Subsidies ahead for postal service


July 8, 2010 - 12:00 AM

The U.S. Postal Service announced Tuesday that it would ask for a two-cent increase in the cost of a first class stamp, from 44 cents to 46 cents, as of the first of the year, along with increases in other postal charges averaging 5.4 percent.
Big mail users, such as those who merchandise through catalogs, and firms with huge numbers of customers, such as telephone and cable companies, are organizing in opposition.
The postal service will win this contest. It is running $7 billion in the red annually. The increase sought will bring in an estimated $2.3 billion — and will fall short of that if more and more communication shifts from costly mail to the free (kinda) Internet. Without more income, the service will run out of money and, in an Adam Smith world*, shut up shop.
Still, the “Affordable Mail Alliance” has a point when it demands that the postal service rein in its labor and other operational costs.
The postal union may be the nation’s largest and most powerful. It has successfully kept postal wages and benefits above the national average for similar work in most communities. And be-cause a very high percentage of its total costs are labor costs, that’s where the opportunity for significant cost reduction lies.
The service could rein in those costs by moving away from setting wages and benefits on a national basis to using regional, even local, patterns. If a worker who must live in a high-cost metropolitan area is paid the same as one who works in a low-cost rural post office, then one of the two is substantially overpaid.
Now, this anomoly has existed for as long as postal wages have been set nationwide. Was Ben Franklin Postmaster General then? It would be the fairest way to cut postal costs.
But it won’t happen. There are too many postal workers with too many relatives in every community, in every congressional district. So forget it.
What will happen is that Congress will allow the U.S. Postal Service to raise rates, reduce services still further and will close the remaining bud-get gap with federal subsidies.
The only alternatives are to shut down the service, which is un-thinkable, or call on the Tooth Fairy — and the Tooth Fairy, dear reader, belongs to the Postal Workers Union, too.

— Emerson Lynn, jr.

* This is not an Adam Smith world.

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