Steve Hutkins authors Save the Post Office on issues affecting the Post Office.
First, a disclaimer. The following analysis is largely speculative. It’s not based on insider information. The evidence comes from news articles, government reports, legal filings, and a few leaked internal USPS documents that were published on postal news sites. The analysis could be totally wrong.
The hypothesis is simply this: The Postal Service has embarked on a plan to reduce labor costs by about 7 percent. That represents approximately 67 million workhours, or the equivalent of about 33,000 jobs.
The analysis will also suggest that all the things we saw earlier this summer — the removal of blue collection boxes, the decommissioning of over 700 sorting machines, trucks leaving plants partially loaded or empty, letter carriers heading out on their routes with mail left behind, a presentation saying that overtime was being eliminated, post offices closing for lunch or earlier in the day, rumors of post offices closing completely — were not, as the Postal Service claimed, isolated incidents, business as usual, or the result of miscommunication between headquarters and local managers.
Rather, they were part of a comprehensive plan to eliminate tens of millions of workhours and downsize the Postal Service in significant ways.
The Seven-Percent Solution
According to its 10-K financial report, in FY 2019 the Postal Service experienced a total “controllable” loss of $3.4 billion. That doesn’t include another $5 billion or so in losses related to pension and retiree health care costs that the Postal Service didn’t pay.
To balance the books, the Postal Service can increase revenues, raise prices or cut costs. Revenue increases are difficult, since First Class letter volumes are falling and Congress has limited what new forms of business the Postal Service can expand into.
The Postal Service has already introduced a temporary rate increase on commercial parcels through the holidays, and it will raise rates again next year. But price increases on letters and flats are limited by law and increases on parcels are constrained by competition in the marketplace. In the past, increasing rates has basically helped the Postal Service keep up with rising costs but done little to reduce the losses.
That leaves cutting costs as the only way to make significant inroads. Given that nearly 80 percent of the Postal Service’s expenses are related to labor, cost cutting means one thing, reducing workhours.
In FY 2019, compensation and benefits costs totaled $47.5 billion. To offset a loss of $3.4 billion, the Postal Service would need to reduce these costs by about 7 percent.
Back in July, District Managers and Plant Managers around the country began sharing Standup Talks in which they outlined the downsizing plan to employees. The talks identify exactly how many workhours need to be eliminated in each district in the three areas of postal operations: mail processing, delivery, and post offices.
The talks indicate that there is a comprehensive plan to reduce workhours across the board by about 7 percent. Even though it hasn’t been stated outright, that goal appears to be a key element of the Postmaster General’s transformative plan for the Postal Service.