Email Stomping Out Snail Mail as U.S. Postal Service Teeters on Bankruptcy
Email Stomping Out Snail Mail as U.S. Postal Service Teeters on Bankruptcy
Posted 09/07/2011 at 7:40am
| by Paul Lilly
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Think about the last time you mailed a physical letter. It's probably been awhile, unless you occasionally drop a line to your grandmother who refuses to purchase a PC. Now think back to the last time you fired off an email. Compare the frequency of the two and, in most cases, you'll find an enormous discrepancy. Turns out the shift towards digital communication is finally taking a toll on the United States Postal Service.
In an interview with The New York Times, Patrick R. Donahoe, the postmaster general, described the situation as "extremely serious." Donahoe said the U.S. Postal Service is on the brink of bankruptcy and will default if Congress doesn't step in and do something drastic.
The Postal Service doesn't have a big cash reserve, and according to NYT, it doesn't have the funds to make a $5.5 billion payment due this month. If that happens, the service could shut its operations during the winter months.
"The situation is dire," said Thomas R. Carper, chairman of the Senate subcommittee that oversees the postal service. "If we do nothing, if we don’t react in a smart, appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak, uneven economic recovery."
Some 167 billion pieces of mail will flow through the U.S. Postal Service this year, which sounds like a big number, but is down 22 percent from five years ago, NYT says. Email, online bill payments, and the Internet in general is suffocating snail mail. In the past four years, the U.S. Postal Service has recorded $20 billion in losses, in part because it's legally required to provide weekly deliveries to 150 million homes and addresses.
So does this mean we can look forward to an email tax, maybe a penny per message sent? Not likely. Instead, Mr. Donahoe wants to cut costs by closing around 300 sorting facilities (bringing the total down to 200) and reducing the workforce from 630,000 to 220,000 by 2015.
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Eagle70ss
September 07, 2011 at 4:40pm
Labor represents 80 percent of USPS expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors.
Decades of promises to Unions including no-layoff clauses are pushing their costs sky high. USPS has lost its ability to adjust to a reducing market for physical mail. The Postal Worker's Union has been unwilling to give up those "cadillac" perks.
btdog
September 07, 2011 at 7:10pm
Boy you're not kidding. I read an article about 2 months ago that said the union just signed a 3 year contract that guaranteed 10 pay increases - 3 merit increases and 7 cost of living adjustments (COLAs). Over the next THREE years!
copterguy
September 07, 2011 at 4:16pm
This doesnt seem to be a problem with UPS,FEDEX, etc.... oh that's right, they are not run by the Government.....privatize it or let it sink. Socialists please pull it out and take note.
jaawn
September 08, 2011 at 1:16am
Uh... the USPS is an independent agency and hasn't received tax-payer money since 1980. So shut up about your "socialism" whining.
I think the other commenters are correct, the issue is that the union is being completely unreasonable. They are taking full advantage of how the U.S. Mail is still depended on for stuff and a strike would be really, really bad for the whole country.
I am really annoyed to hear that this union is potentially putting the USPS out of business. It is ridiculous. There HAS to be lay-offs. It sucks, but it has to happen. If you are "selling" 20% less of your product from one year to the next, paying the SAME number of workers MORE money is not going to work...it just won't.
US_Ranger
September 07, 2011 at 10:43am
On the news yesterday they were talking about this and how the union contracts do not allow layoffs in any large amount. Instead of being allowed to restructure, like any business would do that is facing bankruptcy, they have to follow the rules set in place by the union.
In other words, don't lay anyone off and instead get another stimulus check from taxpayers that pay everyone's salary. What a great concept for a business. Why is there incentive to change anything if there is no penalty for failure and no reason to restructure?
TerribleToaster
September 07, 2011 at 10:52am
Despite being a official government agency, they aren't guaranteed public funding as they are suppose to be self supporting. If they can't get over this and the government doesn't subsidize then USPS will be broken up and mail will become a open market. This would solve the problems here, but it will raise prices for delivery drastically. You might be paying $12 to send that postcard to Grandma.
