The U.S. Postal Service is used to delivering large amounts of mail. Last year, it delivered more than 177 billion pieces. More mail pieces are sent per person in the United States than almost anywhere else in the world. But mail volume has been declining. How will the Postal Service change if volumes continue to fall? Is the Postal Service even financially sustainable at lower volume levels?
The Office of Inspector General (OIG) asked the George Mason University School of Public Policy (GMU) to find out. The results of GMU’s work appear in a paper released today on our website.
GMU researchers looked at how mail volumes of 150, 125, 100, and 75 billion would affect the Postal Service’s financial position and cost structure. Their results are encouraging. They found that the Postal Service is financially sustainable at volume levels down to 100 billion pieces per year, although price increases above inflation would be needed. The cost structure of the Postal Service would also change at lower volume levels. For example, delivery would account for a much larger share of total costs.
GMU researchers also looked at the effect of various cost reduction initiatives and how they would impact the price increases necessary to break even. The paper describes their results and a description of the model they used for their analysis.
What do you think? What are the biggest challenges for the Postal Service at lower volume levels?
This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).