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With Clouded View of the Present,
Commission Tries to Chart the Future

(This President's Viewpoint article first appeared in the March/April 2003 issue of The American Postal Worker magazine)

The Commission on the U.S. Postal Service has conducted two public hearings as well as many private meetings with postal stakeholders in preparation for the report to President Bush, due by July 31. The commission’s charter is to plan the future course of the Postal Service.

In written testimony submitted Feb. 12, I expressed the union’s concern that many of the comments made at the formation of the commission were “inaccurate, misleading, and based on conventional wisdom that is demonstrably wrong.”

The rationale for the establishment of the commission is that first-class mail is in decline at the same time that postal delivery obligations are increasing. Such a scenario would only result in repeated rate increases far into the future. The commission digresses, however, from directly tackling the issues of electronic diversion and an additional 1.7 million new addresses annually, and instead is exploring the postal structure.

Hard-Copy Alternatives

If electronic diversion is the cause of the recent decline in mail volume, no decision by the commission could increase future volume.

There really is no evidence that mail growth is being adversely affected by electronic communications. In a growing economy mail volume would be likely to increase, despite any diversion of hard-copy communication due to technological advances. The accompanying chart shows that, historically, as new technologies have been introduced, total communication has expanded and mail volume has increased.

It has been decades since person-to-person hard-copy communications constituted a major proportion of mail volume. Over the past 15 years, person-to- person letters have been less than 8 percent of total mail volume. Consistently, over 90 percent of letter mail has been between non-households or between non-households and households. Over time, this volume has grown or declined, depending on the strength of the nation’s economy. In light of the economic slump of the last two years, it is not surprising that first-class mail volume has declined in recent years.

Excessive Discounts

Notwithstanding this decline, the deteriorating financial condition of the Postal Service can be attributed directly to postage discounts afforded to more than 70 percent of all letter mail. Only a fraction of the mailing audience pays the published postage rates, with the remainder – big mailers – paying from among a variety of discounted rates. The discounted rates are the norm; the published rates are the exception.

These discounted rates have overcompensated big mailers essentially for applying bar codes prior to entering mail into the postal system, and have resulted in repeated postal deficits.

When the discounted rates jeopardize the future of the Postal Service, the line must be drawn: All mail must make an equitable contribution to the cost of maintaining the postal system. The deficits, after all, are the driving force behind the cry for postal reform.

In my Feb. 20 testimony before the commission, I presented statistics showing that the Postal Service is, in essence, paying large mailers over $1,000 per hour for applying bar codes to letters prior to their entry into the mail stream. This exorbitant amount cannot be justified. Setting artificially low rates for an activity that has little value to the Postal Service is merely a means to reduce mailers’ costs. The rates major mailers currently pay are below the cost required to maintain universal service. If discounts were properly set for applying bar codes, the discount would not exceed the cost of processing the same mail through the Postal Service’s Delivery Bar Code Sorters.

Postal management’s representatives, as well as the USPS Board of Governors and the Rate Commission, are more concerned with limiting the postage costs for major mailers than with generating sufficient revenue for the Postal Service. There is absolutely no justification for 28-cent first-class postage or 19-cent postage for Standard-A mail. These rates are but 50 percent of the costs in most of the rest of the world. Despite the productivity of American postal employees, the drain on postal revenues cannot be overcome. If affixing bar codes adds great value to the mail sorting process, why don’t UPS and FedEx – who use them in their businesses – give work-sharing discounts to their customers?

‘Costs Avoided’

In my testimony before the commissioners, I petitioned them to adopt the principle that discounts should not be allowed to exceed “costs avoided,” – the amount of discounts should not be greater than the amount the Postal Service avoids by not having the work performed by its own employees.

Postal managers have succumbed to pressures from lobbyists for the major mailers and this is reflected in the deficits the Postal Service has experienced over the past three years. More than 70 percent of all letter mail qualifies for rate discounts, resulting in insufficient revenue being generated to maintain universal service.

At the February hearing, several representatives of the mailing industry recommended major modifications of the collective bargaining process as a means of restoring stability to the Postal Service. They reason that if employee pay and benefits are drastically altered, reduced rates will follow. Such modifications would either deny employees the right to engage in collective bargaining for wages, hours and conditions of employment, or deny them the right to resolve disputes through interest arbitration.

My closing remarks to the commission were that “the modification of the collective bargaining process should not be considered as a means to bring the USPS to financial stability.” The current decline in volume can be attributed directly to the economic slump. It is not indicative of permanent erosion of mail volume due to technology or excessive wages to postal workers.

There is a real danger that the cure for an imagined illness will cause irreparable harm to the nation’s postal system.

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