Zoandar
September 07, 2011 at 9:40am
I know one way they could reduce delivery costs. Allow rural delivery residents to opt out of 'junk mail'. But they refuse when you ask them. Why? They say they are being paid to deliver the junk mail. So.....raise the postal rates on junk mail. No more 'bulk rates' and such for all that crap we don't want anyway. Make each piece of junk mail cost the same as a first class letter. That would have to help.
jaawn
September 08, 2011 at 1:19am
this is a GREAT idea. Credit card ads, things addressed to "current resident", and the like should ALL see a major postage rate increase. That should generate a TON of income for them.
someone87
September 07, 2011 at 9:13am
The USPS should be a self sustaining entety in the US government, if they can't survive on their own, without taking tax-payer money to stay in business, they should close up shop, or make whatever cuts nessessary to make ends meet.
compro01
September 12, 2011 at 7:15am
Tell Congress that. USPS can't take a piss without their approval.
jaawn
September 08, 2011 at 1:22am
they can't make the cuts necessary due to the postal workers union, as others have said. That leaves government money as the only option to keep the mail going.
So they HAVE to. The economy would take a huge hit if the mail just stopped. A TON of time and money would have to be spent on businesses changing everything to email only or sending mail with UPS/FEDEX/DHL.
nsvander
September 07, 2011 at 9:07am
Why do they have to deliver every day? I mean seriously, I think that I get one or two days with actuall mail, all the other days are just junk mail, fliers, and inserts. I wonder how much they could save if they stopped delivering on Saturday, or went to every other day mail delivery for the private sector (excluding businesses).
DJSPIN80
September 07, 2011 at 7:56am
Not to sound cold, but USPS has had time to watch technology shift and grow. Instead of innovating, they decided to stagnate and allow rising operating costs to eat into their revenue. UPS, DHL, FedEx...all these guys are innovating, finding ways to make logistics smarter and simple for the mere mortal. USPS? Not really. If they go bankrupt, it sucks for the people who work there, but it's the consequence of not managing your resources well.
sammy_sam
September 07, 2011 at 9:36am
Innovating & ironic that Fed-ex (smartpost) and UPS (mail innovations) have moved a portion of their small package business to USPS.
TerribleToaster
September 07, 2011 at 8:30am
You seem to be mixing express mail up with regular mail. They are very different things, and while USPS does deal in express mail, regular mail is what is killing them; mostly because USPS is a legal monopoly and the only other people (besides the homeowner) that is allowed to access a mailbox.
What really is hurting USPS is that when I go buy a stamp, it costs me the same amount to send a letter to Alaska as it does to send it across the street. Delivery costs are extremely different, but USPS is required by law to charge you the same price regardless of the distance. This use to be non issue because of economies of scale. USPS handled so many mail deliveries that the marginal cost for each piece of mail moved, regardless of the distance traveled, was negligible. But now, this is no longer the case, there simply isn't enough mail going out. To try and counter it they are scaling back in the hopes of bringing long run costs down (which is probably the best solution). But the situation is pretty dire, there is no guarantee that this will stop them from hemorrhaging money.
Blaze589
September 07, 2011 at 9:32am
Actually CNN covered this story a while ago. That doesn't seem to be the problem as you've stated. The problem is the USPS' works heath benefits law as of 2006.
http://news.blogs.cnn.com/2011/08/18/is-benefits-law-dragging-down-the-postal-service/?
In the future USPS plans to only send mail 3 times a week to cut costs.
TerribleToaster
September 07, 2011 at 9:48am
I always considered paying the workers (and by extension their benefits) as a short run cost since your work force can fluctuate drastically in a small amount of time hence part of the marginal cost of delivery.
But regardless, what I was trying to point out is that the revenue from non-urgent mail can't increase as they can't change their pricing per the USPS's USO. They just can't increase the revenue because they can't increase price like a company normally would in such a situation. So when the amount of mail declines, their revenue decreases as well, meanwhile their costs (both in the short and long run) are on the rise. That's why their only option is cutbacks.
TerribleToaster
September 07, 2011 at 7:55am
I use snail mail alot. But only as a way to back up emails and faxes I have already sent.
Brad Chacos
September 07, 2011 at 7:50am
Just about the only thing I use snail-mail for is mailing out the rent check.
ABouman
September 07, 2011 at 9:55am
I do, in fact, use it to send letters to my grandmother. (and for Netflix).
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