By its very nature, the U.S. Postal Service is a labor-intensive organization. In fact, labor makes up three-quarter of total postal costs — or $57 billion.
Controlling these costs is essential to the long-term viability of the postal system. That’s why our latest white paper attempted to determine where labor costs are increasing, where they have shrunk, and how have they changed over the past 10 years.
First, the good news. Between fiscal years 2009 and 2018, overall labor costs fell 14 percent when adjusted for inflation, although mail volume declined 17 percent. At first blush, it might seem labor costs should have dropped more dramatically given this decline in mail. That is, aren’t fewer workers needed if the workload is getting smaller?
Well, there are reasons costs won’t always decline in lockstep with volume. For one, some costs don’t change much in response to changes in mail volume. For example, mail carriers need to cover their entire route regardless of the amount of mail in their bag. In addition, delivery points are growing even as mail volumes are declining. And more delivery points often mean more carrier costs – a dichotomy that will require strategic cost-control initiatives.
Other areas of concern:
- Rural carrier costs are increasing, due to the large increase in the number of rural delivery points. Managing rural delivery costs in the face of declining volumes will be a big challenge for the Postal Service.
- Overtime costs increased substantially in all major labor categories, and this area requires additional attention.
- Labor costs and use of overtime varied over the country. This is an area where additional study may lead to lessons learned that can be applied to the higher cost areas.
What ideas do you have on containing labor costs? What other costs or areas should be analyzed?