Going Postal
March 2, 2010
I found an interesting article today on CNN Money. It is about the Post Office and I found it to be very enlightening. You can view it here.
Unbelievable – no not really
One thing that absolutely leaps out at me when I read this article: the USPS lost $3.8 billion in fiscal year 2009. $3.8 BILLION is a lot of money for any privately funded company or organization. Honestly how are they still in business? How could they afford to lose $3.8 billion and still be in business? Do they have loans or lines of credit or are they able to defer payments? The powers that be over there at USPS did make cuts but could they have made up such an enormous shortfall?
They cut 40,000 jobs and if you assume on average that employee made $26,000 per year (that equates to $12.50 per hour) then the savings was in the order of $1.04 billion. There are no doubt associated costs for each of those employees so the savings would be higher. Yet they lost the $3.8b AFTER making those and other cuts. The situation apparently only stands to get worse in the coming years.
Now before we become too critical of those who run the USPS we need to remember that they are working under 40 year old regulations that likely need to be updated to reflect the modern situation. Never the less, as a business USPS is not very well run and not just because the working conditions have given us a name for work related rage.
Supply & Demand
When demand for a product decreases and thus the supply of that product increases, the price needs to drop to make the product more attractive. Instead, the USPS has steadily increased its rates and this has had the effect of driving more and more customers away. At the risk of getting kicked in the chest by the head of the USPS, I must simply say “This is madness!”. You cannot run a private company into the ground this way and expect it to remain a private company for very long. Either it will be fully nationalized in which case we the tax payers will be getting double taxed (money going to the post office through taxes and money spent on stamps) or fully privatized and quality, which is not always the best anyway, will fall by the wayside. Opening up mail delivery to full competition would create chaos and even though I hate saying it, I do not think it is the answer. Full nationalization as I mentioned would just cost us more money
The answer? Well let us see what kind of business model they come up with today but I think the answer is to fire somebody and send the rest back to Macro and Micro Economics classes.
