Posted on 01/14/2019 9:41:10 AM PST by Kaslin
Later this month, the U.S. Postal Service will enact the biggest price hike in nominal dollars in its history.
The price of sending a 1-ounce letter will increase from 50 cents to 55 cents, effective Jan. 27, after several price increases were approved by the Postal Regulatory Commission.
The price hikes are meant to head off the financial disaster to which the Postal Service seems irreversibly headed. The post office lost $3.9 billion in 2018 and is now more than $120 billion in the hole.
The question is: Will it do any good? Will the price hike move the Postal Service any closer to black ink on its balance sheet?
One expert who follows the industry has his doubts, and he thinks the Postal Service’s increased reliance on package delivery – it delivered 6.8 percent more packages and earned 10.1 percent more in 2018 than the previous year – is only making things worse.
David Vernon, an analyst at Bernstein Research who tracks the industry, said the Postal Service’s deal with Amazon was made with an eye toward driving up volume rather than turning a profit.
Vernon estimated in 2015 Amazon was paying $2 per package to ship with the Postal Service and says even now it is paying only in the $2.15-$2.25 range. Meanwhile, the cheapest the Postal Service can deliver the packages – using independent contractors known as City Carrier Assistants, who work for $20 per hour and devote their entire 8-hour workday to package delivery – is about $3.75, Vernon said.
Those costs figure only to get worse, he said, as the job market tightens and labor, which is 80 percent of delivery costs, becomes more expensive.
The Postal Service says this can’t be true because it is illegal for it to lose money on these deals. A fact sheet put out by the Package Coalition, an Amazon-funded group that opposes President Trump’s calls for reworking this and other deals that are hurting the Postal Service’s bottom line, takes a myth v. fact format to attempt to explain this.
To the “myth” that the Postal Service loses money on its package delivery business, the fact sheet says:
“The Postal Service is required by law to ensure that the prices for its package delivery services cover their costs. The Postal Service’s independent postal regulator, the Postal Regulatory Commission, ensures that this requirement is met.”
To the “myth” that deals with certain shippers set prices below the costs of delivery, it says, “These arrangements with high-volume shippers actually bring profitable package volume to the postal system.”
To the “myth” that the Postal Service was losing $1.46 on every package it delivered for Amazon – a widely reported calculation developed by Vernon and others – it stated: “The legal requirement that prices for Postal Services package delivery services must cover their costs means that this simply can’t be true.”
It’s true, all right. And the American people are going to pay for it – or at least attempt to – with the price hikes later this month.
But if packages aren’t the problem, then the Postal Service needs to explain why deficits gone up as the package business has increased. Package volume has increased from 5.1 billion pieces in 2016 to 5.8 billion in 2017 to 6.2 billion in 2018, and revenue from package shipping has climbed from $17.4 billion in 2016 to $19.6 billion in 2017 to $21.5 billion in 2018.
At the same time, the Postal Service has gone from losing $800 million in 2016 to $2.7 billion in 2017 and nearly $4 billion in 2018.
Vernon suggests a significant rethink of the mission, including reducing mail delivery from six to five or even four days per week. “Charge more and do less,” he said. “That’s with any failing business. Don’t price packages at marginal costs. In a market that is not competitive, price to the customer’s next-best option.”
For instance, Vernon told the Washington Post in April the $2 per-package fee was not just $1.46 short of what it costs to deliver the service but only about half what Amazon would have to pay United Parcel Service or Fed-Ex to deliver its packages.
There is no reason it can’t charge Amazon more than it does, particularly when the option is asking other postal customers – and potentially taxpayers if the situation doesn’t improve – to underwrite the cost of its deal with Amazon.
Until it can figure this out, perhaps putting all its eggs in the package delivery business is not the best way to balance the books.
I don’t see a big deal in having just four-days a week delivery, and having the post office open to mail out or pick up packages on the 5th day (like Saturdays). Most folks would be agreeable to that.
“Don’t Expect Rate Hikes To Solve the Postal Service’s Fiscal Problems”
*****************************
NEAR IMPOSSIBLE! AND MOST UNLIKELY!!!!!!!!!!!!!!!!!
