Five Steps to Postal Reform

Simple changes could save more than $7 billion annually.

Photo by Alexander Schimmeck on Unsplash

The U.S. Postal Service’s (USPS) future is very much in question. But, whether it stays an independent agency or is folded into the Department of Commerce, the Trump administration and Department of Government Efficiency will have to eliminate soaring waste at the USPS. America’s mail carrier lost an astounding $9.5 billion in fiscal year 2024, and taxpayers will be on the hook for (another) bailout unless the agency gets its act together. The good news is there are plenty of savings that policymakers can deliver to taxpayers and consumers. Below are a few of the largest items, totaling more than $7 billion annually:

End Saturday Delivery (estimated annual savings: $2.6 billion)

The USPS currently delivers mail Monday through Saturday, along with Sundays for some packages. However, some have argued for switching to a five-day delivery system to decrease costs and improve worker morale. Agency leadership suggested this idea (with some wiggle room for weekend package deliveries) in its “Five-Year Business Plan” in 2013 and concluded that it would save $1.9 billion per year. That’s $2.6 billion after adjusting for inflation, which is about a third of the average USPS annual loss over the past couple of years.

In 2015, the Inspector General surveyed consumers on whether six days of delivery was worth it at various stamp price points. The watchdog found that a large majority of consumers favored five-day delivery at any price point over 50 cents. Now that the price of a first-class stamp is 73 cents and rapidly rising, it’s reasonable to think consumers prefer five days of delivery over six. While this idea would likely need lawmakers’ sign-off, it’s definitely worth considering.

Hire Fewer Career Workers (estimated annual savings: $2 billion)

Most private delivery companies have a simple formula for keeping labor costs low. Their tried-and-true formula is to have a stable base of career employees and ramp up tens of thousands of seasonal and part-time workers to respond to sudden upticks in demand. Unfortunately, the USPS has not gotten the memo. Postmaster General Louis DeJoy recently gloated, “We converted 190,000 employees to full career status over the past 4 years, increasing our total career employees by approximately 28,000 employees.”

Given that USPS non-career employees cost far less than their career counterparts, these conversions are a significant budget-buster. A 2021 analysis by the Government Accountability Office estimates that the compensation gap is around $25 per hour, though this total shrinks to $8 per hour when comparing similar types of workers with similar experience. Even after controlling for these factors, the USPS saves nearly $2 billion per year by retaining 115,000 non-career workers. Doubling the proportion of non-career workers would likely double these annual savings.

Price Packages to Reflect Delivery Costs (estimated annual savings: $1.3 billion)

The USPS can make money, but only if postage rates reflect underlying delivery costs. Unfortunately, the agency has a terrible track-record in underpricing “competitive products” (i.e., packages) relative to their true costs.

According to TPA’s 2022 Postal Pricing Primer, the USPS’ cost attribution methodology is seriously flawed:

the percent of vehicle depreciation attributed to competitive products remains below 20 percent despite the agency purchasing larger, more expensive vehicles to accommodate packages … Most alarming of all is the agency’s refusal to fully examine the role played by competitive products in escalating overtime costs and assign supposedly unattributable ‘network travel’ costs accordingly. In addition, the USPS fails to account for vehicle and headquarter personnel costs that are clearly increasing as the agency shifts to a package-centric delivery model.

TPA’s report concluded that even a modest increase in cost attribution to competitive products would result in $1.3 billion in higher annual revenues.

End Electric Vehicle (EV) Purchases (estimated annual savings: $1 billion)

The USPS is eager to replace most of its aging fleet of more than 200,000 mail trucks, which have a disturbing tendency to catch on fire. In the latest iteration of a 2021 deal inked with supplier Oshkosh Corp., the agency will spend nearly $10 billion on a fleet of roughly 100,000 custom-built and commercial vehicles, including 66,000 EVs.

This agreement is a complete dumpster fire. EV deliveries are way behind schedule, and according to PMG DeJoy, taxpayers and consumers are paying anywhere from $10,000 to $20,000 more per EV than their gas-powered counterparts. However, this is probably a significant underestimate. In 2022, Congress appropriated $3 billion in taxpayer money to the USPS for the sole purpose of purchasing EVs, including $1.29 billion for the vehicles themselves and $1.71 billion for supporting infrastructure including charging stations. After taking into account this significant one-time sum of money and the USPS’ own “investment” dollars, total annual savings for switching to an all-gas fleet would likely approach $1 billion over the next ten years. Fortunately, supplier Oshkosh Corp. appears to be open to contract changes.

Crack Down on Counterfeit Postage (estimated annual savings: $400 million)

The USPS has a substantial problem monitoring and preventing counterfeit postage. In April 2024, a California woman pled guilty to defrauding the USPS out of more than $150 million in counterfeit postage. And, according to a recent report by National Public Radio’s Manuela López Restrepo, “Customs and Border Protection agents in Chicago seized nearly 162,000 counterfeit U.S. Forever stamps [in February], shipped from China. … had they been real, [they] would have been worth over $118,000.”

The estimated market worldwide for counterfeit postage is $500 million per year, and the U.S. likely accounts for a majority of that figure. The U.K.’s Royal Mail has been able to reduce fake stamp circulation by more than 90 percent by consistently barcoding stamps, and there’s no reason why the USPS can’t do the same.

Conclusion

By making these five simple changes, the USPS can save more than $7 billion per year — a total that exceeds agency net losses for most years. Taxpayers and consumers deserve a responsible and efficient mail carrier.