Postal Reform Necessary for Paper Industry

Jun 05, 2014

 By Donna Harman 
 President & CEO

 Paper Age, May/June Edition

 With the rise of electronic communication, it’s not a surprise that the
 U.S. Postal Service is struggling financially. But those who blame the
 internet for the Postal Service’s problems are missing the bigger
 picture. Much of the USPS’ current financial problems are attributable
 to outsized infrastructure, unreasonable labor cost requirements, and retirement benefits imposed by Congress that are not sustainable. Congress could fix much of these problems through a comprehensive postal reform package, and the American paper industry needs to encourage them to do just that.

Our nation’s paper and printing industry depends on a vital postal service. Approximately one-third of printing and writing paper produced in the United States is delivered through the mail. This represents roughly $6 billion dollars to our industry.

The paper and printing industry is not alone in benefiting from the Postal Service. The entire private sector mailing industry represents $1 trillion dollars to the American economy and employs roughly 8 million Americans. Yet in spite of its economic importance, the Postal Service continues to struggle.

To put the Postal Service’s woes into perspective, the agency lost $354 million in the 1st quarter of Fiscal Year 2014 and many considered that to be good news. Over the past several years, USPS has been losing billions of dollars per quarter. It is encouraging that these losses are getting smaller, but Congress must take action to put the USPS onto a path for long-term sustainability.

To start, any postal reform package must make it easier for the Postal Service to reduce infrastructure and labor costs, as well as eliminate unreasonable financial obligations. Since 2006, mail volume has declined 25 percent yet the Postal Service still maintains an infrastructure geared toward much higher, and now non-existent, demand. The agency must be given the authority to consolidate its facilities and reduce overhead costs.

In addition, the USPS’ current labor force is too large and expensive for the revenues it is taking in. Congress needs to look at ways for the Postal Service to alter some of its workforce provisions so the agency can cut costs and maintain a sustainable number of employees. It also needs to modernize the Postal Service’s collective bargaining process. This process currently prohibits arbitrators from considering the financial condition of USPS in their decisions, but this is a critical factor that needs to be taken into account.

While some in Congress are taking steps to move forward with reforms like these, others are calling for reforms that would set the Postal Service back and hurt the paper industry. Anyone who has ever run a business knows that when sales are declining, the last thing you do is increase prices and reduce service. Yet in the face of the Postal Service’s decline, some are calling for just that approach.

Increasing postage rates might look at first glance like it would bring in more revenue. However this ignores the many mailers and businesses who would simply quit using the mail altogether if prices continue to rise. As volume leaves the USPS, it results in less potential revenue to the USPS, fewer paper purchases, fewer printed pages, and fewer sales throughout the entire paper-based communication chain. The USPS should be able to encourage innovation and provide incentives for companies to use the mail rather than act as a disincentive to those goals.

Similarly, reducing the number of delivery days would have a similar damaging effect on the mailing industry and the USPS.  Many publishers and other companies rely on Saturday mail as a critical way to reach customers. Without it, they will look for alternatives.

Like the Hippocratic Oath taken by doctors, Congress’ first rule should be to do no harm. The paper industry needs to closely watch the debate over postal reform, and support measures that will stabilize the Postal Service – not send it further into a tailspin.