Postal services have been with us for as long as we can remember. However, the postal service is now on the verge of destruction. Facing a deficit of about $10 million this year, our mailing service could very possibly run out of money by this winter. If they run out of money, they will face a shutdown. The agency has proposed to cut Saturday deliveries, close 3700 post offices, and lay off 120,000 workers. The Obama administration has been pushing legislation to aid the failing postal service, pushing to allow the postal service more time to pay out the $5.5 billion they owe to future health coverage of retirees.
This continuously increasing deficit is a result of the postal service's constant overpaying of millions of dollars into pension funds. In this day and age, everything is done over the internet, e-mail instead of the traditional mail, reading news on websites, and paying bills via web. Since 2006, annual mail volume has decreased 22%. For now, the postal service is quickly running out of money. A solution? Send more letters.
Tuesday, September 6, 2011
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5 comments:
The demand for postal services has gone done and the demand for e-everything has gone up. E-mail is a better investment as it is free, requires milliseconds, and is easily savable. The development of online services has caused a dramatic turn in our economy; maybe this is just a sign that America itself is progressing, with no return, further into the 21st century of technology. Is letter sending really worth it if E-mail has so many more benefits?
I think the current issue is that many people take the postal service for granted, seeing that it has been around for such a long time. Many daily communications are now done online or by phone, as "time is of the essence." However, if the postal service is ever discontinued, people will find that it is more necessary than they realized and might be willing to support it in a more personal manner than taxes. Some things - thank you cards, packages - should not and cannot be sent by email and still makes the postal service a necessity. A drastic and quite radical measure that the USPS could take would be the close down their service for a couple of weeks or a month in order to rally support as I believe that many would still view the postal service as a necessary.
The thing is, that it is costing more to deliever letters through a postal service. As there is the alternative service, to use e-mail and other electronic messaging, which is mostly free, this service's product will go down. That being said, do you support the government basically giving them money to help sustain the service, or not? Also, keep in mind that the collapse of this is not gradual, but sudden. The lost of 120,000 workers is only the beginning. The total amount of jobs lost will be substantial, as USPS has more than half a million workers.
I am glad that Kirsten mentioned the issue of the pension funds. Without clearly understanding this portion of the Postal Service's dilemma one cannot come closer to finding the solution to the USPS's problem.
Clearly, the Postal Service is facing a situation in which there is lack of demand, as mentioned in the previous posts. In the words of the Honors Economics, the postal service is facing the TRIBE issue of the Related Product/substitution effect. (Perhaps, even there is a "Taste" issue at play. I, myself, feel that mail is old fashioned.) But accepting this fact will yield no solutions for the USPS. The USPS cannot out-compete virtual mail and it cannot change the tastes of the U.S. population.
The largest issue that the USPS is facing is a supply side issue. What does the USPS supply? It supplies a service. There are no limited resources to its product and thus the USPS supplying too much.
What factor of supply is the key issue? The cost of production is too high. Currently, the USPS's pension fund plan for its retired employees oversteps the USPS's capacity to provide such service. The USPS undoubtedly needs to reform its pension/health structures.
Of course, the greatest opposition of such move is the worker's unions. It is to this end that I actually take issue with the worker's unions.
The alternative to the pension/health reform plan would obviously have to be another reform lowering supply. The one which jumps to my mind, an action which has already been taken by the USPS, is to lower the number of employees. This move, however, is also opposed by worker's unions.
I don't mean to demonize worker's unions in this post. By all means, worker's unions ensure that their members are protected from corporate greed. In this case, however, the stubbornness of the worker's unions may cause the downfall of the USPS (in which case, all postal workers will be out of a job).
I think the postal service's risk of retirement was something that was bound to happen eventually given our world today, where everything is done online or electronically. However, in response to the question Alice brought up, I do think there are some things that should remain done with traditional pen and paper. Emails, for example, while cheaper and more more convenient to send, may be less meaningful to receive to some than handwritten letters. However, at this stage with such a large deficit, can enough letters can be written to save the postal service?
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