As American politics veers again, one of the favored ideas that has re-emerged – as part of the broad push for “government efficiency” – is the privatization of government services, replacing what the federal government does with the same or reduced services supplied by private sector companies.
The USPS
Likely on the list of potential privatization candidates is the Postal Service. As a ubiquitous public sector employer of over 600,000 mostly unionized employees, it represents a juicy target for both conservative thinkers and private sector firms that could step into the agency’s space.
However, the first question is whether the USPS, as an entirety, could be privatized. Most people would say no, given the diversity and scope of the agency’s functions. For example, at the December 10 hearing of the House Committee on Oversight and Accountability, committee chair Rep James Comer (KY 1st) stated
“… when we talk about efficiency, especially members on this side of the aisle, we think of privatization… The problem with that is nobody wants to deliver the mail to every house in America six days a week and to operate all those retail postal facilities. There’s no private company in the world that wants that.”
However, Comer noted, there were some private companies that could perform some functions.
If the package business is an example, that space is already populated by well-run, profitable, private sector companies operating integrated end-to-end networks. Postmaster General Louis DeJoy is trying hard to wedge the Postal Service into the package business, some say to the detriment of hard-copy mail. Regardless of his efforts, it’s reasonable to consider that work to be largely privatized already – if being open to private sector competition is the key indicator.
That leaves traditional mail – letters and flats – on the table; moving that type of material is both operationally different than moving boxes and the de facto, if not statutory, bailiwick of the American post for 250 years. That activity and its associated functions likely are what is envisioned when talk turns to privatizing the Postal Service. Even then, however, it’s not one homogeneous entity with inseparable components; rather, there are arguably four fundamental parts: retail, processing, transportation, and delivery.
Retail
This public-facing element of a postal service is the essential point of access for non-commercial customers. As has been well documented in the appeals filed with the Postal Regulatory Commission when the USPS has sought to close a post office, communities, especially in rural areas, see having a postal retail outlet – whether a “real” post office (i.e., operated by Postal Service), or a contractor-operated facility – as a definition of identity and a critical connector to the world.
Aside from what’s sold, there’s nothing unique about the functions and staffing requirements of a postal retail facility, either, compared to any other store. (Any co-located delivery functions will be discussed below.) What is distinctive is that the majority of post offices aren’t profitable; the infrastructure, operating, and personnel costs outweigh the revenue taken in across the counter.
Therefore, operating all 31,000-plus post offices isn’t a commercially viable or attractive proposition. Privatization, if pursued, would self-limit to only those locations that would be profitable, with the rest retained by the government as a “public good” or essential public service. Offering additional services, whether government services or commercial products and services, might increase the viability of marginally profitable operations, but most would remain in the red.
Regardless, no politician hoping to ever get re-elected would support a measure that would negatively impact voters served by thousands of unprofitable, usually rural, post offices.
Delivery
At the other end of the postal continuum is delivery to addressees, and this has “how” and “when” elements. Generally, the “how” is either the mail is brought to the addressee, e.g., by city or rural carrier, or the addressee picks it up, such as from a post office box or through general delivery or caller service (there’s the link to retail).
Most people would argue that delivery requires not simply the ability to walk or drive from one point to another and match the mail to the address (though doing only that seems to be a challenge for some delivery novices). Rather, being entrusted with what the mail can contain requires a level of responsibility and accountability, as well as the commitment to ensure the mail actually is delivered to the right place.
Though, in theory, a private company could assemble a cadre of minimum wage workers to drop material in mailboxes, the delivery of mail is a core function of a postal service, at least in the view of most Americans, so privatization of delivery may not be what advocates should see as an initial venture.
Separate is the “when” and, for those seeking to improve “efficiency,” that may be where more immediate opportunity lies. The requirement for six-day delivery was always an expectation of the Postal Service; it wasn’t explicitly stated in the universal service obligation and only reflected in annual Congressional appropriation resolutions.
