In recent weeks, the United States Postal Service has found itself short on profit. To compensate for its losses, the agency plans to launch a new clothing line, ready for wear in 2014.
The USPS has been struggling since the beginning of 2006, when it cut annual costs by about $15 billion and reduced the size of its workforce by 28 percent.
For its most recent fiscal year, the USPS reported annual losses of $15.9 billion. It defaulted on billions in retiree health benefit prepayments to avert bankruptcy. Many argue that the USPS should be privatized because it is inefficient and overly bureaucratic. But the organization’s inefficiency is not its only problem. The problems the U.S. Postal Service faces are due in large part to a severe decrease in the necessity of paper mail and an increase in communication via phone and computer. As technology advances, new forms of communication replace more traditional ones such as mail delivery.
To keep in step with technological developments, the USPS is considering ending Saturday mail delivery. According to The Boston Globe, Postmaster General Patrick R. Donahoe said the Saturday cut is intended to mitigate for the financial realities of the nation’s shifting mailing habits, which include an increase in package delivery but a sharp decrease in letter delivery. In addition to the cut, the USPS plans to launch its own clothing line, having recently signed a license agreement with Wahconah Group, a Cleveland-based fashion apparel company, to support its “Rain Heat & Snow” brand. While I respect the efforts of the USPS, I find it unsettling that the federal mail system is resorting to retail to support itself. The USPS is not going to reach the root of the problem by selling upscale apparel. Instead, it must rearrange its methods of production to become more efficient.
It is obvious that business is not as good as it used to be for the postal service, and multiple factors account for this downward trend. First, the decline in letter exchange has made a severe impact on the USPS by decreasing the organization’s revenue. Moreover, the switch from letter-sending to emailing is not the only example of how technology is replacing traditional methods of accomplishing tasks. Online bill payment is another reason the USPS is losing revenue, because paying bills online means less mail sent and less stamps purchased. But technology is not the only thing negatively affecting the USPS. The agency faces problems resulting from the passing of the 2006 Postal Accountability and Enhancement Act (PAEA), which requires the USPS to prepay benefits costs to the federal government. In 2006, when payments began, the USPS was earning far more than it does now. But with the recent loss in revenue, along with the fact that the USPS does not receive any federal taxpayer subsidies, paying the government an annual $5 billion is extremely difficult.
But if USPS administrators think selling merchandise will help raise enough revenue to pay off what they owe, they are wrong. In fact, they have failed with this type of advertising before with the sale of specialty stamp collections and other merchandise — initiatives that cost millions but drew almost no customers. The same result can be expected with the clothing line. Such marketing mistakes, rather than helping the USPS overcome its financial problems, are actually a cause of revenue loss. What’s more, the revenue brought in through stamps or through a clothing line will not be significant enough to produce the funds the USPS needs to stay in business. A price hike on postage may be able to get the business on track for a while, but it is ultimately the restructuring of the system that will fix the postal service’s problems.
Some people think otherwise. While the notion of a price hike improving conditions is a commonly held view, it was the reason for which the USPS could not increase postage rates in January 2011. Postal regulators denied requests by the USPS to increase postage rates in 2011 because they believed the USPS’s financial problems were caused by a flawed business model and not the recession. It is true; the USPS suffers from internal problems such as high administrative costs, bureaucratic inefficiencies, high salaries, high pension costs and high health benefit costs, and these need to be fixed for the agency to maintain its financial solvency. Most important, however, is that none of these problems can be fixed with a simple clothing line.
The USPS is not getting as much business as it got decades ago, but it still operates as if it does. Unless administrators make some major internal changes to improve the agency’s condition, no amount of USPS hoodie sales will keep it in business.
Meredith Berger is an Opinion columnist for The Cavalier Daily. She can be reached at m.berger@cavalierdaily.com.
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