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132 IRET Congressional Advisory 1 (2002)

handle is hein.taxfoundation/iretcgadv0129 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. August 28, 2002 Advisory No. 132 HOW TO BRING POSTAL COMPENSATION INTO LINE WITH THE PRIVATE SECTOR Executive Summary Numerous economic studies have concluded that employees of the Postal Service receive much higher wages and benefits - up to 30% or 40% higher - than do comparable workers in the private sector of the U.S. economy. Many neutral labor arbitrators have reached similar conclusions. * The postal pay premium imposes an enormous financial burden on the labor-intensive Postal Service. Merely reducing the compensation premium from 30% to 10% would have saved the Postal Service $8.1 billion in 2001 alone, enough to have avoided the recent postage increase. The postal pay premium is also contrary to clear statements in federal law that postal pay should be comparable to private sector pay. * If postal wages and benefits were comparable to those in the private sector, the cost savings would allow the Postal Service to operate in the black and cut postal rates. * There are many workable methods for bringing postal compensation into closer alignment with private sector wages and benefits. Some of the options are: * Increase postal compensation at the rate of inflation until the postal pay premium is reduced or eliminated. * Increase postal pay more slowly than increases in an index of private sector labor costs to gradually reduce the postal pay premium. * Restrain postal wages when the postal worker quit rate is very low or the number of qualified people seeking postal jobs is very high. * Vary postal wages by geographic region. * Instruct labor arbitrators, who often determine postal compensation in binding arbitration proceedings, to give more weight in their awards to pay comparability. * Expand the use of worksharing discounts where possible. * Increase the use of part-time and temporary employees who would receive market or above-market compensation but less of a pay premium than full-time career employees. * Privatize the Postal Service and remove its monopoly and other special privileges so that the same market forces which determine compensation for other workers can operate at the Postal Service. * Because the Postal Service's financial problems are mainly due to bloated costs and most of its costs are for labor, reducing or eliminating the postal pay premium should be a central element of Postal Service reform. * Although it may be politically tempting to try ducking the issue, the U.S. Postal Service will almost certainly remain financially sick unless the problem of its above-market wages and benefits is tackled.

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