Reports & studies
November 20, 2011
There’s a new GAO report out this week by the indefatigable Phillip Herr. It’s called “Action Needed to Maximize Cost-Saving Potential of Alternatives to Post Offices.” In this week’s Federal Eye column for the Washington Post, Ed O’Keefe writes about the report and poses the question, “How bad is it at the post office? Here are the numbers.”
Citing Herr’s report, O’Keefe writes: “There were 59 million fewer visits to post offices in 2010 than in 2009, and visits are down 21 percent over the last decade, according to a new Government Accountability Office report. (Ironically — despite searching high and low for a number — the report doesn’t actually say how many visits were recorded in 2010.)”
The reason O’Keefe couldn’t find the number of post office visits in the GAO report is that Herr doesn’t say how many there were, and despite being heavily footnoted, the report doesn’t say where the number 59 million came from.
So, how many people do visit the post office every year?
The Postal Facts Page
O’Keefe is a busy fellow, so apparently he didn’t have time to Google around for an answer to his question. The “Postal Facts” page of the USPS website provides a table with all sorts of data, including annual visits to the post office. (Click on the chart for a larger view, and click on the chart to come back.)
The line for "Total Customer Visits" says there were 1.12 billion visits in 2009 and 1.07 billion in 2010. The decline comes to 50 million (about 5%) — a little less than Herr’s GAO report mentions, but close enough. The table also says there were 1.36 billion visits in 2001, and that would account for the 21% drop over the last decade that Herr cites and O’Keefe repeats.
The Postal Facts page thus provides the numbers on which Herr may have based his claim that visits were down 59 million in 2010, but this just raises another question: Where did the Postal Service come up with its numbers? The Postal Facts page doesn’t say.
Annual Customer Visits to POS Locations
The number of people visiting post offices has become one of the issues being examined in hearings before the Postal Regulatory Commission, now working on an Advisory Opinion on the Retail Access Optimization Initiative (RAOI). After all, if you’re going to close 3,650 post offices — and plan to close a total of 15,000 — it only makes sense to consider how many people use the post office.
In fact, one of the justifications for closing thousands of post offices is that people are visiting the post office much less frequently than they used to. According to the Postal Service, the brick-and-mortar post office is essentially a thing of the past.
In his opening testimony before the PRC on the RAOI, James Boldt, the man running the show, said this: “Customer behavior is also changing. With advances in technology and other product innovations, customers are choosing alternatives to traditional brick-and-mortar retail facilities when possible and instead are attracted to other channels developed by the Postal Service.”
To illustrate his point, Boldt provided the following chart:
The point of the chart was to show that visits to the post office have been steadily declining, and the way the chart cuts off the bottom of the vertical axis, it actually looks like people soon won’t be going to the post office at all.
It wasn’t clear from the chart how these annual visits were being counted, so the National Association of Postmasters (NAPUS) put several interrogatories to Boldt about it. It turns out that only about 15,500 post offices have a Point of Sale (POS) terminal to count window transactions, so the chart doesn’t show the picture for all 32,000 post offices. Plus, the POS terminal doesn’t count many kinds of visits to the post office, like when you go check your p.o. box or pick up a flat-rate box (PRC hearing transcript, Sept. 8, 2011, p. 339).
Actually, it's not even clear what Boldt's chart is showing to begin with. It's supposedly showing annual visits to a POS location, but it can't mean that a thousand people a year visit each location. If you multiply the 15,500 POS locations times the 965 annual visits in 2010, you get about 15 million visits. Since only half the country’s post offices have a POS terminal, let’s double that number for the whole country, which gives us about 30 million visits. But that’s a tiny fraction of the estimated 1.07 billion visits in 2010 shown on the Postal Facts page. So what exactly is Boldt’s chart showing if not annual visits? And why is the label on the vertical axis blacked out?
There’s another version of the chart in a USPS briefing presentation (from April 2011). As with Boldt’s chart, the purpose is to illustrate that “customers visits are diminishing at Post Offices, with internet diversion, competition, and the expansion of Postal Access points outside of traditional Post Offices.” Here’s the briefing presentation version:
Unlike Boldt’s chart, the briefing chart has the vertical axis labeled, with “pieces (m).” Perhaps this refers to the number of pieces of mail that were handled in retail transactions at each of the post offices with a POS terminal, measured in thousands (m). That would mean, then, that Boldt’s chart did not really show the number of customer visits at all. It was showing the number of pieces handled in these visits — about 15 billion pieces at 15,500 locations. That number is at least in the ballpark, considering that the annual volume of mail is about 170 billion, much of it entering the system not at post offices but at Bulk Mail Entry Units.
