Congressman Issa Asks: Can USPS Survive Paying Higher Wages While Workload Decreases?

On March 23, 2011, Rep. Darrell Issa (CA-R), Chairman of the House Oversight and Government Reform Committee announced “a full committee hearing on United States Postal Service (USPS) pay and benefits on April 5th. The Committee expects to hear from the Postal Service on their tentative agreement offered to their largest union, the American Postal Worker Union (APWU), last week. The agreement has yet to be signed.” “The Postmaster General, the President of the American Postal Workers Union, and two members of Postal Board of Governors are expected to testify.” The hearing will bed shown online at http://oversight.house.gov

A few days ago Issa released another statement:

Are Postal Workforce Costs Sustainable? Can the United States Postal Service survive as its employees are paid increasingly higher wages while their workload decreases? Currently, 80 cents of every dollar the Postal Service spends goes to workforce costs. As of 2003, the Postal Service paid a 34.2% wage premium[ PR emphasis] to its employees over comparable private sector labor, and wages have only risen since.

Issa’s statement (and Congressman Dennis Ross [R-FL] of Postal Workers receiving a 34.2%  wage premium relies on the testimony of Dr. Michael Wachter to the President’s Commission on USPS in 2003.  Actually, Wachter wrote, ” By combining the benefits premium with the wage premium, a total compensation premium can be estimated. In the most recent interest proceedings before Arbitrator Goldberg, the total compensation premium was found to be 34.2%.”  Wachter included wage, health, retirement AND paid leave. He did not write Postal Workers receive a WAGE premium of 34.2%, he said COMPENSATION premium. Several economists during 2003 in their testimony to the President’ Commission rebutted Dr. Wachter’s assertion of Postal Workers’ so-called wage premium in comparison to the private sector.

In rebuttal testimony, Dr. James L. Medoff,  a Harvard University Professor (see full testimony below) in 2003 wrote the following:

Dr. Wachter argues that the firm size variable is largely irrelevant in the case of the Postal Service because, while the firm size is large, the average establishment size in the USPS is not.This argument might be valid if his regressions could be done with accurate measures of both firm size and establishment size. Dr. Wachter’s regression is based entirely on data from the Current Population Survey (CPS) compiled by the Census Bureau. The data from the CPS lumps all firms with more than 1,000 workers together into one category. This means that including the establishment size variable leads to highly misleading results in the case of the Postal Service.The USPS is an “extremely large” firm, but because of the relatively small size of its establishments, Dr. Wachter’s analysis will effectively consider it comparable to firms that are not even “large”.

In short, Dr. Wachter’s conception of “comparable levels of work” is deeply flawed and his model of the labor market is misleading and incomplete. I have never personally or professionally found his claims ofa postal wage premium convincing. The NALC’s approach to comparability, which focuses on similar workers performing similar functions in national delivery firms that compete with the Postal Service is much more compelling. I urge the Commission to rely on the common sense exhibited by the union’s approach and to treat Dr. Wachter’s testimony with an appropriate level of skepticism.

William H. Young, President of NALC in 2003 wrote (see full letter below) to the President’s Commission:

This Commission would commit a grave error if it were to misinterpret the meaning of the recent Goldberg and Wells Awards (which covered other bargaining units) or even the decade-old Kerr and Mittenthal Awards (which covered the NALC as part of a Joint Bargaining Committee with the APWU). While these awards concluded that a wage premium existed, they never adopted a precise estimate of the size of the premium. Certainly, none have adopted Dr. Wachter’s estimate of 21 percent wage premium.

According to economist Joel Popkin in his testimony (see full testimony below) to the Postal Commission in 2003 regarding 80% of USPS revenue is spent on the workforce:

The first is the widespread popular characterization –spin, if you wish– of labor costs as representing 80 percent of the total costs of USPS. That is blatantly incorrect. Publicly available USPS records (summarized since 1984 in Chart A) show that wages and benefits allocated to workers covered by collective bargaining represent 56.8 percent of total costs. Costs associated with workers covered under APWU bargaining agreements, largely mail processing and retail station clerks, accounted for only 26.0 percent of USPS costs in the 2002 fiscal year. In addition, the data in Chart A show that over the past couple of decades the labor share of postal costs has declined, the share of the APWU most dramatically.

