process has produced powerful layoff protections. As of February 2003, 89 percent of USPS career union employees were protected by no-layoff guarantees. As a result, the Postal Service has been unable to reduce workhours, and ultimately increase its total factor productivity, as much as it should have as a result of worksharing, falling first-class mail volume, and large capital investments in automated equipment. All other Federal employees are subject to force reductions if there is no longer any work for them to perform.
To effectively control costs, USPS management needs to be able to adjust the size of the Postal workforce. Congress ought to consider whether layoff protection should continue to be a unique Postal benefit in future union contract provisions.
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