US Postal Service Cutbacks – What They Mean to You
In case you haven’t heard, the US Postal Service has announced major cost-cutting measures that will negatively impact the quality (or at least speed) of their service. We’ve talked about this before, but USPS is hurting. Badly. In fact, they’re currently projected to lose over $14B next year, up from $8.5B in 2010. Yikes!
In response, they’ve talked about closing locations, and of course they’ve increased stamp prices. But those changes only get you so far, with the proposed 3600 Post Office closings only saving around $200M.
Well, now they’ve raised the stakes, and have decided to shutter over half of their mail 461 processing centers nationwide. These closures would eliminate 252 such centers and result in roughly 30k layoffs. The savings? Around $3B — which will still leave them with over $10B of red ink on an annual basis.
So what does this mean for you? For starters, you can say goodbye to next-day service on local, first class mailings. Instead, mail will have to travel further (on average) to processing centers that will be significantly busier. Thus, the typical 1-3 day service will become 2-3 days, and periodicals are expected to take 2-9 days.
In other words, your Netflix service will likely slowdown, and you won’t be able to cut things quite as close with respect to bill payments.
Of course, this degradation of service will likely cause a decrease in mail volume, with more people moving their transactions online, streaming movies instead of watching DVDs, etc. And this will do nothing other than further reduce USPS revenue, resulting in a vicious cycle of service cuts spawning more service cuts.
Technically, they have to await an advisory opinion from the Postal Regulatory Commission next March before they can act, but that opinion is non-binding so it seems pretty likely that this will happen.
What do you think? Is the USPS doomed? If so, what will take its place? And how much will it cost? If not, how can they save themselves?
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Modified on December 20th, 2011 - 17 Comments
Filed under: Miscellany
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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17 Responses to “US Postal Service Cutbacks – What They Mean to You”
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December 7th, 2011 at 2:02 pm
Personally I don’t think this change will impact me much at all. I wasn’t even aware that USPS had a service commitment of 1-3 days for 1st class mail. I do know sometimes that mail gets to me pretty fast but I never expected or banked on that. So if they can save $3 billion and all it does is that sometimes my mail takes 2 days instead of 1 day then I’m all for that as I doubt I’d ever really notice. I guess my Netflix discs might take a little longer, I can live with that.
THe USPS isn’t ‘doomed’. It will gradually lose business and revenue. That will require cut backs and changes in service. But they won’t be shutting down anytime soon.
December 7th, 2011 at 3:25 pm
I completely agree with Jim (comment # 1).
Not sure why they keep talking about eliminating mail delivery on Saturday. Seems like it would be better to go to alternate day delivery – all existing routes become either M/W/F or T/Th/Sa.
If a (large) business wants daily delivery they could pay a fee for it. Most small businesses would likely be OK with alt day schedule.
I also think the route jeeps/vans are a perfect situation for all-electric vehicles. Re-charge at the depot overnight. If vehicle loses power, have a few spare batteries that can be delivered from the depot as needed and popped in. Have photovoltaic (or emerging things like solar paint) on the top of the vehicles. I realize in some remote or urban situations this may not be feasible, but a huge amount of folks live in suburbs and exurbs. Hey, the depot could have it’s own solar array and wind turbines.
But I digress.
December 7th, 2011 at 7:11 pm
Another legacy holdback from our ancient Constitution. We are in modern times, with modern communication channels. The USPS (as required by the constitution) was dreampt before the telegraph!!
December 7th, 2011 at 7:37 pm
I don’t think this will affect most people. I usually only check mail 3-4 times a week anyway.
The USPS needs to make changes to adapt. People don’t use mail as they did even 5 years ago.
I think there is a good chance that UPS and Fedex will offer services to deliver small pouches for letters that require next day delivery. A few years back, Airborne used to sell $7 flat rate pouches. If the price came down a few bucks, I think many businesses would use this type of service when needed.
December 7th, 2011 at 8:14 pm
The industries that need high-speed document delivery have already begun adapting their requirements to electronic delivery. My work is doing away with paper paychecks and even paper W2s are going away after this year. We can log into an account which has all our payment and employee information with pdf downloadable tax documents.
The reduction in speed brought on by these changes will most likely have the effect mentioned above. Some who use it will migrate to electronic means and revenue will further decrease. The thing is many of the things that the post office has brought into existence, such as the way physical addresses are maintained, are used extensively by the private delivery companies.
December 8th, 2011 at 3:45 pm
I agree with people here… it’s something that people will adjust to relatively easily if they notice it at all, at least with normal first class mail.
Once again, the proper solution here is for congress to lift the ban forcing USPS prices from going up no faster than inflation… post office rates continue to be significantly cheaper and more extensive than the private competition, and it’s clearly an unsustainable business at such prices.
Clearly there is decreased demand for the postal service, but that doesn’t mean the price is too high. Decreased demand is from people who have completely shifted to email, and no amount low prices will change them on that. But people who need to send letters through the mail have to understand that NOBODY can sustainably do that for 46 cents, especially with decreased demand.
Yes, poor management is a huge problem, but even Fedex and UPS certainly can’t and won’t ever offer such low prices, because there is no way to stay in business at that rate, no matter how efficiently you run things!
