By MONIQUE MORRISSEY
On June 15, President Trump appointed Louis DeJoy, a North Carolina businessman and Republican fundraiser as the new Postmaster General. DeJoy has wasted no time in ordering major changes to how the United States Postal Service operates. Many have noted that the service cuts he has implemented, such as eliminating overtime and late trips, leaving mail to be delivered the next day, could harm the integrity of the November elections, which will rely heavily on mail voting, due to the pandemic.
The slowdown also seems aimed at pleasing President Trump, who makes no secret of his dislike of the Postal Service, which he believes is undercharging Amazon for deliveries. Trump has also lashed out at the Washington Post, owned by Amazon CEO Jeff Bezos, for its news coverage of his administration.
HOLDING POSTAL SERVICE HOSTAGE
DeJoy, of course, denies that he’s deliberately sabotaging the Postal Service at the behest of the president, claiming service cuts are necessary to keep the Postal Service afloat. Though social distancing measures have boosted online orders during the pandemic, the crisis has reduced the volume of paper mail, which still accounts for about two-thirds of Postal Service revenues.
Since the Postal Service is self-funded and has high fixed costs associated with daily delivery and maintaining post offices, it’s an obvious candidate for the same pandemic relief offered to airlines and other businesses affected by the suspension of much economic activity. But the president and Republican-controlled Senate have resisted helping the Postal Service, not just refusing to agree to relief funds included in a House-passed bill, but even holding hostage a loan to the Postal Service in the CARES Act that was signed into law by the president.
FORCING CUSTOMERS TO SEEK ALTERNATIVES
Since reliable on-time delivery is the most important factor in choosing among delivery services, the inevitable result of DeJoy’s actions will be customers seeking alternatives to the Postal Service, likely including the more rapid expansion of Amazon’s in-house delivery operations.
Since there are sunk costs associated with building out a delivery network, Amazon’s business, once lost, is unlikely to come back.
Whether or not Amazon is negatively affected by Postal Service cuts, rivals such as UPS and FedEx will gain customers, forcing more belt-tightening at a beloved public service that has been forced to continually downsize since Congress passed the Postal Accountability and Enhancement Act (PAEA) in 2006.
The PAEA set strict limits on postage increases while forcing the Postal Service to rapidly pre-fund retiree health benefits. The latter requirement was designed to offset reduced contributions to federal pensions after the Postal Service was found to be overpaying for these benefits. The Postal Service, though part of the federal government, is an off-budget agency, so this ploy was intended to neutralize the effect of reduced pension payments on the federal budget.
In other words, the Postal Service’s longstanding financial woes have nothing to do with the Postal Service itself, an agency whose popularity reflects its excellent service record and low costs compared with counterparts in other countries. Rather, they’re a relic of a time Congress made a bigger show of concern over deficits and used accounting gimmicks to cover them up.
Though the Postal Service began defaulting on retiree health payments before the pre-funding requirement lapsed in 2017, the PAEA forced the Postal Service to take severe cost-cutting measures and gave it an unearned reputation as a fiscal wastrel.
CHANGES WILL BENEFIT LOW-WAGE OUTSOURCING
In addition to rival delivery services, the beneficiaries of DeJoy’s actions will likely include low-wage “work-sharing” companies that do work outsourced by the Postal Service, such as presorting and transporting bulk mail closer to its destination. Whereas federal law requires federal contractors in the construction and related industries to pay workers the prevailing wage — usually the area’s union wage — nothing prevents the Postal Service from contracting with companies whose only competitive advantage is paying low wages — often as a result of union busting.
One virulently anti-union company — surprise, surprise! — was DeJoy’s former company, New Breed Logistics (since acquired by XPO Logistics, in which DeJoy owns considerable stock).
HURTS WORKERS MOST OF ALL
Since the Postal Service is required to rebate the full cost savings from outsourcing to the companies doing the work, “work-sharing” doesn’t even benefit the Postal Service – but workers definitely lose out. This is especially tragic because the Postal Service has been an important rung in the ladder to the middle-class for many workers and their families, especially Black workers and military veterans.
Looking at the Current Population Survey microdata, postal workers are twice as likely to be military veterans (14.5 percent) as non-postal workers (7.2 percent), because veterans benefit from preferential hiring in federal jobs and many have skills sought by the Postal Service. One in five (21.6 percent) postal workers is Black, nearly double Black workers’ share of the non-postal workforce (11.9 percent).
Postal workers and their unions have long defended the Postal Service against efforts to privatize it or force it to operate like a for-profit business rather than a public service. Most Americans will be hurt if Trump succeeds in gutting the Postal Service, but workers — the Postal Service’s fiercest champions — will be hurt most of all.
(Monique Morrissey is an economist at the Economic Policy Institute. She previously worked at the AFL-CIO Office of Investment and the Financial Markets Center.)