(This article has a brief and researched description of the present financial status of the USPS. what are the factors that lead to the fall of the independent agency USPS? How the finances have dried up? What will happen if the postal service giant goes bankrupt?)
The United States Postal Service( USPS) , which provides postal service in United States , including its insular areas and associated states, is an independent agency of the executive branch of the United States federal government. Currently employing over 600000 workers, it’s the third largest civilian employer after the federal government and Walmart. So what is leading to the fall of the United States Postal Services, even though it being such a grand organisation?
Is it an email that is killing the Postal Services? No, even though the internet era has led to a significant decline in the postal volume but it did not harm much of USPS’s revenue. By 2002 the majority of US internet users have already started replacing their postal volume with emails, yet the USPS had sufficient penny in their pockets. Adding on to that, they have had profitable years between 20003-206 which shows us that Gmail, Hotmail, and our mailman can profitably co-exist.
Factors leading to the fall of US postal services:
While electronic-mail did not take much toll on the postal services, E-billing has significantly sent USPS reeling. USPS have recognized the significant threats of it and entered into the e-billing platform itself. eBillPay the e-billing platform of USPS came in 2000 and was discontinued in 2004 when consumers saw there was no utility for a online billing middleman.
If all the billing were done and paid electronically then, USPS would have lost somewhere between $15 billion to $18 billion, noted the then commentators. By 2009, most of the billing shifted to electronic platforms, and companies accelerated the adoption of paperless transaction statements to cut costs and encouraging consumers to “go green”. The 2008 economic recession, hit the USPS rather hard. The companies which shifted during the crisis to the paperless transaction had no intention of switching back to postal mail once the economy started shining again. The USPS tried to convince people back to paper statements but that garnered a poor reception.
Is it just e-billing or more factors that are leading to the fall of this independent agency? While emails did not affect much but as internet speed became capable of sharing photos, videos and many other applications, it became one of the reasons for dropping of mail volume. Sending postcards now seem like a thing of the distant past and a large part of our Gen Z might not have ever received a post card in our whole life. Relatable, isn’t it?
Also, more than ¾th of the expense of USPS is employee compensation. These are a result of its excessive health and pension benefits. USPS has been losing money for a decade now. Its expenses soar over its revenues by few billion. Collectively, all these factors are leading the US Postal giant to succumb.
Financial analysis of how the revenues dried up-
Chart showing decline in First Class mail volume over the last 14 years (image credit– Flickr)
The USPS lost around $2 billion in the second quarter of the fiscal year (2019), resulting it to lose $7 billion in the 2019, which was much worse comparing to the losses $4 billion in 2018. Its losses mainly owe to compensation costs, pension liabilities and retiree’s health benefits. In 2020, for the quarter one of the fiscal year, there is a loss of $748 million.
There has been in a decline in the mail volume of First-Class mail and Marketing mail by a percentage of 3.8% and 7.9%, respectively, as compared to the same quarter last year. This had led to the drying up of revenues by $168 million in First-Class mail and $254 million in Marketing mail. On the other hand shipping/packages continued to grow and there is an increase of $146 million in revenue despite a 4.6% reduction in volume.. Labour costs are one of the biggest factors why revenue is shrinking. It takes up almost 76% of the agency’s costs.
The Way out
The way out, as deemed by the officials, is a reduction in overall labour hours to cut down the cost. The USPS is running a loss for a decade and will continue to do so in the 2020’s. And now out of all times, due to the corona virus pandemic raging the world and US being one the worst it countries, the already struggling Postal Service is marching towards its doom. The Americans are now not depending on the USPS only for mail but also for food and medicine. The USPS is going towards a financial jeopardy and without federal help it has high chance of going bust. But the current government administration is not quite interested in bailing it out.
Why a bailout package is necessary?
The USPS has already declared that without federal cash it will run out of cash by September. Democrats of the Congress have put USPS to their funding list priorities for a fourth corona virus relief bill. The Republicans are however hostile towards the idea of a bail out and US president Donald Trump blamed Amazon for paying less and using USPS as its delivery boy in a series of tweets.
But in reality what is bleeding are not packages but the collapse in mail volume. And the corona virus pandemic badly added to the existing bruises. In general, all the complexities can be narrowed down to plunge in mail volume, taking down the revenue with it. And if immediate bailout package is not provided rural America would be quite cut off from getting postal services.
What happens if USPS goes bust?
USPS maybe a monopolistic giant but unlike any private company it has the responsibility to deliver you mail no matter where your address.
If USPS goes bust, rural areas will simply stop getting mails and packages or there will be high price surge in case of sending any mail to or from rural areas if at all any private entity comes into scene. That high price surge will be quite unaffordable for the residents of the rural areas. If USPS goes bankrupt, it will not just generate unemployment for 600000 of its current employees, adding largely to the upcoming unemployment that the world will see due to the pandemic.
USPS is also responsible for the delivery chain of small and medium businesses, and if it goes bankrupt, it will take down all of it along with it, much like the Night King talking down with him the whole army of dead in Game of Thrones. E-commerce giants like Amazon won’t suffer, but the small and medium business holders will lose out on their living. With the upcoming recession the world is entering into due to the pandemic, we need USPS now, more than ever!
**Cover picture credit-(Mike Lawrie/Getty Images)