USPS Rolls Over in Negotiations — Again

Article Published in the Federal Times

The U.S. Postal Service and one of its largest unions, the National Association of Letter Carriers (NALC), just reached a tentative agreement on a new five-year contract. Union head William Young called the agreement a “win-win deal for the Postal Service and the nation’s city letter carriers.”

A “one-sided victory” would be more accurate. The terms of the contract mark a big win for the union, and an equally big loss for the Postal Service.

Apparently, the Postal Service would prefer to cave in to union demands rather than confront the long-term challenges of its burgeoning labor costs. USPS also capitulated earlier this year in its negotiations with the American Postal Workers Union, its largest union.

By all accounts, the NALC achieved a major coup for its members. The tentative contract provides for guaranteed raises of almost 9 percent for all union members over five years, irrespective of job performance. Letter carriers will enjoy yearly raises at a clip far exceeding that achieved by their counterparts in the APWU earlier in the year.

Beyond these raises, the contract also includes cost-of-living adjustments, estimated to be around $3,000 per worker each year. It even provides for a 2.5 percent yearly increase in the uniform allowance, to $371 by 2011.

Meanwhile, the Postal Service has reportedly proposed in its negotiations with the National Rural Letter Carriers Association (NRLCA), to establish a locality-based pay system, under which carrier pay would vary based on their geographic location. Having settled with its two largest workforces before seeking this important cost savings tool suggests that Postal Service management lacks a focused wage policy for its workforce.

Certainly, union leadership deserves credit for advancing the financial interests of its members so effectively. And most letter carriers deserve to be compensated appropriately for their hard work.

The Postal Service’s management, however, got virtually nothing in return, such as increased labor flexibility, for its generosity. Ultimately, First Class stamp buyers — who are captive to the USPS monopoly on letter delivery — will pay the price for this failure to negotiate significant cost-controlling measures.

On two important issues — the contracting of routes to private carriers and the ability to hire temporary employees — USPS simply capitulated to union demands. In fact, the NALC contract prohibits the subcontracting of existing work, institutes a moratorium on future contracting, and forbids the hiring of truly temporary employees.

Labor costs account for about 80 percent of the Postal Service’s expenditures, and contract workers, who tend to cost about half as much as unionized workers, represent an effective method of reining in the runaway costs responsible for ever-increasing postage rates.

Union leaders often raise concerns about the safety and sanctity of the mail if private contractors deliver it. But these fears ignore the fact that USPS already engages in significant worksharing agreements with private firms to transport, sort, and even deliver mail throughout the country. If private contractors go through routine security checks, safety should not be a concern.

And as the rise of online banking illustrates, an ever-increasing number of Americans are willing to trust private firms with sensitive financial information.

Further, there should be no fear of job losses, as Postmaster General John Potter has already pledged that contract workers would not replace unionized employees under any circumstances.

Such union intransigence on contracting is detrimental to the Postal Service’s fiscal health. And USPS leadership seems all too willing to yield.

The proposal to the rural carriers’ union to enact locality based pay, common in the private sector, makes a great deal of sense. Costs of living vary across the country, and a geographically based payment system would ensure that Postal Service resources were used most efficiently.

If USPS management were serious about its commitment to control labor costs, it would be pushing for similar provisions with all its unions.

Instead, it’s making deals that are only a “win-win” for the leadership of the big unions. For everyone else, they come at all too high a price.

Charles Guy, Ph.D., is an adjunct fellow with the Lexington Institute and former director, Office of Economics, Strategic Planning, U.S. Postal Service.