It has been pointed out by GAO and Postmasters that delivery costs  contributes to 43%-45%  of  USPS labor costs.  Since 2002 USPS has reduced its career workforce from 752,949 to 571,566 (as of Pay Period 7, 2011) or 181,383 employees. But yet USPS, postal pundits and lawmakers still use the 80% figure to describe solely the bargaining unit workforce when it includes all postal employees including supervisors and managers.

Issa’s statement went on to say:

In an as-yet unsigned contract with their largest union, the Postal Service expanded “no-layoff” protection to thousands of new employees.

Here is language from Article 6 of the Tentative Agreement

(2) Employees who become members of the regular work force after the date of this Award, September 15, 1978, shall be provided the same protection afforded under (1) above
on completion of six years of continuous service and having worked in at least 20 pay periods during each of the six years.

(3) With respect to employees hired into the regular work force after the date of this Award and who have not acquired the protection provided under (2) above, the Employer shall have the right to effect layoffs for lack of work or for other legitimate reasons.

As with most negotiated contracts the Article 6 language also includes: “Protection against layoffs continues for all career  employees who were on the rolls as of Nov. 20, 2010.   The language of Article 6 , which governs layoffs and reductions-in-force, remains unchanged.”  Arbitrator James J. Healy in settling the 1978-1981 Contract Agreement required six years of continous service to achieve protection against layoff.

Lastly, Issa’s statement “….and wages have only risen since” is incorrect:

APWU General Wage Increases (Level 5/6 Step 0) and COLA – Contract Year 2006-2010:

2006- 1.3% | $0

2007- 0% | $0 and $686

2008- 2.6% | $479 and $1477

2009- 1.2%|  $0 and $0

2010- 0% | $0 and $0

Total for almost SEVEN (7) years (2011, 2012  included) = $2,466 wages, $2,642 COLA=$5, 108= $730 ($729.75) per year or $29 per pay period or $14 per week-  subtract the 4% increase in Health Premiums and inflation.  The last pay raise for Postal Workers represented by APWU was 2009. The next pay raise if the Tentative Agreement is ratified by the membership is scheduled for November of 2012. The next COLA is scheduled for 2013. Three years without a pay raise yet Issa and company thinks this is too much.

Note: On the Health Premiums. The issue of USPS contributions to Health Care Premiums has ignited much debate. But during one of the negotiations on the contract NALC and APWU suggested Postal Workers pull out of FEHB but USPS declined.

APWU Tentative Agreement 2010-2015

2011- 0% | $0 and $0

2012 – 1% (Nov. 17, 2012) | $0 and $0

2013- 1.5% | TBA

2014 – 1% | TBA

2015- 1/2 of year $0

Dr. Joel Popkin Rebuttal On Postal Worker’s Pay 2003
NALC and Dr. James L. Medoff
NALC and Dr. James Medoff Rebuttal To Dr. Wachter On Postal Pay 2003

27 thoughts on “Congressman Issa Asks: Can USPS Survive Paying Higher Wages While Workload Decreases?

  1. I am getting seriously tired of the mis information etc from Rep Issa, reminds me of the Soviet Union and their disinformation tactics for years during the cold war! (USAF Intelligence Officer once upon a time, now a postal employee!). ALL THE UNIONS NEED TO START RUNNING TELEVISION ADS, ESPECIALLY IN REP ISSA’S DISTRICT, TELLING THE FACTS THAT THIS MULTI MILLIONAIRE IS MIS-REPRESENTING!

  2. well last week you back off the post office when they were going to close 3 branches in your district now here you come again just like a roach when the lights are out here you come again give us back the money you owe us you know from that slush fund or happy piggy bank you were use to and cut your stall by 75 % i wonder just how much you guys get for staff. over paid creap

  3. I read that if the congress would just give the csrs over funding back all would be o.k.. The USPS is not allowed to make a profit so unless the USPS had a stash of cash laying around to pay this cost, it had to come from the customers, right. So if congress refunds this money, I ask who does it belong to?

  4. Hey Congressman Issa…How about repaying the US Postal Service, 75 BILLION DOLLARS in overpayments to its CSRS retirement plan. The GAO said so, now do it!

  5. So the U.S. Postal Service has been overcharging its retirement CSRS since 1971. The GAO did an audit of the postal service and overpayments reach 75 billion dollars… WHAT!
    The federal government doesn’t want to totally repay the Postal Service the money, only part of it. WHY NOT? Its their money!
    If the federal government totally repays the 75 billion to the Postal Service, they would instantly be in the black and making money.
    Also adjust the current payments so you don’t continue to overcharge, the federal government will not do this!

  6. Issa is a politician. The USPS is a massive loosing debt laden semi quasi government service which is to operate at a break even point. Both statements are true. In order to increase employee wages steps have to be taken to reduce debt as an increase in demand for Postal products to increase sales and generate revenue is not going to happen. Services that are no longer needed for the USPS to reduce massive debt are reduce high echelon high salary positions that do not attribute to creating measurable dollar results, Eliminate non needed community post offices that no longer serve purpose due to time and changing demographics. Reduce district staph’s(sic) that are nonessential in human resources, labor relations, plant , transportation HCR, VMF, lawyers who cannot make it in the real world but are paid commensurate salaries and benefits that exceed speciality law firms. Discontinue PFP AS MONEY IS LOST IN EXCEEDING COST TO MAKE A NUMBER BY HOOK OR CROOK.
    Why waste money on a cost that does not benefit the customer and for the most part the customer contribute nothing in receiving this service as the service does not exist as a mail recipient demand. Time is not a factor in receiving BULK BUSINESS STANDARD MAIL ON SAT. AND IS NEITHER A DEMAND FROM THE MAILER AS AN EXTENDED TIME FRAME IS GIVEN TO ORDER THE PRODUCT OFFERED IN THIS ADVERTISING MAIL.. The USPS loss in Feb. 2011 was a billion dollars. Revenue down 1.5% the driver of revenue was down 1.5%. The only positive revenue gain was in SHIPPING SERVICES. Deliver Express and 2ND day Priority on the weekend. Mail paid with a premium to guarantee delivery in a defined time frame. UPS and FED X OPERATE IN THIS MANNER AND ARE PROFITABLE COMPANIES UNLIKE THE UPS.
    Eliminate Sat. deliver as fuel cost are up 12%. Parking vehicles used on route delivery would be a significant saving on fuel alone. The cost of no SAT. route delivery personnel along with saving on fuel would be the MOST SAVING FACTOR TO THE BREAKEVEN POINT AND WOULD CONTRIBUTE TO EMPLOYEES RECEIVING A WAGE INCREASE. HOW CAN WAGES BE INCREASED WITH USPS SPENDING MORE MONEY DAILY THAN IT TAKEN IN.
    POSITIVE REVENUES ARE HISTORY AS DEMAND FOR POSTAL SERVICE AND PRODUCTS WILL CONTINUE TO DECLINE. THE USPS HAS EXCEEDED ITS NEED TO EXIST. THE DAY OF THE INTERNET CONNECTS PEOPLE IN SOCIAL AND BUSINESS USE. FACEBOOK, EBAY, TWITTER, MY SPACE ARE OUTLETS FOR SOCIAL NETWORKING. ONE MAY EVEN PAY AND RECEIVE BILL STATEMENTS VIA AN E MAIL ADDRESS. THE DELIVERY OF PEOPLE AND BUSINESS CONNECTIONS AE VIA AN E MAIL ADDRESS AND NOT A PHYSICAL MAILBOX AT A STREET ADDRESS.
    ELIMINATION OF SAT. ROUTE DELIVERY IS THE KEY TO REDUCING WASTED COST AND MAINTAIN JUST CAUSE FOR CONTINUING A SERVICE FOR ALL AMERICANS TO RECEIVE ADVERTISING BULK BUSINESS MAIL AND PARCEL DELIVERY MON.-FRI.. THIS ALSO CONTRIBUTES TO STABLE EMPLOYMENT NUMBERS WITHOUT CONTRIBUTING TO UNEMPLOYMENT NUMBERS.
    THE USPS MUST DOWNSIZE OR BECOME A FOSSIL IN THE PAST DIANSOUR
    AGE OF PEOPLE CONNECTING VIA THE WRITTEN WORD PROCESSED AND DELIVERED BY A USPS MAILER CARRIER AND PLACED IN A MAILBOX EVEN AS A SEARS CATALOGUE WAS AT A TIME IN HISTORY.

  7. lastboastdope pull your head out you are not impressing anyone with your vast knowledge or lack thereof. You have your opinion but fact is email and related technology has been around for awhile-did everyone quit drinking brewed coffee when instant coffee appeared?

  8. Issa is a complete idiot!! Does he want all americans except congressmen to make a decent salary!! Postal workers have earned the right to make the salary we are making! While he and other congressmen especially republicans are at home having cocktails and sleeping at night, we are at work, trying to get the mail out to millions of americans and other countries in this nation! Postal workers do not count like other federal agencies in most instances, unless it is something negative, then we are imoportant! Like holidays, national crisis, Postal workers still have to work, just the senior workers are off. So Republibcan Issa, why don’t you quit putting the postal workers down and give us a little respect and credit for the job we do 365 days a year!! Do you wnat all americans to make miminum wage forever!! The economy is bad enough. Why don’t you republicans wake up! I don’t see you lowering your own wages or benefits! Set the example first!

  9. Too much “shoot the messenger” going on in our craft. The “overpay” issue has been addressed by the OPM OIG. He essentially said “that money is gone”. Not fair but who said life’s fair? In whatever form the USPS gets any of it back, it’ll have no bearing on the viability of our operations. Move on.

    The vital issues today are the TA and the Congressional oversight hearings. The TA gives us more time to adapt ourselves to the current economic climate. And like it or, Congress is our ultimate boss. That is a constitutional requirement. We must prove ourselves anew as the challenges we face are new.

    The PO is a unique entity, neither government service agency, nor business for profit. It’s an odd hybrid that once had the ability to pay its own way..and now doesn’t. That is where the rubber meets the road brothers and sisters.

    We can rail against the numbers and claim they are fake but that is a self defeating path to take. The better option, the only one that has any chance of success (and that means we keep our jobs) is to let the changes needed take place in a way that leaves us all working for a new USPS. This requires a radical shift away from our old, now obsolete, business model. It requires we get smaller and more able to be part of an information highway that no longer needs mass volumes of mail.

    Vote yes on the TA and then be willing join the effort to remake this old dinosaur that has served US so well for so long. Without doing that, we will most certainly share the dinosaurs fate.

  10. The country isn’t broke. All the money is just in the hands of the few. And they arent’ required to pay taxes. The top 400 billionaires are worth what the bottom 50% are (150,000,000 people). 40 years ago you coundn’t even say that for the top 4000. If you’re of the disappearing middle class, you should be concerned with this trend. The power and money is all in the hands of the few. This is an Oligarchy by definition.

  11. Mr Issa
    How about using the congressional seat you bought to address the viability of the hidden tax we call Social Security. Of course, Congress doesn’t contribute to this as the average working American does. Why don’t you use your time in Washington to tackle something with some substance? Remember your constituents voted you into office and they can just as easily vote you out!!!!!! If you will not address the overfunding of CCRS by the USPS you must have another agenda for your verbal attack against the United States Postal Worker. Maybe the American people should be allowed to vote on Congressman’s pay. Maybe you and the rest of Congress need a pay cut to make this great country viable in the future. With the national deficit at an all time high I think that a pay cut should be in order for you as well as the rest of Congress.

  12. Mr. Issa
    If you feel the need to submerse yourself into USPS finances I have a question for you. Why don’t you address the fact the we, the USPS are funding CSRS retirement 5 billion dollars a year which is overfunded by 71 billion. This is required by Congress. Being that you bought your seat in congress and you intend to use it, how about using it responsibly. Maybe you could sponsor a bill that would take the burden of the 5 billion dollar payment to CCRS retirement away from the USPS. No other federal agency is required to fund this towards CSRS.

  13. I know alot of people are worried about what future employees might get from this contract ,but if i,m to be honest i dont care about future employees
    i,m a little more worried about keeping what i spent 17 year,s earning ?
    and the truth is there should be more part time workers in the post office in make sense financially and thats just the way it is ..
    things change in life they cant stay the same all the time i do indeed feel bad for the subs some of which have worked as many years as i have and are still not regular,s but thats a choice they have made to stay and not seek other jobs .
    i would much rather see the postal sevice live on for another 100 years than to lose it all just over costs ..

  14. Issa should just shut the hell up PERIOD!!
    HE HAS NO IDEA AT ALL WHAT HE IS TALKING ABOUT
    AND EVERY TIME HE OPENS HIS MOUTH HE LOOKS MORE IGNORANT

  15. So many people using the Republican talking points here. What am I to believe? As am employee I see what’s going on, it doesn’t take a degree from any university to realize. Come to my plant on Sunday night at 7:30PM and you will see it too. Tour 1 is already on the floor working, and Tour 3 is being held over because the Supervisors are scared that they can’t get the Monday mail out on time. The Supervisors and Managers can’t Manage with what they have, and panic rules. The Mail is gotten out each morning to the huge relief of Management. The Mail gets out DESPITE Management, Why?, the employees that actually touch the mail being dedicated to that end.

  16. Maybe Issa needs to read the Mass. APWU Local reasons for voting no on the contract before asking anymore questions. After reading those reasons, I have changed my opinion and now recommend a no vote. Anyone who is considering a yes vote really needs to read that and reconsider. From that article, it sounds pretty definite that all current full time regulars, as we currently know them, will be a thing of the past and the new USPS work force will be replacing them by forced excessing/layoffs from the fake protection that is being passed. This may be one of the biggest frauds in the history of labor contracts ever. Be sure and read that article and the fine print that is not being disclosed by those pushing this mess. The real scary part also is the same people that agreed to this are the ones that will be representing our interest in arbitration. We are screwed anyway you look at it.

  17. The USPS aims to pay higher wages and delivery mail on Sat. as its core mission is to increase debt without any rationale as to the factors of supply and demand to maintain a state of being viable. Board of governors (9) president appointed ans PMG AND DEPUTY PMG\\ have never take Economics 101 but maintain citizens are entitled to Postal services regardless if used. The USPS maintain non needed Post Offices regardless if needed or used: just have a Post Office available in case the use justifies or not.
    The major wasted cost is delivering waste paper on Sat. with fuel cost up .12 a gallon to SPLY. The demise of the USPS can in large be attributed to advances in technology that connect individuals and businesses. The personal communication referred to as FIRST CLASS MAIL has declined in volume resulting in loss of revenue; the only increase in any Postal endeavor is in shipping services. The Feb. 2011 BILLION DOLLAR LOSS reflects the need and use of the USPS: it is a loosing business situation. The elimination of upper tiers of high salaried management in an attempt to reduce bottom line cost has little significance in the overall pictures of a NEGATIVE DOLLAR BOTTOMLINE. The most significant cost factor which bears no return and increases cost is Sat. mail DELIVERY or placing waster paper Ina physical street address mailbox.
    This service is nonessential in keeping Americans connected as it was 50 years ago. The Internet and advances in technology has changed the American culture. This is the APPS age, smart phones, tablets, increased use of means to
    produce electronic recording keeping as in the medical record field and transfer of funds via direct deposit via increase business and government use as federal treasury agencies as treasury dept. and social security will be fully processed direct deposit by 2013.

    The USPS can continue to increase wages and waste money on Sat. mail delivery
    and live in the past or management and politicians can face reality that the majority of services provided by the USPS 50 years ago are obsolete. Today is a new age in communications and the USPS must concentrate efforts as a delivery company with a line of services and products in demand by consumers not postal patrons as referred to many years ago.

    The argument that Americans are entitled to a postal systems with decreasing demand and use at a massive dollar lost should make it clear to politicians and union groups that the factor that creates revenue an increase in sales no longer exist. Collective bargaining to increase wages in a decreasing dollar business cannot in reality come to be. Cannot get blood from a turnip.

    Rep. Issa looks at the issue from reality that exist at the moment. The funds to maintain the USPS as it exist at the moment are not available to fund wages increases. Unlike signs a plus(demand for wage increase) and a minus (funds available for wage increase) equal a minus. A giant step to eliminate the most significant cost which provides no needed postal service, is to eliminate Sat. mail delivery which is equivalent to bleeding from an artery with no attempt to stop before bleeding to death or cease to exist.

