Business » Companies
Author`s name Dmitry Sudakov

The eviscerartion of USPS

Year after year, the U.S. state postal service is deteriorating. The losses are growing and have reached $16 billion last year. Multiple post offices throughout the country are on the verge of being shut down, and thousands of employees may be laid off.

All proposed measures to keep the U.S. mail afloat so far have not yielded results, and post officials recently reported that they would no longer deliver mail on Saturdays.

For the average American, United States Postal Service (USPS) is not just a government agency, but perhaps one of the symbols of the government. A Professor at New York University, who devoted many years to studying specific problems of the state mail, said that post offices are not just a business, but one of the foundations of the American democracy. According to the professor, it is more than just a beautiful metaphor. Established in 1775, the postal service meant very much for the young country. Often, the mail service was the only factor that united disparate states.

This view is shared by most Americans. The U.S. founding fathers placed such importance on the postal service that they laid in the Constitution control of Congress over its operations (which, incidentally, had sad consequences for the contemporary USPS).

Over the centuries, USPS has become a powerful government agency, and, until recently, was making good contribution to the state budget. This is one of the largest employers in the public sector of the U.S. economy, and its employees enjoy significant benefits. USPS handles 40 percent of the world's mail, which is over half a billion units daily. The law says that USPS does not have the right to refuse delivery of correspondence, even if the destination is in snowy Alaska or an Indian reservation somewhere in the Grand Canyon.

Delivery of mail within the U.S. and outside of the country is implemented by a huge fleet of USPS. The agency has 260,000 postal vans as well as private aviation, river transport, pack animals used in some areas, and up to 1963 the agency even employed sled dog teams. Numerous competitors of USPS often use the services of the state agency to deliver their parcels to remote areas.

Twice in the last century the Americans had a chance to understand the importance of USPS in their lives. The first incident occurred before the start of the holiday season in 1966, when the main Post Office in Chicago (that at the time served as the main sorting hub and was considered the largest mail center in the world) was suddenly hit by a huge inflow of promotional products. The unexpected incident led to a paralysis of the service for nearly three weeks, and the attempt to recruit untrained employees only aggravated the situation.

A few years later, a lengthy strike of postal workers protesting against low wages broke out in New York. President Nixon did not think of anything better than to mobilize the National Guard and the Army - fortunately, not against the strikers, but to replace them. Corporals, sergeants and soldiers were sent to sort and deliver mail and packages, but it quickly turned into such a fiasco that within a week the Nixon administration was forced to negotiate with the strikers.

The thirty years in late 20th and early 21st century were the prime time of USPS. The service not only enjoyed subsidies from the federal budget, but was also fueling it. Even the beginning of the era of the Internet did not bother postmasters. The Americans are quite conservative, and, in addition to regular letters (which are increasingly being replaced by e-mail), the agency still works with a huge number of greetings on Christmas and Independence Day, as well as wedding and other invitations that residents of the U.S. prefer to send by snail mail.

Real issues of USPS began with the development of online payments and e-commerce. According to a consensus of experts, the postmasters simply overlooked the latest trend, giving way to competitors like UPS (United Parcel Service). A decent share of the market delivery of parcels and documents was seized by FedEx. Online payments eliminated an entire category of mail. If before every American family regularly used to send five or six envelopes with receipts of payment for utility and other services, now most of these payments are made with a few clicks of a computer mouse.

Yet, the biggest problem of USPS is the control by the U.S. Congress. In 2006, at the height of the success of the postal service, Congress adopted Postal Accountability and Enhancement Act. Among other things, the law established the right of retired workers to obtain health insurance for 75 years after the retirement. In practice, this meant that the USPS has to pay annually over five billion dollars to the pension and insurance funds over the next ten years.

When the things were going well, such payments did not cause any problems. However, two years after the law came into effect, the global economic crisis broke out, and USPS faced a serious problem. If the agency was a business enterprise, the solution would be simple - to shut down inefficient branches, dismiss redundant workers, and stop delivery to remote areas. But any such decision should be approved by Congress, and people's representatives block any attempt of "restructuring" and "improving efficiency" by such methods.

However, tough measures still had to be taken. For several years, there has been a gradual extinction of post offices, especially in small rural settlements. This process even has its chronicler, a graduate student at the University of Pennsylvania Evan Kalish who for three years has been posting on his blogs pictures of post offices he visited before they were shut down. He will have to get busy - if so far only 500 branches have been shut down, now at least 3,700 post offices face closure.

Recently, USPS announced that it had to raise the cost of letters delivery from 44 to 45 cents. This seems like a small increase, but this is the first one in many decades. Another innovation is limiting Saturday delivery to parcels and packages only. Postmasters had to get approval for every decision through Congress, but USPS is still suffering huge losses.

To reinvigorate the postal service, current head of USPS Patrick Donahue proposed eliminating 15,000 unprofitable branches and cutting 120,000 jobs. It would seem as a logical business strategy, but the Americans are horrified by it. While the decision is unpopular, it will have to be taken.

This story would have been no more than an amusing incident to the Russians if it had not been for one thing. Even considering all the differences between the two countries, the role of postal service is quite similar due to comparable distances and remote locations. It would not be a bad idea to look at the American experience as the U.S. is looking for a compromise that can save the single postal network at a reasonable cost.

Ilya Nikonov


Read the original in Russian