Is the US Postal Service Close to Shutting Down?
US Postal Service: Is It Set for a Crash?
The US Postal Service (USPS) is close to shutting down this winter unless Congress agrees a rescue deal. The agency is so low on cash that it will not be able to make a $5.5 billion payment due this month. The payment which is due on 30 September, is to fund retirees’ future health care so won’t cause immediate disaster. However, sometime early next year, the agency will run out of money to pay its employees and to fuel its vehicles, forcing it to stop delivering the three billion pieces of mail it handles every week.
The online threat
This is the culmination of a long running issue which postal services the world over are facing - the internet! With the uptake of email and online banking, plus environmental pressures to stop printing utility bills, the volume of mail delivered in the US has fallen by over 22% in the past five years and will reach a low of around 167 billion pieces of mail this fiscal year. It is unlikely that this trend will reverse and predictions are that volume could plunge to 118 billion pieces by 2020.
Meanwhile the USPS has had a tough time cutting its costs to match the revenue drop, with a history of labour contracts offering good health and pension benefits, under-used post offices, and laws that restrict its ability to make basic business decisions, like reducing the frequency of deliveries. Compounding this is the requirement to provide a universal delivery service, making deliveries to 150 million addresses nationwide each week.
Labour costs represent 80% of the agency’s expenses, compared with 53% for United Parcel Service and 32% at FedEx, its two biggest private competitors.Continued on the next page