Industry Associations: USPS – Spendthrift Monopolist

06/05/2017

In a joint statement, three Industry Associations, Alliance of Nonprofit Mailers, The Association of Magazine Media (MPA), and The Association for Postal Commerce (PostCom) call the labor deal with the National Association of Letter Carriers a “spendthrift monopolist”.

The statement calls out that their expert witness in the Postal Regulatory Commissions – PRC ten year review showed that postal workers are paid nearly twice what is paid in the private sector for comparable work.

The associations urge the PRC to keep the price cap unchanged.

For more on the agreement, see Fairrington’s post USPS and NALC Reach Tentative Contract Agreement.

The joint statement goes on to outline the agreement and their views:

“The agreement offers current career employees three general pay increases, including one that is retroactive, totaling 4.7% over the life of the contract.  These increases are on top of seven cost-of-living (“COLA”) increases (two also paid retroactively).  Instead of continuing a shift to lower-cost employees, the agreement converts many City Carrier Assistants (“CCAs”) to career status and preserves existing narrow limits on the total number of CCAs that the Postal Service may employ. The contract also continues existing no-layoff provisions and a prohibition against contracting out city carrier work.

The NALC deal is only one of a recent series of collective bargaining agreements that widen the postal employee compensation premium rather than narrowing it. A negotiated – and generous – collective bargaining agreement with the National Rural Letter Carriers Association in early 2016 led an arbitration panel to award similar terms to the American Postal Workers Union. The panel did this even though, by the neutral arbitrator’s own admission, “the package of economic benefits received by bargaining unit employees—retirement benefits, retiree health care, paid leave, low employee health care contributions, and a no-layoff provision—are superior to those typically available to private sector employees.”

We have no argument with the nation’s postal workers.  It is commendable that USPS provides stable, middle-class employment for a large number of employees, but substantially over-compensating them, and paying for this with above-inflation rate increases for mailers, is inappropriate and jeopardizes the whole enterprise. There are proven ways to rein in excess labor costs without disrupting the lives of existing employees: (1) restraining the growth of their compensation; and (2) compensating new employees comparably to the private sector. Even a measured adoption of these reforms could save the Postal Service billions of dollars a year.

The Postal Service’s lack of fiscal restraint would be unfortunate even if mailers enjoyed effective competitive alternatives to the USPS.  But most don’t. The USPS has a legal monopoly over delivering letter mail, exclusive use by law of every mail recipient’s mailbox, and market dominance over many mail products.

Until now, the CPI cap on rate increases has given captive mailers some protection from out-of-control postal costs.  But in the ten-year review, the USPS is asking the Commission to gut the CPI cap. “Trust us,” the USPS says. It has “inherent incentives” to “aggressively pursue efficiency gains,” even without strict controls on how much the USPS can charge captive mailers.

The NALC contract confirms that the Postal Service cannot be trusted to make the tough decisions needed to control its own costs. The Commission faces a clear choice.  It can maintain the CPI cap, which will protect captive mailers and encourage the USPS to resume proper cost control efforts and otherwise act like a real business. Real businesses, when faced with declining demand, lower, not raise prices and operating costs.  If the Commission loosens the cap, it enables the Postal Service to double down on its binge spending. At the end of that road, however, lies not financial stability but ruin”.