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Tuesday, November 27, 2012

 

Mail going the way of the Twinkies?

  Twinkies may not have been such a burden on the U.S. economy but what about the U.S. Postal Service?  The Postmaster General quoted that there are many similarities between Hostess and the U.S. Postal Service.  The Postal Service is 28 times the workforce of Hostess and the Postal Service only squeezes by on labor costs and a service on the brink of extinction.  
  Unlike a private enterprise, the Postal Service can’t close most locations even if they’re unprofitable. It can’t raise prices on its primary product by more than the inflation rate or change its pension or health benefits. And as of Sept. 28, when it exhausted its $15 billion borrowing limit with the U.S. Treasury, it can’t borrow any more money.  The U.S. Postal Service is running with no more than four days of operating cash on hand.  Labor costs have grown to 80 percent of expenses, even after 280,000 jobs were cut since 2000, as mail volume has dropped 26 percent from its peak six years ago.  
  In 2011, with mail volume and revenue well past its peak, the service signed a contract with its largest union that prohibits most employees from being fired if the service wants to downsize. The service is now offering its second round of early-retirement incentives, giving as many as 114,000 American Postal Workers Union members $15,000 apiece to retire. 
  Applying what we know of group theory, the U.S. Postal Service is in deep trouble because the demand for the goods and services they provide are almost no existent anymore.  They are a large government agency that can barely run anymore because of the loss of demand.  There are too many people to provide for and the unions won't allow the post workers to be fired.  Because of this the government has to bail out one of its own agencies to keep them going but with the fall out of Hostess, the Postmaster General sees too many similarities between them.  The postal service is barely running on a weeks worth of pay because of the loss of demand and they are at there limit of borrowing from the treasury.  So where do we draw the line for another business as important as the P.S. when it puts a strain on economy?   


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