Inflation has reached record levels this year, and just about everything from the effects of the pandemic to the war in Ukraine have been cited as contributing factors. For a lot of people, the impacts of inflation are usually quick and direct — the price of that gallon of gas you bought this week compared to last week — but it’s a more complex story when it comes to the U.S. Postal Service.
As we report in our latest white paper, inflation affects the Postal Service in different ways. For example, inflation has a direct impact on cost-of-living adjustments (COLAs) for career bargaining employees, the vast majority of the Postal Service workforce. COLAs are pegged to the inflation rate, but not all USPS employees receive COLAs. Meanwhile, other wage increases, such as for non-bargaining and non-career employees, aren’t directly tied to inflation, but increases that don’t keep up with inflation may contribute to employee turnover, which in turn increases costs associated with replacing workers who leave for better pay elsewhere.
You see a similar indirect impact involving costs associated with employee benefits. For instance, rising premiums for health insurance means both the employer and employee will be paying more. And some benefit expenses aren’t under the Postal Service’s direct control — like retirement benefit costs. The percentage of payroll that USPS must set aside each year to fund them is determined by the Office of Personnel Management.
Then, there’s the impact that the Postal Service experiences just like any consumer or private business — erosion of buying power. USPS dollars simply don’t buy as much. But there’s also a unique challenge: When the Postal Service announces a price increase to account for inflation, it must provide advance notice of its intention and the amount; during the notice period, inflation can go even higher, meaning USPS can end up with new prices that still don’t fully reflect inflation.
Even more impacts exist — like we said, it’s a complex story — but our paper tries to examine each impact clearly. Take a look!
And let us know: Has inflation affected how much you use the mail?