As the volume of mail has dwindled in recent years and the diversion of messages to electronic media has mushroomed, all while the number of delivery points has grown, the public perception that six-day mail delivery is essential has changed, and many surveys have found people would accept a lesser frequency. Unfortunately, the 2022 Postal Service Reform Act codified the six-day delivery requirement, so any change would require Congressional action – and overcoming the opposition of the carriers’ unions.
Transportation
The privatization of transportation has already happened; moving mail between post offices and processing facilities has long been dominated by private sector transportation companies. Whether operating by road, rail, or air, contractors have demonstrated they can reliably and efficiently get the mail where it needs to go. Moreover, contractors can be held to performance standards prescribed by the Postal Service and paid based on competitive bidding.
Unfortunately, Postmaster General Louis DeJoy has begun to reverse that age-old arrangement and is insourcing short-haul trucking to postal vehicle service drivers who are part of the American Postal Workers Union.
Contract drivers can be part-time or split-shift; career USPS employees have a fixed eight-hour schedule. Although the USPS won’t reveal whether insourcing will reduce costs (many believe it won’t), it will allow the USPS to find jobs for career workers – who, by contract, can’t be laid off – if they become excess because of processing network realignments.
Processing
The mail processing network may be the area where the greatest opportunity exists for private companies.
First, private sector firms already exist that process mail: presort mailers and consolidators have the same equipment as postal facilities, work from the same distribution schemes, follow comparable dispatch schedules, and employ workers with tasks and skills similar to those of USPS employees.
Second, the cost of staffing a private mail processing operation would be lower. Wages and benefits aside, the complement of a private operation can be flexed by the hour, day, or other interval based on workload; other than a decreasing pool of temporary “pre-career” workers, postal staffing is inflexible.
Third, a private mail processing network does not require the construction of new facilities. Private companies like presort mailers and consolidators already have facilities, and contracted operation of existing postal facilities, run in compliance with USPS requirements, could be implemented incrementally based on the acquisition and training of workers.
Adding It Up
The foregoing analysis suggests a model in which the retail and delivery functions – the “First Mile” and “Last Mile” – might best remain as government functions while the “Middle Mile” could easily be outsourced to private companies.
Of course, the overarching question is whether that possibility is good public policy – which, in turn, is dependent on who is setting that policy and from which side of the political spectrum they draw their opinions about what can, should, or shouldn’t be offered by the government vs. private sector.
Though America has had a postal system operated by the federal government as a public good since 1775, there’s no guarantee that a not-so-distant future shift in political thinking can’t undo that for the benefit of private interests. Service to postal customers, already being subordinated by the PMG in the pursuit of an elusive self-sustaining Postal Service, likely would be pushed farther out of focus.
In turn, that begs another question: given the overall decline of hard-copy mail, and the decreasing use of postal retail and delivery channels, is there any long-term prospect of profit sufficient to draw the attention from private operators? As argued above, retail has only limited opportunity (a “maybe”) and delivery and services have less (a “no”).
However, the private sector has already established itself in transportation and has the capability to easily expand into mail processing so, for those functions, the answer seems to be “yes.”
Nothing Soon
Regardless of which form of privatization might emerge as the shiny object for proponents, the easier part might be drafting a proposal.
As has been seen in virtually every significant change to government operations – changes that involve legislative action – developing a consensus around a workable outcome would be the real challenge. Looking back at the major postal legislation in the US – in 1970, 2006, and 2022, for example – the legislative process is driven by competing interests, with the outcome decided not on its merits, but who had the greatest influence and how the horse-trading of provisions worked out. And, again referring back to the same examples, whatever might be done the first time likely would require amendment after amendment.
Therefore, even if political zealots focus on the USPS, don’t throw away your Forever stamps. Major changes to the Postal Service may take a long time – if ever – to be agreed upon, and longer still to be implemented; check back next year.
Leo Raymond is owner/managing director, Mailers Hub.
This article originally appeared in the March/April, 2025 issue of Mailing Systems Technology.
