Thursday, 22 September 2011

What do do about the post office?


The PO has a real problem that it has a lot less business than it used to.  UPS and Fedex have taken away much of the package delivery business, and the number of letters has dropped significantly as people and businesses switch to electronic delivery of bills, checks, and letters that used to be sent by mail.  But they still are required to deliver every day to every address in the country, and have a variety of other requirements put on them by Congress. As a result, their fixed costs are large, their variable costs relatively small, while their revenue is entirely variable, depending on how much mail they handle.

Also, compared to other countries, mail in the US is very cheap.  A first class letter costs 44¢, even from Maine to Guam.  In Canada, a domestic letter costs 59¢.  In the UK, its 46p (71¢) first class, 36p (55¢) second class.  In France it's €0,60 (81¢).  I think you'll find that everywhere else in the developed world, prices are higher, and except for Canada, the area for which the domestic rate is valid is a lot smaller than it is here.  I also note that UPS and Fedex are typically more expensive than the PO for similar service, so their distinction is better or more flexible service, not price cutting.

Dropping Saturday delivery impresses me as a poor idea, doesn't save much money since it doesn't eliminate any jobs, just cuts hours, and it's a significant drop in service.

In a lot of countries, they have very few stand-alone POs and a lot of contract postal counters in drugstores and the like.  The US has a little of that in small rural POs, but they could replace a lot of branches by contract stations, which would cut staff while preserving a similar level of service.

The PO does a certain amount of "last mile" delivery for UPS and Fedex; the UPS guy drops a bunch of packages at the local post office, who deliver them with the mail that day or the next.  They should do more of that -- they physically deliver to every address, one place they definitely beat the competition.

It's also not totally silly to suggest raising the price, although I suppose that the Republicans will blather about job-killing.