  18. “lastbesthope”: For an intelligent person, I am really surprised that you use
    “death spiral” when you speak of the USPS….and for some reason, YOU tie
    the USPS to the US Government’s “financial state”.

    Your PREMISE and EQUATING the USPS with US Government profligate
    spending is COMPLETELY FALSE and disingenuous. Federal Statute
    that controls the USPS was amended in 2006 to force PRE-PAYMENT of
    5.5 Billion Dollars worth of “expense” for FUTURE RETIREES medical
    expense EVERY YEAR. Without this 5.5 BILLION DOLLAR EXPENSE
    COLLAR, the Postal Service would not be in it’s current financial state.

    What happened ? Did you FORGET that? Or do you think it’s OKAY for
    CONGRESS to do the SAME THING to the USPS that they do with SOCIAL
    SECURITY….use them as a cash cow every year, putting 5.5 BILLION into
    THE GENERAL FUND, leaving THE REAL OBLIGATION to pay these
    “retiree expenses” to some FUTURE CONGRESS to use TAX DOLLARS
    to pay something that they have already collected the money for??

    The Postal Service should only be obligated to a “CURRENT ACCOUNT”
    annual expense to pay these costs…LIKE EVERY OTHER AGENCY OF THE
    US GOVERNMENT…and the Postal Service OIG and actuarial organizations
    “hired” by the Postal Service have reports AND FACTUAL DATA to prove their
    case that THEY ARE BEING TAKEN TO THE CLEANERS BY CONGRESS.

    And finally….THE NATIONAL DEBT HAS ABSOLUTELY NOTHING TO DO
    WITH THE POSTAL SERVICE.
    It would seem that YOU think that Postal workers NEED TO GIVE UP WAGES
    AND BENEFITS in order to “BALANCE THE NATIONAL BUDGET” AND “REPAY”
    THE NATIONAL DEBT.
    This idea is absurd….the USPS Budget has no tie to the US Federal Budget,
    AT ALL. YOUR idea of SACRIFICE FOR THE COMMON GOOD should be
    applied to NATIONAL TAX POLICY, not the USPS Budget or Collective
    Bargaining Agreements negotiated by the parties.

    Now just WHO is “willfully ignorant” here? And WHO’S FAKE DEBT are we
    talking about here?
    I submit that you DON’T WORK HERE and that you are a CONSERVATIVE
    WITH AN AGENDA, posting here for the purpose of UNION BASHING.
    Even POSTAL MANAGEMENT ORGANIZATIONS see the value in collective
    bargaining and publicly support it.

    Your first post would pass the muster, mister, but your second one
    REVEALS EXACTLY WHO YOU ARE.

    Take a hike Jack.

  19. Can the USA keep pay Congressmen such high increases in pay and benefits,is the question.Trillions in debt that they got us in and no talk about the sinking ship they are in.

  20. So our national debt is fake and the USPS isn’t actually broke?

    This is the willful ignorance of those who cannot handle the truth….which seems to be a condition found most often in those who are insulated from the real world i.e live in a priviledged bubble union types.

  21. The Post Office isn’t even really “broke”. The 5.4 billion dollar prepayment didn’t exist before 2006. That is what is the problem. And it was just another way to shake money out of the PO to help Idiot Bush pay for his Idiot Wars.

  22. Quit watching Fake News. The country isn’t broke. They are just letting all the wealthy and powerful interests have all the money. Corporations pay little or no taxes while we scapegoat regular Americans for their “extravagent” lifestyles at 50 k a year. Share a brain with someone.

  23. When you find yourself in a hole….stop digging. This rehash of what some eggheads said to the 2003 Commission is pointless. The USPS is in a financial death spiral..as is our nation. Our choice is to adjust to the reality that WE ARE BROKE and make some grown up decisions on how we go forward…. or throw a child like tantrum and insist that what we want is what we want.

    The TA reached by the USPS/APWU, after months of negotiations, is about as good as can be expected from labor’s side and allows mangaement needed flexibility as they deal with the issue of disappearing mail volume.

    Congress need not concern itself too much with what has been agreed to by those who have actually made a compromise deal. Their time would be better spent reaching a deal amongst themselves to reduce our cancerous national debt without shutting down our government in the process.

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