The U.S. Postal Service (hereafter USPS) is a self-supporting government enterprise of the United States of America. The USPS is the only delivery service in the nation that delivers to all, 150 million residences, businesses and Post Office Boxes. The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. The USPS has an annual revenue of more than $67 billion and delivers nearly 40 percent of the world's mail.

For the last five years, the net loss of the USPS has been increasing mainly due to a significant decrease in mail volume and pre-funding requirements of Retiree Health Benefits Fund. In spite of aggressive restructuring programs, the situation is so severe that it threatens the existence of the USPS. Although the USPS has reduced its workforce by 15.6% from 2006 to 2010, as seen in the table 1, mail volume has decreased by 19.9% during the same period. Furthermore, the introduction of pre-funding requirements for Retiree Health Benefits Fund in 2007 has been worsening the financial situation of the USPS.

<Table 1> the summary of USPS's financial crisis

(units: $ billion)

Reference: USPS 2010 annual report, 2011 Integrated Financial Plan

The U.S. Government Accountability Office (GAO) has recently pointed out the USPS's financial crisis as a risk factor for the government and retained USPS on its high risk list issued in February 2011. In order to tackle the financial problem, The GAO advised the USPS to modernize and restructure network processing, retail, and delivery operations.

Among the several reform proposals presented by the USPS, there are noteworthy plans in 'delivery frequency', 'workforce flexibility' and 'network processing'. First of all, the USPS proposed a '5-day-a-week delivery' and projecting that this would  save about $3.1 billion annually and reduce mail volume by less than 1 percent. However, the GAO pointed out that the USPS's 5-day delivery proposal has both positive and negative effects and by itself is insufficient to improve the USPS's financial condition. Table 2 shows key trade-offs of 5-day delivery.

<Table 2> Key trade-offs of 5-day delivery

Reference: U.S government accountability office, March 2011

Secondly, the USPS and American Postal Workers Union (APWU) reached an agreement on a new contract on March 2011, which affects 205,000 union members by May 2015. Thanks to this agreement, the USPS would get greater workforce flexibility and cost relief, while the union could maintain employment. For example, wages of current employees will freeze by October 2012 and increase at less than 1.5% per annum. New entry-level employees will receive a 10.2% reduced level of wages. The USPS projects that it would save up to $ 3.8 billion.

Last but not least, in September 2011 the USPS announced their plan to eliminate 252 mail processing centers, about half of all such facilities, in the next two years. This would reduce as many as 35,000 jobs and save around $ 3 billion annually. On the other hand, it would also increase the delivery time for first-class mail from one day to two days.

Unlike the postal services in other countries, the USPS does not provide banking or insurance services, and heavily relies on the revenue from mail service. However, few would disagree with the fact that the postal service still plays a vital role in the U.S economy. In order to tackle this financial crisis and maintain sustainable development, not only the USPS but also the government, the congress and the other interested parties need to make a concerted effort.

1. Pre-funding requirement of Retiree Health Benefits Fund: A mandate in the Postal Accountability and Enhancement Act of 2006 (PAEA) that requires the USPS to pre-fund the healthcare benefits of future retirees. The PAEA's pre-funding requirement costs the Postal Service more than $5 billion annually for the 10-year period from 2007 to 2016.

Song Kyung-ho, Research Analyst at Korea Institute 다른기사 보기