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An Open Letter
Worksharing Advocate Ignores the Facts
APWU Web News Article #29-05, July 7, 2005
The APWU has long been frustrated by the fact that the Postal Rate Commission (PRC), the body that oversees postal ratemaking, has repeatedly approved excessive workshare discounts. Although the PRC rulings have paid lip service to the principle that workshare discounts should not exceed costs avoided, the decisions of the PRC have maintained and even increased discounts beyond justifiable levels. In our view, this has occurred because the PRC has been too responsive to pressure from the mailing industry.
In this, the PRC has been aided and abetted by its professional staff, which should have been providing impartial technical and economic analysis. Until recently the PRC’s Office of Rates, Analysis and Planning was directed by Mr. Robert Cohen, who, it should be noted, is not an economist.
During Mr. Cohen’s tenure as director, we were often dismayed by his broadside criticisms of the Postal Service and his statements about the cost of postal mail processing. Because we considered Cohen’s positions to be one-sided and pro large mailer, we considered his departure from the PRC’s staff to be a positive development.
Unfortunately, Mr. Cohen’s move to the private sector has not kept him from advocating the position of the large mailers.
Stubborn Facts
At a recent conference on postal economics in Europe, Mr. Cohen delivered a paper in which he claimed that the American Postal Workers Union opposes worksharing discounts. It is astonishing that the recently departed head of the PRC’s staff responsible for rate analysis would make such an outlandish claim.
For more than a decade the APWU has repeatedly expressed our support for worksharing discounts — provided they do not exceed the costs avoided by the Postal Service. We have done this in numerous filings with the PRC, as well as public statements to Congress, the President’s Commission on the U.S. Postal Service, and in our publications.
Irony
At the same European conference, Mr. Cohen also claimed to find irony in his version of the APWU's position, suggesting that postal workers should be grateful for the increased volume that results from excessive discounts.
What Mr. Cohen fails to realize is that excessive worksharing discounts threaten the foundation of the Postal Service. With excessive discounts, the Postal Service loses revenue on every piece of workshared mail.
Recent USPS reports demonstrate the problem: Despite a 3 percent growth in volume over the first eight months of fiscal year 2005, revenue has increased by only 1.3 percent. This is part of a trend caused by the reduction in revenue per piece. And it is likely to continue, as excessive worksharing discounts encourage more and more mailers to shift from paying full rates to paying drastically discounted postage.
Mr. Cohen’s assertion reminds us of the old sales pitch: “I’m selling my product at a loss, but I’ll make it up in volume.” Regrettably, in the case of the Postal Service, this is not a phony pitch; it is policy — bad policy.
Efficiency
Another example of Cohen’s unfair criticism of the Postal Service and postal workers is his contention that,
“The increase of postal productive efficiency over time in the U.S. is the product of the growth of workshared volume and the increasing depth of presort and depth of drop shipping into the network….”
This statement is outrageous for several reasons:
First, it is universally understood in the postal community that mail processing labor productivity has increased dramatically over the last decade due to rapid automation.
Furthermore, worksharing has depressed the rate of mail processing productivity growth, because it takes mail volume away from the most efficient mail processing system. (This effect was acknowledged in a recent GAO Report to Congress.)
Finally, Cohen’s statement misuses the term “productive efficiency.” When mail is not processed at all in certain operations, the productive efficiency of those operations likely goes down due to lost volume; postal productive efficiency generally is unaffected.
Mr. Cohen’s misstatements, unjustified conclusions and unfair criticisms do a disservice to the Postal Service, its employees, the mailing community, and ultimately, the American people.
For more background on excessive postage discounts, see:
(APWU Web News Article #20-05, April 21, 2005)
(Burrus Update #4-05, March 15, 2005)
(Burrus Update #17-04, Dec. 7, 2004)
(Congressional Testimony)
(Burrus Update #5-03, March 20, 2003)
(APWU News Service bulletin Vol. 33, No. 4, Feb. 20, 2003)
(Congressional Testimony)
(APWU Press Release, Jan. 31, 2002)
