Ask the President

Question:

In one of their news updates, management claims that labor expenses are the “key drivers of costs.” How much of the costs are for management? Locally we have not lost any management positions, but we have lost several craft positions. I cannot believe that craft employees account for 80 percent of the USPS costs and that management salaries, transportation, equipment, and utilities only add up to 20 percent. I would like to see a breakdown of costs by category, so see where the money actually goes.

Gene, Great Falls (MT) Local 208

President Burrus

Thank you for your inquiry. I addressed this subject in an Update last year, shortly after postage for first-class letters was increased from 39¢ to 41¢.

I noted then that news reports generally seemed to accept the fact that inflation drives all costs, but nonetheless blamed the postage increase on the cost of labor. Virtually all of the articles recited the claim that 80 percent of postal expenses could be attributed to labor costs. Based on this misleading statistic, comparisons were made to private delivery companies, such as Federal Express and the United Parcel Service.

As I wrote last year, the 80 percent figure is deceptive because it includes the salaries and benefits of the Postal Service’s entire management structure, including supervisors, managers, and executives, as well as casuals, Transitional Employees, and other non-career employees who are not represented by the postal unions.

The Postal Service has elected to report labor costs as a single line-item, grouping craft employees who have collective bargaining rights with supervisors, managers, and contract employees. It is this artificial grouping, along with the addition of large payments to fund current and future retiree health benefits that result in the 80-percent figure.

News sources typically report increased postage rates as though they are driven by labor costs that constitute 80 percent of total costs because of negotiated union contracts.  Accurate reporting would reveal that the APWU bargaining unit expenses comprise only 22.8 percent of USPS expenses; city letter carriers comprise just 20.0 percent; and total expenses for employees covered by collective bargaining agreements equal roughly  54.1 percent.   (These percentages do not account for the pre-payment of retiree health benefits for current employees, because the Postal Service does not provide such detail in its published reports.  If the pre-payment of retiree health costs were included, the percentages would rise somewhat, but remain a far cry from the reported 80 percent.)

The published comparisons with FedEx and UPS are also flawed. Both FedEx and UPS own and operate their own fleets of aircraft, while the Postal Service contracts for air transportation. Because of the air fleets, a large segment of FedEx and UPS costs are assigned to the category of equipment, rather than labor.  Removing these transportation and equipment costs from the calculation brings the relative labor percentages much closer.

Increases in postage rates — and postal employees’ wages — have been consistent with increases in the Consumer Price Index (CPI) over the past 35 years. The American Postal Workers Union is proud that we have been successful in securing livable wages and benefits for the workers who operate the most reliable, efficient, and affordable postal service in the world.

Jan. 29, 2008