While all this may explain Boldt’s chart, we’re back to the question: Where did the Postal Service’s “Postal Facts” come up with its numbers purporting to show a drop in visits, a "fact" now being repeated by the GAO to Congress, the Washington Post, and numerous other news agencies?
The Household Diary Survey
Perhaps the numbers were derived from another source, the survey of US households the USPS conducts each year. This “Household Diary Survey” (HDS) questions some 8,500 families over the telephone or Internet about their postal habits. The 2010 report shows the following chart:
The chart shows that the percentage of households visiting the post office every month is substantial — 83% in 2010. The survey doesn't tell us the total number of visits per year, but we can develop an estimate. If we take the lowest number in each range (1, 3, 7), we find that the average US household visits a post office at least 2.5 times a month. There are 115 million households in the U.S. That comes to over 3.5 billion visits a year. That’s more than three times as many as "Postal Facts" indicates.
Even that number may underestimate the total annual visits to the post office. Think about the people with p.o. boxes, who go to the post office almost every day. According to this OIG report, there are 21 million post office boxes, of which 14.4 million are occupied. If those boxholders checked their boxes five days a week, that would come to 3.6 billion visits a year.
But we could be talking about even bigger numbers. According to a new survey conducted by the American Consumer institute, the average consumer visits the post office more than four times per month. There are over 234 million people over 18 in the US. That would come to over 11 billion visits a year.
In other words, the number of visits to the post office each year is huge — on the order of several billion. So it looks like the Postal Facts page, with its number 1.07 billion visits in 2010, has grossly underestimated the frequency people use the post office. And it is just ludicrous to think that the Postal Service has such a firm grasp of the numbers that it knows visits declined by 5% in 2010. There's no evidence that visits to the post office are even declining at all.
Take another look at the Household Survey chart. Rather than showing a decline from 2009 to 2010, the HDS chart shows just the opposite. It says that the number of visits was fairly stable from 2009 to 2010. In fact, the numbers for those visiting a post office more than a couple of times a year went up: The percent of US households visiting 3 to 6 times rose from 30% to 33%, and for 7 or more times, from 18% to 19%. As the survey report observes, "Even with the continued availability of mail-related products and services through alternative modes (such as Internet orders), in-person visits to postal facilities remain stable."
So how could Boldt testify to a sharp decline in visits when the Household Diary report shows an increase in visits?
Explaining the Inconsistencies
NAPUS asked Boldt just that question in one of its interrogatories. Boldt explained the inconsistency by making two points. First, the Household Survey questioned customers on the phone or Internet about the range of frequency of their visits, but “they were not asked to recall or provide evidence of the actual number of visits.” In other words, the survey dealt with ranges, not specific numbers, and it’s possible people made erroneous claims (they weren’t asked to “provide evidence”).
October 21, 2011
Someone please give Phil Herr at the GAO a Xanax. The guy has been focused on USPS doomsday scenarios for so long, it’s apparently making him depressed and clouding his vision. His new GAO report paints a dire picture of the Postal Service’s future, but it’s based on numbers that seem to be pulled out of thin air.
A few days ago, Herr gave the Senate’s Committee on Homeland Security and Governmental Affairs a new GAO report on the Postal Service entitled “Mail Trends Highlight Need to Fundamentally Change Business Model.” The report is intended to inform Congressional leaders about how bad the situation is and to provide guidance about what to do. Its effect, however, will be to heighten the hysteria on Capitol Hill so that only “fundamental” restructuring changes are considered.
And what might those changes be? The report proposes three: (1) turn the Postal Service into a government-subsidized federal agency (read “taxpayer-funded bail-out”); (2) keep the current structure but give the USPS “additional flexibility” (so that it can “revise” the universal service obligation, outsource more business, close 16,000 post offices, and put 225,000 workers out of work), and (3) privatize the Postal Service completely.
If you’ve been following Herr’s GAO reports and his testimonies to Congress, there’s not much new here, except perhaps the way privatization is increasingly seen as a viable option. But the numbers in the report are worth noting.
The report begins, “Total mail volume is projected to decrease by 25 percent, First-Class Mail is expected to decrease by 50 percent, and Standard Mail volume is projected to remain flat. While dire, USPS’s projections could prove optimistic if communication continues to move to digital technologies as quickly as in the recent past.” Accompanying this prediction is the following table.
