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Study shows that, if implemented, White House proposal for the U.S. Postal Service would hit 70 million Americans in rural areas, small towns, and suburbs with much higher fees for packages

For Immediate Release

12/21/2018 -  

American Postal Workers Union President Mark Dimondstein says: “This gift delivered to Wall Street will be paid for by Main Street.”

WASHINGTON – When the Trump Administration released its postal task force report earlier this month, the American Postal Workers Union said that, if implemented, it would result in “less services and higher prices.” Now, a new research study from the Institute for Policy Studies (IPS) shows just how costly privatizing or even partially privatizing postal services would be. Entitled “Who Would Pay the Biggest Price for Postal Privatization,” IPS researchers demonstrate that the White House plan would lead to significantly higher prices and less service for 70 million Americans in rural areas, small towns and suburbs – and all those who mail and ship to those locations.

“The U.S. Postal Service is committed to uniform pricing and serving everyone in the United States, no matter where we live or work,” said Sarah Anderson, director of the IPS Global Economy Project and co-author of the study with IPS Associate Fellow Scott Klinger and IPS Research Assistant Brian Wakamo. “Without competition from this public service, for-profit firms will jack up their already higher prices and force Americans to pay more for vital services.”

The IPS findings were released Tuesday. Earlier this week, Anderson previewed her findings in an op-ed in The New York Times.

In April of 2018, President Trump appointed the Task Force on the Future of the Postal Service, which, according to the executive order, was charged with rethinking the “definition” of the Universal Service Obligation where all of the USPS’ customers receive mail and packages at reasonable rates regardless of where they live. In June, the U.S. Office of Management and Budget (OMB), an arm of the White House, recommended postal privatization as part of a report on overall government restructuring. The Task Force’s report, released on December 4, proposed that some mail and packages would be declared “essential,” but much of what the USPS now delivers would be considered “non-essential” and delivered more slowly or shifted to pricier private delivery companies.

“The people of this country, especially those who live in rural areas and small towns, should be up in arms over what the administration has proposed,”  said Mark Dimondstein, president of the American Postal Workers Union. “This gift delivered to Wall Street will be paid for by Main Street. FedEx and UPS and their investors will benefit, but 70 million Americans will pay a high price. Would you locate a business reliant on internet sales in a small town or rural area if you were subject to significantly higher rates?”

The cost of shipping packages is important due to the continued growth of ecommerce. Package delivery has become an integral part of the U.S. economy and a necessary service for consumers and businesses. For their study, IPS researchers analyzed current pricing for shipping between different delivery points as currently charged by USPS, the United Parcel Service (UPS) and Federal Express (FedEx).

While USPS charges uniform rates no matter where a package originated or where it is shipped, both UPS and FedEx require customers to pay more for shipments to and from suburbs, small towns, rural areas all over the country, and the states of Alaska and Hawaii.

Key findings from the IPS research paper:

  • UPS and FedEx impose surcharges for deliveries in approximately 53 percent of the nation’s 42,000 zip codes.
  •  These zip codes are home to some 70 million people, about 21 percent of the U.S. population.
  •  UPS and FedEx impose surcharges on packages delivered not just to rural areas, but also to suburban communities adjacent to large cities. Examples of affected communities include Laveen, Ariz. (eight miles from Phoenix); Whites Creek Tenn. (eight miles from Nashville); and Belle Chasse, La. (8 miles from New Orleans). 

IPS researchers also found that even customers in large cities would pay more for package delivery – if the USPS was eliminated as a public option. For example, based on current pricing, the cost of a three-pound package sent from Chicago to Denver costs $33.35 for two-day delivery via FedEx, $33.40 via 2nd day air via UPS, but just $11.75 for Priority Mail delivery by the USPS. Similarly, a two-day shipment between Los Angeles and Kula, Hawaii costs $84.69 via FedEx, and $64.97 via UPS, but a maximum of $17.30 as a Priority Mail package via USPS.

Private shipping companies, IPS researchers found, also add a surcharge for holiday shipments and Saturday deliveries, while USPS charges the same prices throughout the year and does not charge extra for Saturdays.

Based on current pricing structure and the expected lack of competition in the package delivery market, IPS researchers conclude that postal privatization would impose a considerable cost increase on U.S. consumers and businesses. “The estimated 70 million Americans living in places the private companies already charge extra fees would pay the biggest price,” they write, “losing the affordable and reliable shipping services they have always enjoyed.”

In addition, “[b]usinesses, from the online retail shops to manufacturers shipping parts to customers in need, could face sharply higher shipping costs, leading to higher prices for their customers or lower profits for their businesses. Small businesses would be hit especially hard, since they don’t have the clout to negotiate the same level of shipping discounts as big corporations.”

The U.S. Postal Service, IPS notes, receives no taxpayer subsidies and provides a “vital and truly democratic public service” by connecting all areas of the United States with uniform pricing and universal service.

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