Postal Service Turnaround Plan Is ‘Far From Reality’ as High Labor Costs Sink America’s Mail Delivery Service

The perennially plagued U.S. Postal Service is attributing its sinking budget outlook to high labor costs, warning that the mail service faces a dismal future due to crushing obligations, particularly for salaries, benefits, and retirement plans.The commission that regulates America’s quasi-public mail delivery service announced Thursday that its cumulative operating losses over the past decade total $20 billion. Nearly 70 percent of the expenses it has incurred are due to labor. While revenue has been increasing — up 15 percent in the past 10 years — it has not kept up with the 20 percent increase in expenses over the same period. “The postal service is in a serious financial crisis, operating under an unsustainable model,” the Postal Regulatory Commission’s vice chairman, Robert Taub, told a House oversight subcommittee on Tuesday.The volume of mail has seen a steady decline for the last 20 years, Mr. Taub said. USPS delivered 109 billion pieces of mail last year, down from 213 billion pieces of mail at its peak in the 2006 budget year.While volume is dropping, employee costs are headed in the opposite direction, Mr. Taub said. Salaries and benefits have grown 26 percent in the past decade, to $61 billion from $48 billion, with average hourly wages rising to $39.93 from $31.65. Retirement costs grew to $9 billion from $7 billion over the same period. The postal service’s retirement system has an approximate $101 billion in unfunded benefits, even after Congress in 2022 eliminated all of the agency’s past-due obligations for approximately $57 billion in missed payments to the Postal Service Retiree Health Benefits Fund.The price of a first-class stamp has been rising steadily to try to catch up. It will reach 82 cents next month. While prices rise, service has deteriorated, with First Class mail deliveries averaging three to five days, down from two to three days.The U.S. Postal Service, whose origin predates the founding of the country, has received financial relief from Congress in recent years but continues to lose ground. The postmaster general, David Steiner, told the subcommittee that a congressionally mandated requirement for six-day mail delivery alone costs an extra $3.4 billion per year. That’s up from $2.2 billion five years ago, attributable to increasing labor costs and declining labor efficiency. Mr. Steiner suggested eliminating Saturday delivery to help stem losses. The agency also wants to extend a pause in funding the retirement system to try to keep the mail service temporarily afloat but that will not be a long-term solution, the vice commissioner warned. If the governors of the postal system use a waiver authorized by the commission, it would free up $2.4 billion this year and $15 billion by 2030. After that, another funding solution would be needed. One reason the retirement system is not able to cover rising payouts is a requirement that funds for benefits be invested in government bonds, which typically underperform more diversified investment options. The postal service has taken a number of short-term measures to try to stem losses, from suspending non-essential travel, pausing discretionary purchases of office supplies, and deferring the use of non-crucial external services and consultants. The postal service published a 10-year turnaround plan in 2021 that the commission says has failed to stem the problem. The Delivering for America plan projected break-even net income by 2023. Instead, the postal service incurred a $6.5 billion net loss that year. “The DFA projections were far from reality,” Mr. Taub told the committee.Mr. Steiner has warned the agency could run out of cash in less than a year, but Mr. Taub said that can be avoided if Congress sets up longer-term solutions.“We as a nation must respond. I do not believe that we can leave it up to the Postal Service to save itself,” Mr. Taub told the committee.

Postal Service Turnaround Plan Is ‘Far From Reality’ as High Labor Costs Sink America’s Mail Delivery Service

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