December 4, 2019

The USPS Office of Inspector General released a 44-page white paper on December 2 titled, “A Closer Look at Postal Labor Costs.”  With labor costing $57 billion or 76 percent of all costs, a closer look is very important.  The OIG found that in the ten years 2009-2018, USPS did a good job in reducing inflated-adjusted labor costs by 14 percent.  But that was not enough to offset the concurrent 17 percent in volume loss.  The report correctly found that, “While there are many reasons that costs should not be expected to fall in lockstep with volume, our analysis raises questions about current cost control efforts and identified areas where additional investigation may be warranted.”

The OIG also found these important points:

Looking at the 10-year trend of inflation-adjusted labor costs, we identified the following additional key findings.  

■Carrier costs grew from 43 percent to 48 percent of compensation and benefit costs. This is because the steady growth of delivery points makes cutting carrier costs more challenging relative to other postal operations. As the trend in delivery points is likely to continue, managing its delivery costs will become increasingly important to the Postal Service in the future.

■City carrier costs declined by 11 percent despite increases in delivery points, workhours, and a 54 percent increase in overtime. This decline in costs seems like a significant accomplishment given the growth in delivery points and increases in parcel volume.

■Rural carrier costs increased 8 percent along with a rise in delivery points, workhours, cost per route, and a 280 percent increase in overtime. The upward trend in rural delivery points makes the Postal Service’s management of rural delivery costs a challenge as mail volume declines in the future.

■Total clerk and mail handler costs declined by 25 percent, but that decline largely ceased in 2015. The flattening of costs in 2015 is notable because that was when a newly-imposed reduction in First-Class Mail service standards was forecast to lower those costs significantly.

■Clerk and mail handler overtime increased by almost 100 percent. This raises questions as to whether non-career employees are being used in the most efficient manner possible.

■Total retirement costs account for almost a quarter of the Postal Service’s labor costs

Our private sector readers should notice several cost reductions their for-profit or nonprofit organizations would be forced to pursue.  The increased portion of carrier cost is related to the mandated public service of delivery to every address every day.  Stagnating clerk savings are linked to the public service mandate to keep 31,000 post offices open.