Wednesday, September 7, 2011

The Post Office May File for Bankruptcy: Is This Really a Surprise?

In the real world, if a business keeps spending more money than all their competitors to do the same function, they eventually price themselves out of the market. The post office has been doing that for over a decade but since it is considered an essential government office and perhaps most importantly is funded by our tax dollars and thus not readily accountable, they were subsidized so that their services were cheaper despite their higher costs. Had they kept that business model under control, they still could have used it successfully for many decades to come but they couldn't even do that. Now they are in a spot where they have spent so much future money that they couldn't possibly raise the price of a stamp enough to bail themselves out.

One of the reasons why is that they give out generous salaries. The average Federal Civilian employee made $81,258 in 2010 which is a 61.5% increase in the last ten years. The average private sector employee made $50,462 in 2010 which is only a 33.3% increase in the last ten years. If you add in their benefits, the average Federal Civilian took in $123,049 on average compared to the private sector employee who received $61,051 for 2010. This is a pretty significant chunk of change when multiplied by the 2.1 million Private Civilians employed by the government in 2010.

So why are government civilians' salaries growing at such a fast pace? Well federal compensation is legislated on by Congress and those raises have occurred regardless of economic factors these last few years. Tack on increases in locality pay, a wide expansion in benefits, a growth in the number of high-paid jobs (the number of six figure jobs more than doubled between 2007 and 2009) and routine adjustments that move workers into higher salary brackets regardless of performance and it really isn't surprising.

Is this increase in pay really just an indicator that there are more highly skilled jobs in the government than in the private sector? Pulling out of the 2011 Federal Budget for example, the USDA's office of Communications paid out $9 million in benefits and wages in 2010 for a total of 77 employees. That averages out to $117,000 each. Or if you look at the 62 employees of the USDA's office of Chief Economist, you will find that they earned on average of $177,000 in 2010. I have never worked in an office comprised entirely of highly skilled individuals, I'm guessing the same applies here. Even if it were true that there are more highly skilled employees per capita than the private sector, what has changed since 2000 to merit the 61.5% increase? The simple truth is that they just pay more despite what the government claims. A USA Today analysis of 200 jobs that cross between the private and federal civilian sectors confirms this by showing that on average, working for the government garners a 20% premium over your private sector counterparts. Not to shabby.

The average private sector person garners $10,589 worth of benefits every year while the federal civilian garners $41,791. Why the discrepancy? Well according to the USPS website, the new hire immediately gets 13 days of vacation and 13 days of sick leave for the first three years and then their vacation time goes up to 20 days. This doesn't even count the 10 federal holidays that they get. The federal employees also get retirement health benefits, a inflation protected pension, a retirement saving plans with government match, all of which are rare these days out in the private sector world. Then there are those that are just as valuable but hard to put a price on like job security. If you work for the private sector, you are 4 times more likely to be laid off than a federal employee. Only 1 in 5000 federal employees on average are fired for poor performance each year.

So the Post Office is going broke. Does this really surprise anyone?


R. Sherman said...

Nodding vigorously throughout and screaming "I can give you a witness, Brother!"

I would only add, that given that FedEx and UPS are going gangbusters, it should provide everyone with the evidence required to support government getting out of those things which private concerns can do better and cheaper.


R. Sherman said...


Ed said...

R. Sherman - I hadn't read that article on it but I've read several similar articles which prompted me to write my own. The one thing your linked article pointed out that was news to me was that stamp prices are tied to inflation. That really ties the hands of the post office.

geri said...

Ed, I would hesitate to base numbers when it comes to government salaries. My husband works for the federal government and it took him probably 15 years to get a good salary from his office, in fact he had to fight for it despite having a Masters education. His is a very stressful job and very highly specialized, in fact if he gets out from his job it will be very hard for him to look for another job that is related.

I saw another website too that decried the salaries of teachers in our area. I saw that Evan's kindergarten teacher is making $77,000 (if this is true). But she is bilingual and works from 8am to 8pm and one parent told me that she is the best kindergarten teacher in our school. Is that salary too much to trust your child's education with?

I know of a filipina postal worker, I don't know how much she makes but she delivers mail in the scorching 100+ heat and snowstorms. Because of budget cuts she punches in from 7:30 and out at 6pm, works on Saturdays. She should be paid well.

Tom's ex-girlfriend works at the post office and she doesn't make much.

So I don't know where these numbers are coming from and what's the real story behind them.

And what is a fair salary anyway? You know, decent enough to support a small family, provide shelter, food and college education to their kids? How much is that exactly?

If there are salaries that needs to be slashed are $200,000 congressmen approximately make who are obviously doing nothing.

Ed said...

Geri - It really isn't about worth. No doubt some people work hard and deserve what they get. This is about people in the Federal government getting paid more (in wages and benefits) because they are paid from an unlimited supply of money, our tax dollars versus the private citizen whose pay is based on what the market can bear.

I think you would agree that if you had an unlimited supply of money, your purchases would look much different than they do now on a finite source. How can you convince me that the government is different in this aspect?

In this example, the USPS is running a $9.2 billion annual deficit doing exactly what other companies do profitably and for less money. It doesn't matter who has the hardest workers with the best degrees. It does matter whether or not it makes sense to continue to support a business model that has no chance of working.