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Friday, October 8, 2010

USPS: We'll make it up on volume...

A lot of print-based material is mailed - particularly personalized offers of various sorts.

Recently the USPS applied for a rate increase - but they were turned down.  (First class mail going from $0.44 to $0.46).

I'm of two minds on this issue.  On the one hand the USPS does have some products that I like - some of the delivery confirmation stuff is nice and reasonably priced.  And for people like my elderly mother it gets the daily job of mailing taken care of.  Since she is not a computer user the USPS works just fine for her.

On the down side, if you read the article, the USPS is suffering from the same recession issues you see in the rest of the "government" world - too much infrastructure (people, benefits, retirees, plants, equipment) serving a declining market with antiquated technology.

They've had a good run - more than 200 years - doing what they do.  But times have changed.  When I was a kid ZIP codes came into use - probably the first publicly visible change to the mailing process ever - but change has hit them at an ever increasing rate since then.  But the problems, as you'll see below, were a long time in coming.

Unfortunately, like so many other public/government systems they have a very large pension/retiree/health care burden to carry - along with corresponding unrealistic expectations of employees.

I recall about 20 years ago when I had first started my own business.  One of the biggest expenses was health insurance - it probably cost around $600 a month to cover my family at that time.  In those days I used to get a laundry basket (speaking of antiquated things - are we the only ones that still use them?) full of work-related junk mail a week - including the phone-book-like Computer Shopper, tons of Mac and graphic arts related magazines, and so on.

One day I was sorting through the junk when I came upon a postcard.  The postcard offered me, as a postal employee (which I was not so I don't know why I even got it in the first place) my family health care package for $9.99 a week.

That's right - $9.99 US dollars as week - or about $520 a year - versus the $7,200 I was paying.

Now, as a small business owner, this really stuck in my mind.  It reminded me of the old Yiddish sales saying "we lose money on every sale but we make it up on volume".

Well, here I am twenty years later (which is hard enough to believe) and I am still in business and not (completely) losing my ass.  The USPS, on the other hand, is (from the above link):

"The Postal Service ends the current fiscal year with approximately $2 billion cash and available credit, meeting all our end-of-year financial obligations, including a $5.5 billion payment to the Retiree Health Benefit Fund as required by law.

As we have stated repeatedly throughout the year, the Postal Service sought a deferral of this $5.5 billion payment to minimize the risk of defaulting on our financial obligations in Fiscal Year 2011. Unfortunately, no legislative action has been taken at this time."

So, looks like I will get to fund these guys starting in 2011.

The most interesting thing about all of this is that if I created this sort of liability for myself I would be stuck paying for it.  When the USPS does it - no one is at fault and I get stuck paying for it even though I didn't screw up.

By my figuring if they just had let go of the 100K employees 20 years ago they would be $13 billion US ahead on health care costs alone - not to mention pension, salary and benefits.

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