Postal Labor Negotiations Must Not Undermine Agency

Article Published in the Federal Times

At midnight on November 20, all four U.S. Postal Service labor contracts are set to expire. Don’t panic. Postal workers, as federal employees, are not permitted to strike. So your advertisements, credit-card solicitations and catalogues will still be delivered.

But while unionized postal workers can’t strike, they can collectively bargain for increased wages and benefits. Union leaders know full well that USPS is not a private company. It’s a government agency, and Uncle Sam is not going to let the Postal Service “go under.” So unions push for deals that would sink a publicly-traded firm.

What’s more, USPS management does not have the options — or discipline — private-sector management has. With a car company, say, or an airline, management gets direct feedback from shareholders and bond-rating services if settlement terms are financially problematic.

In fact, the same legislation which granted collective bargaining rights to postal unions in 1970 requires arbitration if labor and management cannot reach an agreement. The results of these arbitrations are binding. And once the process starts, USPS no longer has control over the cost issues at stake.

In other words, the solution to labor-management deadlocks is a bureaucratic — not a market oriented — process.

By federal law, the Postal Service is required to “maintain compensation for its officers and employees comparable to the rates and types of compensation paid in the private sector.” Unfortunately, this pay-equity “standard” was never spelled out. As a result, it’s essentially open to interpretation, if not arbitrary.

When they go to the bargaining table, both union and USPS management teams have panels of experts making comparisons and pointing out trends and consequences. What is “comparable?” What is “similar work?” Billions of dollars in labor costs are at stake.

The unions claim that workers are underpaid. They make statistically dizzying cases that postal compensation should be compared, not to what it would take to attract and retain similarly-skilled workers, but to carefully selected segments of the private sector — with emphasis given to white male workers at large companies in highly unionized industries.

In 2005, “the average annual pay and benefits for career bargaining unit employees was $62,635,” according to USPS’s 2005 Comprehensive Statement on Postal Operations.

The Postal Service has documented a 20-30 percent wage premium and presented the evidence at every wage arbitration since the early 1980s. This is also supported by the fact that there are long waiting lists for postal jobs. And workers give them up at a much lower rate than happens in the private sector. A number of “neutral” arbitrators have made these observations.

Nevertheless, wages continue to rise. Part of the problem lies in the fact that pension and retiree health benefits are not part of negotiations.

According to the President’s Commission on the U.S. Postal Service, “The 1970 Act denies negotiators and arbitrators alike the ability to factor the entire wage/benefit package into the agreement. By amending the 1970 Act to include a broader range of benefits in the collective bargaining process, negotiators and arbitrators will be better able to ensure private sector comparability across most wage and benefits components.”

Now, lest you think that this all is just a matter of paying a few more cents to mail a letter, consider this: Despite some downsizing in recent years, around 800,000 Americans work in the Postal Service. That makes USPS one of the very largest employers in the United States.

Despite the surge of technology in every aspect of our economy, USPS remains stubbornly labor intensive. Every year the Postal Service puts around 80% of its $70 billion budget into labor costs. So it’s no wonder that labor settlements matter.

Postal workers are dedicated, loyal and hard working. Their compensation rewards them fairly and no one is suggesting taking away wages and benefits earned. But postal workers and their unions must also recognize that excessive settlements kill the goose that lays the golden egg.

Today, the goose is not healthy. Future benefits for postal workers — as opposed to pensions — are underfunded to the tune of over $70 billion dollars. There are fewer and fewer options for the Postal Service to grow profits to deal with those unfunded overhangs when paper mail volumes trend downwards.

If you talk about government — taxpayer — bailouts, the magnitude of USPS problems dwarfs the potential collapse of a GM or an airline bankruptcy.

Americans should pay attention to the upcoming negotiations. A settlement may be reached on Nov. 20, but time is running out on real reform.

Sam Ryan is a senior fellow at the Lexington Institute.