The recent announcement that Canada’s postal service will cease home delivery over the next five years while substantially increasing postal rates should sound a cautionary note with Congress. While that drastic action won’t happen here any time soon, both postal services share common problems: expenses are rising while use plummets, thanks to the Internet.
Canada’s response is to end all residential mail delivery in cities and older suburbs. It’s a familiar story: declining mail volumes and high wage and pension costs. If nothing is done, Canada Post estimates it will soon be losing $1 billion a year. The government-owned service instead is choosing to eliminate 8,000 jobs, mostly through attrition.
Canadians who live in cities and newer suburbs would pick up their mail and parcels at centrally located community boxes. That’s already the procedure in newer suburbs. Canadians in rural areas would still get home delivery.
And there is the more-than-modest increase in the price of a stamp from 63 cents to 85 cents. The U.S. Postal Service has requested an emergency rate hike in the price of a first-class stamp from 46 cents to 49 cents, but the final decision is up to the independent Postal Regulatory Commission. Not that a rate hike will make much of a dent in the Postal Service’s deficit.
The Postal Service is suffocating under the disastrous 2006 congressional requirement that it make annual $5.6 billion payments to cover expected health care costs for future retirees.
No other federal program is saddled with that requirement. Imagine any business prefunding health benefits for the next 75 years and expecting to survive.
Postmaster General Patrick Donahoe has been trying to get legislation out of lawmakers that would allow the post office a chance to stay in operation. This year marks the agency’s seventh straight annual loss despite growth in revenue since 2008.
But take away that health care payment and the Postal Service would post an operating surplus.
Donahoe has been slashing expenses and managed to save $1 billion over the past year by consolidating 143 mail processing centers, eliminating 1,400 delivery routes and modifying retail hours in 7,000 post offices.
That’s not to mention a reduction in the service’s career workforce by 37,400 through attrition. And now the U.S. Postal Service has a lucrative deal with retail giant Amazon to begin package delivery on Sunday. Canada Post also would continue to deliver parcels from commercial customers such as the Canadian branch of Amazon.
Congress should roll back the onerous and ridiculous prefunding requirement. That would be a start in avoiding the home delivery-less road Canada is embarking upon.