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?