;(
*********
GyG@PlanetWTF?
**********************************************
USPS is a business plan past its prime. And retaining its cost-heavy structure is coming back to haunt it.
****sending a 1-ounce letter will increase from 50 cents to 55 cents, ***
I still remember the 3 cent stamps used for so many decades.
But then, in 1860, a letter from the East to California cost $5.00 with the Pony Express.
“The legal requirement that prices for Postal Services package delivery services must cover their costs means that this simply can’t be true.”
In America, its impossible to reform, reduce or consolidate anything connected with government, because even the craziest inefficiencies are held up by massive government spending, and massive government DEBT.
It can’t last.
“sending a 1-ounce letter will increase from 50 cents to 55 cents”
—
Glad I stockpiled some “Forever” stamps a few years back.
If it weren’t a constitutional requirement (Article I, section 8), USPS would be out of business; the model is not sustainable given present telecommunications technology.
Is this another “Hate USPS” thread?
It’s a voluntary expenditure. There is no law which requires one to have a mail box, or mail anything.
If you think you’re not getting enough value for the price just STOP.
Make bulk spam mail pay more! It is 90% of the mail we receive, and also the cheapest. Double their rate immediately and while it might eliminate some (a good thing!), it would also generate a lot of money.
“Quick Facts: Postal Service Workers
2017 Median Pay: $57,260 per year
$27.53 per hour
Typical Entry-Level Education: High school diploma or equivalent
Work Experience in a Related Occupation: None
On-the-job Training: Short-term on-the-job training
Number of Jobs, 2016 502,400
Job Outlook, 2016-26 -13% (Decline)
Employment Change, 2016-26 -65,300”
And only a 13% reduction in force over the next 10 years? Just wonder what all of our ex-military are going to do for their “next job” after they put in their twenty?
I’m down to mailing one bill a month. The power co. wants to charge me $4.50/mo. to send a hard copy of my bill and allow me to pay online. So I get a copy and mail back. All electronic is free. I want a copy. And no, I’m not gonna print it.
All others I pay online and hand deliver one that’s convenient.
My experience is USPS is cheaper to send packages though.
“Make bulk spam mail pay more! It is 90% of the mail we receive, and also the cheapest. Double their rate immediately and while it might eliminate some (a good thing!), it would also generate a lot of money.”
Yeah, you have to wonder why the “tree huggers” who are going ape $hit over paper bags and drinking straws, are not on bulk mail like white on rice?
The Postal Service needs to go the way of the wire-line phone! We’re lucky that the day the mail comes with the weekly bulk mail rags, is the same day as our trash pickup. So I can walk from the mailbox to the curbside recycle bin and deposit all of it without having to carry it into the house. (except on days when we decide to have a fire in our wood-burning stove, then we save it to start the fire)
Let UPS, FedEx and others compete in first class mail delivery and watch the price decrease.
JoMa
I can agree with that. My Mom gets literally 5 lbs. of junk mail some weeks - mostly catalogs of overpriced crap she can’t afford, and mailings from every “charitable” organization in the country, I think...
Also, whatever happened with Trump killing (I thought) the program that allows shippers in China, etc., to ship stuff direct to US customers for almost nothing? I mean, it is nice to be able to buy a quite good, actually, single AAA LED mini-flashlight w/ zoom for $2 on eBay plus “free” shipping, but, c’mon! US mailers and shippers subsidize that!
The problem is pensions.
This really is the racket. The pension rules are very generous for the postal union, and I assume many other federal workers, too. That’s what we’re spending money on. It’s not package delivery, it’s double pensioners who retire from all work at age 60 and live another 30 years.
Thanks for the heads up, BTW. Time to stock up on “forever” stamps. And maybe I should get a couple packages sent off B4 the hike.
Packages — other than what will go in flat rate boxes, or by small 1st class (under 13 oz.) I find UPS to still usually be somehow cheaper. (I have accounts with all: FedEx, USPS, and UPS).
I wonder if my local USPS office has any nice Forever stamps in stock...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.