Why the Postal Service's 'Discounts' Are Flawed

Burrus Update #14-02, July 16, 2002

Over the past six months I have been writing and speaking about the danger of postal discounts. The audience for these messages has been the APWU membership and the general public, but more needs to be done to ensure they understand how excessive discounts to major mailers and direct mail firms affect the future solvency of the United States Postal Service and their future as postal employees.

In a capitalist society, discounts are a common tool of the business community to increase sales and attract customers. A reduction in price can result in greater sales volume and it is often better to sell more of a product at a reduced profit per piece than to sell fewer items at a greater profit per piece.This practice has become an integral part of our capitalist culture.

Management's attempt to increase revenue through the use of discounts is flawed, however, because mail volume is affected more by fluctuations in the economy than the cost of postage.The record over the years clearly shows that offering discounts in a stagnant economy does not increase mail volume.In addition, discounts reduce the volume of non-discounted mail: when mailers are given the opportunity to choose between non-discounted postage and discounted postage, they choose the lower rate.This results in reduced postal revenue per piece, without an increase in volume.

Discounted first-class mail in the U.S. costs as little as 27.5 cents, compared with much higher postage rates in the rest of the world. First-class mail costs 52 cents in Germany, 42 cents in France, and 67 cents in Japan, yet the delivery obligations of the United States exceed those countries combined.

Furthermore, the discounts themselves exceed the savings the Postal Service captures by handling large volumes of presorted mail.This is why we call them subsidies.While the Postal Service saves approximately one cent per piece when it receives mail that has been presorted, it grants discounts of approximately nine cents per piece.That amounts to an eight-cent per piece giveaway to the presorters.Multiply that giveaway by millions of pieces of mail, and you can see how the Postal Service arrived at its present crisis.

Despite its financial woes huge deficits, $13.5 billion in debt, and expenses that continue to exceed revenue the Postal Service refuses to adjust the discounted rates to stop the giveaways and to reflect increased costs.

The Postal Service must act quickly to overcome the financial crisis in the very near future, or efforts will be undertaken to dismantle it as the provider of universal mail service.

Management's short-term, misguided approach is spelled out in the Transformation Plan, which has at its core additional discounts along with cutting costs and service reductions.Cutting costs will provide only limited, temporary relief to the reduced revenue caused by the discounts, but our members will be adversely affected and service to the public will deteriorate, while the Postal Service slides to the brink of insolvency.Despite the deterioration of the employee/supervisor relationship over recent years, our members will experience increased harassment and dislocation in the near future. In addition:

• Service will be cut and mail-processing plants will be consolidated, resulting in transportation of mail from one community to another;
• Retail services will be drastically reduced and delivery will be delayed, leading to increased customer complaints;
• Offices will be closed and workers relocated, disrupting families;
• Our members will be required to work the same mail volume with fewer co-workers;
• Our members will be required to work more mandatory overtime;
• Our members will be disciplined for leave usage, denied worker's compensation, and will be subjected to other forms of supervisory harassment.

Even with all of these cutbacks, the Postal Service will not solve its fiscal problems, and within a relatively short time, serious consideration will be given to dismantling it.Postal services will be provided based upon one's ability to pay, where the cost of business mail is set at a moderate rate, while the citizen's rate is based on what it costs to deliver mail to an individual's home or community.

The postal problem is revenue and this problem is caused by reduced income per piece, which is caused by the discounts.Each time rates are increased, more business mail is transferred from non-discounted to discounted, impeding revenue growth.Yet postal management has been captivated by the mailing industry and now lacks the fortitude to stop its corporate welfare program.

This does not mean that all postage rates have to increase. The public already pays a disproportionate share of postal costs, while the major mailers and direct mail firms receive subsidies.There is no valid reason that business mailers' rates have increased only 60 percent of inflation over the past 10 years while non-business mailers rates have increased more than 100 percent.These mailers are demanding that the Postal Service continue to pay them $1,500 per hour for applying bar codes when it costs only$30 per hour for postal employees to apply the bar codes.And while they receive unwarranted subsidies, the mailers complain about the high cost of postal labor!

The very survival of the Postal Service is at stake.While those who want to privatize the Postal Service point to technology as the reason for postal financial woes, the problem is revenues, which are depressed by unjustified discounts.This is far more than a theoretical dispute.The future of the United States Postal Service is at stake and your future as a postal employee is as well.

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