December 8th, 2011 at 4:09 pm
I sell thousands of items online every year and most items go by first class via the USPS. I couldn’t afford paying $8 to ship a 3oz item via UPS. I spend maybe $5000 a year on small parcels via USPS. 15 years ago, I spent maybe $5/year on stamps. I would think millions of other people are buying small items that go via the USPS and help out.
December 8th, 2011 at 6:17 pm
I haven’t written a check or sent paper cards (holiday, birthdays, etc.) in six years. I get all bills (and bank statements) online and pay them online. I send ecards to friends and family. This saves time, money and paper, and reduces trash in landfills. All I get in the mail is JUNK MAIL, which I check ONCE or TWICE a week.
Sorry to hear that USPS is having problems, but whatever it does will have minimal effect on me. USPS is like a dying dinosaur that has not adapted to modern trends and times.
December 8th, 2011 at 8:48 pm
I agree with Arvin on lifting the ban on increasing postal rates above that of inflation or core CPI or whatever index it’s tied to.
I can get used to mail coming a day or two later, but as more people switch to electronic forms of delivery (streaming netflix – magazines on ereaders) the cost of running the Postal Service has to increase.
It’s a scale thing. If demand wasn’t dropping the inflation rate limit on postal prices might be fine for years to come but as demand drops, cost per unit delivered goes up and red ink starts expanding.
December 9th, 2011 at 11:31 am
So, I don’t get my magazine around the same time each month; no big deal. So, I pay the amount of a first class postage stamp that will be needed to meet cost of keeping the postal system running; again, no big deal.
Using bill pay and finding free shipping deals alleviates the majority of those rise in postal expenses. The only time I ship packages is during the Christmas season; I complain more about the long lines than I do the cost to mail them. Throw in a few birthdays which can be taken care with online gift ecards…..these approaches counter what I wrote below; don’t use the services and people lose their jobs….you get the gist.
Let them do what is necessary to keep folks employed and postal services running. I am ALL for these folks keeping their jobs and eventually getting their pensions. Yeah, I know that’s [pensions] on the chopping block. Got too many people without jobs; I would certainly not want to throw more to the wolves based on my desire to save on postal costs.
Personally, I would like to see store catalogs go the way of the dinosaur. Less weight and space will be taken up; less waste in the landfills, too.
But, that’s just me……..
December 9th, 2011 at 12:21 pm
One reason they’re running in the red is because in 2006 Congress mandated that by 2016 the USPS must have enough funds in reserve for 75 years worth of retirement benefits. They need to put money aside for employees not even born yet. What other organization in the world does that?
December 9th, 2011 at 6:22 pm
I doubt a Federal entity like the post office will ever totally go away, but we as the people are going to be the ones that suffer more if this is implemented. There doesn’t seem to be any alternatively brought forth and with the changes they are making, they will still be in the hole most significantly.
December 10th, 2011 at 3:23 pm
Meanwhile, Canada Post keeps making money. Reason #47282 it’s better to be Canadian.
December 12th, 2011 at 12:37 pm
I’ve said for years that they should just outsource the whole shebang to UPS and/or FedEx. Companies that know what they’re doing. Ever since my one old college roommate told me how he worked as a casual summer USPS worker, I’ve been pretty jaded by the USPS. He said that he could do 1.5 routes in a day and he wasn’t even as familiar with the routes as the regular employees. He also said that regular employees routinely finished their routes by early afternoon and would waste time (in the summer swimming in their pools if they had them) before returning at the end of the day. Those kinds of things don’t happen with UPS and Fed Ex–unless you want to be an ex-employee…
December 16th, 2011 at 9:30 am
Maybe they could explore cutting back a little on their gold-plated benefits packages. Is 10 weeks of paid leave a year absolutely necessary to retain competent employees?
December 19th, 2011 at 8:00 pm
> all-electric vehicles
Electric is not efficient when you have to haul heavy packages. I think the best compromise would be to have a hybrid vehicle.
> I’ve said for years that they should just
> outsource the whole shebang to UPS and/or FedEx.
UPS and FedEx pawn off their unprofitable packages to USPS. They all have contracts with USPS to deliver packages to suburban and rural locations. What business can’t be profitable when they can cherry pick the most profitable routes and give the non-profitable ones to USPS? There are inefficiencies at the USPS, but the mandate of the post office is very different from UPS and FedEx. Rural people are not paying $8 for a package because they live far away. “The mission of the Postal Service is to provide the American public with trusted universal postal service at affordable prices.” – http://en.wikipedia.org/wiki/U.....al_Service
I do think the post office needs to consolidate distribution centers and buy property instead of leasing. I also think they shouldn’t fund into the pension at the rate they are currently doing.
February 6th, 2013 at 3:07 pm
In case you haven’t noticed, USPS has been slowing down for some time, because of cuts. Their package services have picked up because Fed-Ex and UPS switches over locally. USPS completes the delivery. Also, because more people are working online and need delivery services.USPS does not get all the big government money like a lot of other agencies do. They are regulated by the government, but don’t get the money.I think the only people that will really be totally negatively impacted will be small businesses who rely on only one form of delivery service.I think they deserve a pat on the back (USPS)for taking matters into their own hands and seeing that their retirees have a future. We have a Congress now that acts like a bunch of children in a mud fight.They get very little done.(The very little they do get done is usually at the expense of the American consumer, in one way or another)