When a disruptive technology can take half of a company’s business by offering faster, cheaper service, that company can either quit or redefine the business it is in. The U.S. Postal Service has chosen the second option — for now, anyway — but its most recent proposed overhaul merely redefines its business as a worse version of its current model.
From a peak of 98 million pieces in 2006, first-class mail volume has fallen to 78 million now and is expected to drop below 50 million by 2020. It’s obvious why: Email is quick, holds huge amounts of text and images and is considerably less expensive than paper mail. Paying bills online is now the norm. The Internet is not the answer every time, but online tools generally perform services previously done by USPS better. Believe us, the newspaper industry empathizes.
The latest response from USPS has been to propose cuts worth $3 billion, closing 252 of 461 mail-processing centers and slowing the delivery of first-class mail and, perhaps, failing to meet its universal-service requirement. The result will be worse service for countless home and business customers and a greater reliance on alternative delivery systems. Still worse, the $3 billion is only a small part of its expected $14.1 billion operating loss for 2012 or the $20 billion the Postal Service estimates it will need to save by 2015 to become profitable.
Earlier this year, the Postal Service agreed to a contract with the 250,000-member American Postal Workers Union that extends a no-layoff provision and provides raises and cost-of-living adjustments. USPS can’t afford that contract. Nor can it afford its bricks and mortar spread across the country. Nor can it afford an outlook that clings to the idea that when the economy rebounds, so too will Americans rediscover the virtues of paper and waiting for the delivery of information.
Postmaster General Patrick Donahoe seems to know this, but his approach, particularly in signing that contract, is not helpful. He could be helped, however, by a Senate bill that does have the beginning of an important, long-term change in direction for the Postal Service. The bill’s primary benefit is that it deals with reality.
That reality starts with the painful but unavoidable: The Postal Service can no longer afford its 571,000-member work force (with an average annual employee cost of $80,000) or its layers of administration given the value of its service. The 21st Century Postal Service Act, sponsored by Sens. Susan Collins, Joe Lieberman, I-Conn., Scott Brown, R-Mass., and Tom Carper, D-Del., reduces the postal work force by nearly 20 percent through buyouts paid for through funds — not tax dollars — the Postal Service overpaid to the federal retirement system.
The bill also reduces infrastructure by encouraging post offices to co-locate at local businesses — pharmacies, convenience stores, service stations — instead of simply closing post offices. And it cuts the amount the Postal Service must pay each year to fund a health benefit. In all, the bill closes the short-term budget gap.
It seems likely given the Postal Service’s previous response to crisis — let’s cut service on Saturday! — that Congress might also provide stronger incentives to persuade it to find new roles in a digital future. That has been happening in Europe for a decade, and while no one knows what value a digital Postal Service might add, it’s fairly clear that a successful future does not include slower delivery on fewer days with a higher percentage of junk mail. Yet that’s where USPS is headed without this substantial reform.
The public has voted with its keyboards on how it increasingly wants to communicate. The government’s interest in this case is not to keep the Postal Service kicking in perpetuity, but to maintain or improve the efficient delivery of information and goods. The Senate bill begins to align the Postal Service with those values.