Article Published in the Washington Examiner
“I can’t believe the American public wants private contractors delivering their mail,” said William Young, president of the National Association of Letter Carriers, prior to a protest staged recently in Washington, D.C. The union recently broke off its contract negotiations with the U.S. Postal Service.
Joined by members of other postal workers unions, the demonstration was organized to oppose the contracting of mail delivery to private firms. Mailmen from 18 different states attended the rally.
But with labor costs hovering around 80 percent of total expenditures — compared with about 50 percent in the private sector — USPS management would be wise to take advantage of the cost-cutting opportunities that private contractors provide.
Otherwise, consumers will continue to face the burden of ever-rising postage rates, leading, in all likelihood, to less mail for postmen to deliver. In just a few weeks, a new stamp-price increase will go into effect. And Postmaster General John Potter has hinted that USPS will now begin increasing rates annually.
Postal Service employees enjoy a 20 percent to 30 percent wage premium over their private-sector counterparts. This translates to average annual pay and benefits for career bargaining unit employees of $62,348, according to the Postal Service’s 2006 comprehensive statement on postal operations.
As USPS adjusts to the challenges of e-mail and other digital communications, reform efforts should address the significant impact of labor costs on the Postal Service’s overall financial health.
“Keeping our rates under the [inflationary] cap and being able to pay our employees a fair wage requires us to find ways to remove an additional $1 billion in costs each year,” Potter said at an April 17 congressional hearing. “One way is through the expansion of contract delivery services.”
Private contracting of mail delivery can cost half as much as delivery by federal postal employees. So it puts a real dent in rising labor costs. That’s why the postal service already contracts out 7,612 routes. That number has increased by 297 routes since 2005, according to Thomas Day, a senior vice president at USPS.
In addition, the Postal Service employs work-sharing agreements with private companies in many aspects of its work moving mail around the country, while still preserving service quality and creating substantial savings for consumers and taxpayers.
For further savings, the USPS could expand on its program which allows existing retail stores like pharmacies and supermarkets to distribute basic postal products. Approximately 5,000 such contracts already exist, with minimal USPS infrastructure investment. This is a great way to meet the demand for common products like First Class stamps.
The letter carriers’ unions and other critics claim that private delivery firms will expose customers to security risks, poor service, and an unreliable workforce. Such complaints ignore the fact that as contract routes have grown across the nation, the public has barely noticed.
This isn’t to say that security concerns should be taken lightly. But Americans already trust private companies with all kinds of sensitive material, from online banking to package delivery.
Provided that USPS managers exercise careful oversight, including background checks and quality controls, why should we be fearful of private companies delivering our letters?
It’s understandable that union leaders would view private contractors unfavorably. After all, they don’t pay union dues and work for lower wages than federal postal employees do.
But Potter has made clear that contractors pose no threat to the job security of current union employees: “It is not our intention to take existing work from our letter carriers or to lay any carriers off. That is something I pledge not to do.”
Private delivery contracting is an important tool for USPS management to use in reining in costs and hopefully preventing the rate increases that seem to be all too common these days.
Plus, because the number of delivery points is steadily expanding — 1.8 million were added over the last year alone — the demand for mail deliverers will continue to grow. And private delivery contractors represent a way for the Postal Service to hold the line on expenses, improving financial viability, without downsizing the unionized workforce. This is good for all parties involved.
But by leading the pickets earlier this month, Young and other union leaders weren’t just protesting private contractors. They were also protesting lower prices for consumers.
Robert R. Schrum is a research fellow at the Lexington Institute in Arlington.
Find Archived Articles: