"Salaries and benefits make up 80 percent of the Post Office's budget. By comparison, FedEx spends 43 percent of its budget on labor, while UPS spends 63 percent, according to Businessweek. Why the disparity? As the magazine put it, "USPS has historically placed the interests of its unions first."
You can't simply compare the USPS with FedEx or UPS. Neither of the latter provide regular deliveries. How much would it cost FedEx to have a large enough workforce to visit a significant fraction of the homes in the US every single workday? For that matter, doesn't UPS and/or FedEx have an agreement where UPS does the final delivery of some of the packages, precisely because USPS has most people?
Without that comparison, that comment comes across as a gratuitous slam against unions.
Yeah, stupid Constitution for giving Congress monopoly power over the mail system. Silly also that we require universal postal service at affordable rates in exchange for that monopoly.
I think you're reading into my comment, I was merely stating why UPS and FedEX don't deliver mail and why comparisons between them and USPS are difficult to do. Though for completeness there have been people who've competed with USPS in the past, Lysander Spooner is a notable one.
While it often seems to surprise Americans, there's nothing about a universal postal service - or even universal postal service - that requires granting anyone a monopoly. Many countries have allowed competition in the postal market and/or privatized their postal service. The results have mostly been very positive. Really, it's a bit like suggesting that the only way we can be sure every American can purchase food is to grant a Federal Food Service a monopoly on all retail food sales. It just isn't so.
Basically, there are three ways you can provide universal service:
1) Split the country up into regions, and reverse auction contracts to provide service; contracts require mail interchange with other contractors. Not common in the postal sector, but widely used elsewhere.
2) Designate one entity as the universal service provider. Could be state owned (as in NZ) or floated on the stock exchange (as in Germany). Since providing universal service is expensive, the government provides a subsidy to cover the cost. Accounts are reviewed periodically to ensure the subsidy is in-line with costs, and that value is being obtained for the money.
3) Designate one entity as the universal service provider. Don't directly subsidize them, but instead grant them monopolies on random services which you fondly hope will provide revenue streams broadly similar to what universal service actually costs.
Method 3 has a few disadvantages:. It's unfair, it's expensive, it's opaque, and it doesn't actually work. For example, at some point, the monopoly revenue will be too high. With nothing else to do with the cash, it'll get spent on lavish infrastructure, marble floors, and gold-plated pensions. Later, changing market conditions means the monopoly revenue falls, and the postal service goes bankrupt. Insanity.
It would be interesting to see some sort of normalized comparison. I would guess the USPS still spends more on labor, but the raw figures are, as you say, a bit misleading. Two normalizations I'd like to see are: 1) accounting for what proportion of USPS labor costs are caused by its legal mandate to deliver mail to remote areas, which we could approximate by "any area not served by either UPS or FedEx"; and 2) breaking out by delivery mode, for example overnight-air deliveries will have a lower % of money spent on labor costs, not because the labor is cheaper, but because the non-labor costs are higher.
This is correct. One of the reasons that FedEx and UPS have lower costs is that they've been able to turn over many unprofitable "last mile" deliveries to the USPS. In many cases though, this has been mutually beneficial. FedEx and UPS are among the largest USPS customers.
Personally, I have no problem with the US government subsidizing the delivery of the mail to the tune of $5-10 billion per year. The reduction in friction of resulting commerce is easily worth an order of magnitude more. Merely the societal benefit of an utterly reliable and ubiquitous communication system (even if somewhat redundant for certain purposes) has significant value.
The only thing that is causing the problem is the federal government has demanded the USPS pay vast riches into a special tax on them alone which the government is calling a "trust fund" for "future pension obligations". This is just a ransacking of the postal service's operating income by the feds. There is no trust fund, the money is not saved anywhere. It goes into the Treasury and is spent by the federal government the same year it is received. 100% of the postal service's financial problems are because of this plunder.
9 comments
[ 2.4 ms ] story [ 16.7 ms ] threadYou can't simply compare the USPS with FedEx or UPS. Neither of the latter provide regular deliveries. How much would it cost FedEx to have a large enough workforce to visit a significant fraction of the homes in the US every single workday? For that matter, doesn't UPS and/or FedEx have an agreement where UPS does the final delivery of some of the packages, precisely because USPS has most people?
Without that comparison, that comment comes across as a gratuitous slam against unions.
Basically, there are three ways you can provide universal service:
1) Split the country up into regions, and reverse auction contracts to provide service; contracts require mail interchange with other contractors. Not common in the postal sector, but widely used elsewhere.
2) Designate one entity as the universal service provider. Could be state owned (as in NZ) or floated on the stock exchange (as in Germany). Since providing universal service is expensive, the government provides a subsidy to cover the cost. Accounts are reviewed periodically to ensure the subsidy is in-line with costs, and that value is being obtained for the money.
3) Designate one entity as the universal service provider. Don't directly subsidize them, but instead grant them monopolies on random services which you fondly hope will provide revenue streams broadly similar to what universal service actually costs.
Method 3 has a few disadvantages:. It's unfair, it's expensive, it's opaque, and it doesn't actually work. For example, at some point, the monopoly revenue will be too high. With nothing else to do with the cash, it'll get spent on lavish infrastructure, marble floors, and gold-plated pensions. Later, changing market conditions means the monopoly revenue falls, and the postal service goes bankrupt. Insanity.
Personally, I have no problem with the US government subsidizing the delivery of the mail to the tune of $5-10 billion per year. The reduction in friction of resulting commerce is easily worth an order of magnitude more. Merely the societal benefit of an utterly reliable and ubiquitous communication system (even if somewhat redundant for certain purposes) has significant value.