The U.S. Postal Service may be living high on the hog, but it is still begging at the trough.
According to a recent filing with the Postal Regulatory Commission, the USPS’ total revenue for January 2023 and the fiscal year are up from last year, despite declining first-class mail volume and ebbing parcel demand. The service’s coffers are filled thanks to a dizzying series of price hikes, including a 10 percent increase in first-class Forever stamps since July 2022. That’s on top of $57 billion in loan forgiveness, $13 billion granted to the agency by Congress since 2020, $3 billion in annual tax preferences, and a recent “note purchase agreement” with the Treasury for $3 billion yearly in subsidized loans.
Despite increasing revenue, America’s mail carrier has lost more than $2 billion since the start of the 2023 fiscal year and expects to shed at least an additional $2 billion by the end of the fiscal year. Unless the struggling agency puts a dent in surging costs, taxpayers and consumers will continue to foot the bill for failed postal policies.
A leading cause of the agency’s prolific spending is the continual increase in labor costs, which comprise about three-quarters of total USPS expenses. In turn, labor costs largely depend on the number of delivery points, which have increased markedly in recent years. According to a 2019 report by the inspector general, “Carrier costs grew from 43 percent to 48 percent of compensation and benefit costs (over a 10-year period). This is because the steady growth of delivery points makes cutting carrier costs more challenging relative to other postal operations.”
And, while overall delivery points increased by 6 percent from 2009 to 2018, rural routes surged by 14 percent.
It’s little wonder that inflation-adjusted rural carrier compensation and benefits increased by 8 percent over 10 years. Meanwhile, city carrier costs have slowly declined (albeit not quickly enough to keep pace with declining first-class mail volumes).
One reason for this dramatic divergence is the consolidation of delivery points in more densely populated areas. The USPS has made clear that, for newly built developments, “centralized delivery is the preferred mode of delivery. … Curbside, sidewalk delivery, and door modes are generally not available for new delivery points, with very rare exceptions, as determined by the Postal Service in its sole discretion, on a case-by-case basis.”
This is often accomplished via cluster mailboxes, which have popped up outside dense communities nationwide. But, this model doesn’t work well for rural Americans, who would likely have to drive miles to get to any centralized delivery point. As a result, carriers working in rural and “ruralburban” areas usually must make do with old-fashioned mailboxes and the high associated delivery costs.
Fortunately, there are ways to centralize rural delivery without making life too difficult for non-city dwellers. For example, some mailbox units on the market offer two mailboxes in one, and others, four mailboxes in one. This small step toward centralization could yield significant savings for America’s mail carriers.
Assuming that the agency saves $100 to $150 yearly for each address it “centralizes” (likely a low estimate), modestly centralizing a small part of the 50 million rural delivery points in the United States could yield billions of dollars in savings. Even if the USPS offered to defray the cost of mailbox conversions and shared a portion of the savings with households, they would still likely make significant sums over the long term.
The savings are not limited to rural areas. According to the inspector general, nearly 70 percent of all delivery points in the United States are not centralized. A significant conversion effort could go a long way toward reversing net losses, but this won’t be possible without a sustained effort to get communities on board and incentivize adoption.
By ushering in a delivery revolution, the USPS can finally trim its fat and get back into the black.
