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Unions and Postal Service Reform

The U.S. Postal Service is close to maxing out its $15 billion line of credit with the Treasury and could run out of operating cash by the end of the year. But its contract with the postal unions is preventing the USPS from implementing the cost reductions it needs to get its finances under control.

Labor accounts for 80 percent of the USPS’s costs — the Service has the second largest civilian workforce in the nation, behind only Wal-Mart — and 85 percent of workers are protected by the collective bargaining agreement.

“The unions have become a giant anchor on an already sinking ship,” Tad DeHaven, a budget analyst at the Cato Institute, wrote in an article appearing on The Daily Caller. Last year the average postal worker received about $79,000 in total compensation, compared to $61,000 for the average private sector employee.

But the union contracts “inhibit the flexibility required to efficiently manage the USPS workforce,” according to DeHaven. He cited the “no-layoff” provisions that protect most workers, which forces the USPS to lay off lower-cost part-time and temporary workers before it can fire a full-time employee.

Union contracts also make it difficult for the USPS to hire part-time workers, which could result in savings and give managers flexibility in dealing with fluctuations in workload. Only 13 percent of USPS employees are part-time, compared to 53 percent for UPS and 40 percent for FedEx.

Despite the USPS’s difficulties, the American Postal Workers Union — which represents more than 200,000 workers — is in contract negotiations with the Service and union chief William Burrus insists a pay increase for his members is an “entitlement.” He said the union wants “more money, better benefits.”

DeHaven concludes: “The postal unions are likely betting that in a worst case financial scenario for the USPS, policymakers will tap taxpayers for a bailout. Unfortunately, if recent history is a guide, they’re probably correct.”