December 2, 2019 (RISC-WP-20-001)
- The Postal Service is a labor-intensive organization, with labor accounting for 76 percent of costs.
- As letter volume declines, managing labor costs will become critical to the Postal Service’s financial health.
The Postal Service continues to face financial challenges due to declines in letter mail volume. As declines persist, strategic cost control is one of the key factors that must be addressed. And clearly, labor costs will be a critical area, as it is the greatest component of postal costs — accounting for $57 billion or 76 percent of total costs in fiscal year 2018. As a result, we wanted to gain a clearer understanding of the sources of these significant costs and how they have changed in recent years.
The OIG found that over the past 10 years, the Postal Service was able to cut its inflation-adjusted labor costs by 14 percent in response to a 17 percent decline in mail volume. While overall labor costs are falling, there are still a few areas of concern, including upward pressure on rural carrier costs due to the increase in rural delivery points and steady increase of the use of overtime over the past ten years.