From the Office Of Inspector General:
The single largest Postal Service expense after compensation is purchased transportation. In 2010, the Postal Service spent $5.9 billion moving mail between cities with contracted highway, air, rail, and water transportation.
Overall, offering more early retirements for eligible employees would create additional cost savings. For retiree health benefits, there would be little total savings. Generally,the Postal Service would have to pay more for FEHB premiums in retirement but it would save on premium costs for the employee. As the Postal Service pays a greater share of premium payments for employees than the rest of the federal government (discussed earlier in this paper), it would save as Postal Service retirees pay premiums according to federal rates. The problem, however, is how to incentivize further buyouts
that the Postal Service cannot afford to offer in its current financial state.
Labor expenses are also affected by the way the Postal Service utilizes labor. Table 1 shows the number of Postal Service employees by category in 2010 and 2000. Since 2000, the Postal Service has shed over 200,000 career employees (26 percent), and has experienced an 18 percent drop in volume while increasing the number of delivery points by 10 percent. The top four employee categories by size are still city carriers,clerks, rural carriers, and mail handlers, although they have switched order since 2000 as some new automation and efforts to optimize the network have further reduced the complement of clerks.
As mail volume declines, the Postal Service has made a great effort to reduce its employee complement. This has been aided by the high number of retirement eligible employees in the postal workforce. The number of career employees has declined by more than 100,000 from 2006. In 2009, the Postal Service offered retirement incentives According to the Postal Service, that early retirement offer saved the organization nearly $350 million.26 Postal commentators have advocated for even more aggressive efforts to reduce the number of employees.
These retirements raise the question of what effect early retirement has on the Postal Service’s retirement obligations. Table 2 offers some insight into this issue. It describes the effect on both current employee costs and future retirement obligations, which it is assumed the Postal Service will have to fund fully at some point. The assumption is that employees who retire early are not replaced by new employees. The effect of pension increases versus salary increases is also not considered. Employees who retire earlier typically receive a smaller annuity. However, retirees receive automatic pension increases based on inflation in retirement. If these inflation increases are greater than 100,000 from 2006.In 2009, the Postal Service offered retirement incentives to certain employees, and more than 20,000 clerks and mail handlers took advantage.25 According to the Postal Service, that early retirement offer saved the organization nearly $350 million.26 Postal commentators have advocated for even more aggressive efforts to reduce the number of employees.These retirements raise the question of what effect early retirement has on the Postal Service’s retirement obligations. Table 2 offers some insight into this issue