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Why Postal Workers Should Favor Privatization
By Edward L. Hudgins

The conventional wisdom holds that postal workers will be the last to welcome privatization of the U.S. Postal Service, that they will fight vigorously to preserve that government monopoly and with it, they believe, their jobs. But need this be the case? Or should postal workers see privatization as an opportunity?

It is first necessary to take stock of the USPSís current situation. While the Postal Service retains a monopoly on the delivery of first- and third-class mail and the use of mailboxes, it does face stiff competition on many fronts. Urgent communications can be sent via a local messenger on a bike or a Federal Express jet. Faxes, e-mails, and the Internet have reduced the need to put a stamp on an envelope to transfer documents from here to there.

A General Accounting Office study has confirmed the fears of many postal officials. Over the next decade annual USPS revenues, currently at nearly $65 billion, will decline by some $15 billion as more people pay more bills electronically. That will mean less "The check is in the mail" excuses as well as less income for the USPS.

The Postal Service wants to offer new business and ecommerce services to obtain desperately needed revenue. It wants to offer email and online security services and to coordinate business orders, shipping, billing and inventory. It has an arrangement with Mail Boxes, Etc. to offer products at that company's outlets. And in a move that would have been unthinkable even a few years ago, it has entered an alliance with tradition rival Federal Express. FedEx now will be carrying express mail. It is understandable why USPS wants this arrangement. Private carriers now handle some 90 percent of overnight deliveries. In return FedEx will be allowed to put its drop boxes in post offices.

These are the sorts of plans one would expect from any good entrepreneur. However, the USPS's expansion into new markets and its public-private partnerships open it to changes of unfair advantages. After all, the USPS pays no taxes, it can borrow from the Treasury, and if its new business ventures fail, it could make up losses with higher stamp prices. In addition to bring exempt from most government regulations under which private businesses must operate, it also is exempt from many of the constraints to which other government agencies are subject, even though it is government entity. Perhaps worst of all, the Postal Service has regulatory authority that it can and does use against competitors.

Clashes with private companies offering innovative ecommerce services seem inevitable. The Postal Service will be between a rock and a hard place. So whatís the solution?

Perhaps in Germany we see the wave of the future. Deutsche Post, the largest mail carrier in Europe, has been reorganized as a joint-stock company under private management. In November 2000, it made an initial public offering of stock and in 2003, its monopoly will be repealed.

What will happen to American postal workers if such an approach is tried here? Deutsche Post did reduce its labor force over a decade without forced lay-offs. But more interesting is one of Deutsche Post's motivations. That company is offering a wider variety of communications, information and delivery services, and is becoming a continental and global service provider.

A privatized U.S. Postal Service, even subject to the same tax and regulatory regime of the private sector, would certainly be able to integrate much more efficiently into the new economy. In addition to ecommerce, who knows what other services it might offer? Maybe during the day USPS couriers on bikes will offer one-hour delivery. Perhaps during the evening those postal trucks that usually are idle could be used to deliver merchandise from local stores to customers' homes.

A lesson might be learned from the information revolution. In 1996 ATT announced it might need to lay off 40,000 workers (in the end it didn't). But in the decade prior to the announcement the MCI workforce had grown from 12,000 to 48,000, jobs at Sprint rose from 27,000 to 52,000, and the number of cable operators and programmers in the economy grew from 24,000 to 112,000. In other words, in the telecommunications industry as a whole, far more net jobs were created than ATT planned to eliminate.

The Internet and ecommerce is generating more postal volume, not less. It's just a different mix: more Amazon.com and ebay packages and fewer electric bills. A private U.S. Postal Service could act as an entrepreneur facilitating economic growth rather than as a government monopoly seeking to cripple competitors and acting as a ball and chain on the leg of the economy.

Edward L. Hudgins

Cato's director of regulatory studies Edward L. Hudgins is an expert on the regulation of agriculture, pharmaceuticals, labor, space, and transportation and on state and international regulatory comparisons. He is the former editor of Cato's Regulation magazine. He served as a senior economist for the Joint Economic Committee of the U.S. Congress and was both deputy director for economic policy studies and director of the Center for International Economic Growth at the Heritage Foundation. He has testified on many occasions before Congress. Hudgins is widely published and has appeared on numerous television shows, including public television's NewsHour and Dateline NBC. He has a bachelor's degree from the University of Maryland, a master's from American University, and a doctorate from Catholic University. He has taught at universities in this country and in Germany.


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