In the face of a projected $7 billion loss this year, Congress recently passed legislation allowing the U.S. Postal Service to forgo $4 billion in required payments to pre-fund retiree health benefits. This temporary band-aid did nothing to address the Postal Service’s struggling business model, which is weighed-down by excessive labor costs.
The average USPS worker earns $83,000 per year in compensation, which is considerably more than the average U.S. worker. And the Government Accountability Office recently noted that "compensation and benefits constitute close to 80 percent of USPS's costs — a percentage that has remained similar over the years despite major advances in technology and the automation of postal operations."
A particularly egregious example of the union’s drag on the Postal Service’s finances recently appeared in the Federal Times. With mail volume dropping due to the recession and the Internet rendering regular mail increasingly moot, the Postal Service is being forced to pay thousands of workers to literally do nothing:
The U.S. Postal Service, struggling with a massive deficit caused by plummeting mail volume, spends more than a million dollars each week to pay thousands of employees to sit in empty rooms and do nothing. It’s a practice called “standby time,” and it has existed for years — but postal employees say it was rarely used until this year. Now, postal officials say, the agency is averaging about 45,000 hours of standby time every week — the equivalent of having 1,125 full-time employees sitting idle, at a cost of more than $50 million per year.
And what is to blame for this absurd situation?
But a thicket of union rules prevents managers from laying off excess employees; a recent agreement with the unions, in fact, temporarily prevents the Postal Service from even reassigning them to other facilities that could use them. So they sit — some for a few hours, others for entire shifts. Postal union officials estimate some 15,000 employees have spent time on standby this year.
As Chris Edwards and I recently argued, it’s time for the Postal Service’s monopoly on the mail to be removed. In addition, Congress should begin laying the foundation for the Postal Service’s eventual privatization.
Please see Downsizing Government’s essay on privatization for more on that issue. And for an excellent look at the problem with public sector unionism, please see Cato’s new policy analysis, “Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government.”