July 13, 2017

With the release of U.S. Postal Service financial results for the first 8 months of Fiscal Year 2017 (October 2016-May 2017), some have emphasized that the USPS lost 2.5 billion pieces of mail, equal to 2.4 percent. In the business world, this degree of contraction calls for stringent cost reductions to keep revenue above costs. For the Postal Service, labor compensation makes up about 80 percent of total costs.

Apparently, the disconnect between volume trends and costs stems in part from the fact that volume declines were not totally anticipated. They were 1.7 percent worse than plan. Also, the explosion of e-commerce package deliveries has led to additional employees and work hours. The reduction by 21 cents or 0.5 percent of cost per work hour is progress, but small.