The table indicates the total mail volume for 2020 is projected to be 127 billion pieces. But where does this number come from? The “source” simply states, “USPS,” but that doesn’t help much if you want to locate the data or analysis on which the forecast is based. The sidebar for the GAO report says, “This summary is based on GAO’s past work, including GAO-11-278 (High-Risk Series: An Update) and GAO-10-455 (USPS: Strategies and Options to Facilitate Progress toward Financial Viability).” But what do we find if we turn to those earlier reports?
Both of these reports state that mail volume in 2020 is expected to be not 127 billion pieces a year, but rather 150 billion pieces. The “High Risk” report (Feb. 2011) states, “USPS expects mail volume to decline further to about 150 billion pieces by 2020” (page 44). And the “Strategies and Options” report contains the following chart showing the same thing (page 8):
The Postal Service's 2010 Annual Report projects 2020 mail volume around 152 billion pieces in a "best case" scenario. This projection is consistent with (and perhaps partly based on) a report done in March 2010 for the USPS by Boston Consulting Group, which also predicted a drop in total mail volume to 150 billion pieces, as seen in the following chart:
The BCG report does state that volumes could drop even further as a result of a “sustained period of zero economic growth” (like Japan’s Lost Decade) or the kind of online diversion experienced in the most "Internet-enabled" European countries. Similarly, the USPS 2010 annual report says a "worse case" scenario might be as bad as 120 billion pieces. But these are all "worse-case" scenarios, and the new GAO report says its numbers “could prove optimistic” — in other words, they are not part of a worst-case scenario.
Yet somehow the Postal Service and the GAO are now predicting a total volume decline far worse than the BCG report and the GAO’s earlier reports, one of which came out just a few months ago. Has Internet use skyrocketed over the past few months?
September 23, 2011
The retail and delivery operations of the post office have been "coupled" for 150 years, ever since the post office started delivering the mail. Now the USPS Office of Inspector General (OIG) is telling us that these operations should be "decoupled." It's not that the two aren't getting along — it's just that the Postal Service could save some money and provide better service if the two functions were divorced from each other. It would be even better if they both moved out of the post office altogether.
It's all explained in a new OIG report entitled “Retail and Delivery: Decoupling Could Improve Service and Lower Costs.” The study examines how the Postal Service and its customers would be better off if retail functions — the selling of postal products that takes place at the front of the post office — were separated from the delivery functions that take place in the back, where letter carriers prepare their mail for delivery, trucks are loaded and unloaded, and various administrative tasks are carried out. The separation would initially be “managerial” — a matter of who does what work — but it would also become a “spatial” issue — where the work gets done.
The title says decoupling “could” save money and improve service, but the report is about how decoupling would make things better. It's not an objective analysis of the pros and cons of different forms of separation and integration. When the report mentions the logic behind the traditional "coupling" arrangement of retail and delivery within the post office, it’s only to say how outmoded this is. The report is basically an advocacy document with a not-so-hidden agenda — divide up the jobs that get done in the post office, outsource the work, close the post office, and move the Postal Service further along the path of privatization. This agenda shapes the entire study.
For example, the report says decoupling would improve retail because it would give the Postal Service “more flexibility to respond to changing customer needs for service.” That’s a reference to the Postal Service’s endlessly repeated claim that people prefer doing postal business at retail outlets or online rather than at post offices. The OIG report doesn’t mention that the Postal Service has been pushing people in that direction by reducing service at post offices and expanding them at the alternatives.
The report says that with decoupling, retail would improve because it would receive more managerial attention. To make this point, it reminds people of all those times they’ve been standing in line at the post office while there are workers in the back doing something else. The report doesn’t explain that this is often the manager’s decision and not the clerk’s. It’s a problem that could easily be remedied by having headquarters tell management to give customer service a higher priority. You don’t need to radically transform the whole system with this “decoupling” idea to make that happen, but better customer service might make people value post offices, and that’s not part of the plan.
The report acknowledges that in some cases, like small rural post offices, decoupling is not practical, and it also acknowledges that there are some benefits to the traditional system, where clerks can do different things, depending on the workflow in the office — sometimes doing retail, sometimes helping with the work in the back. The report says this issue could be addressed with a “reasonable increase in work hour flexibility.” That’s means use more part-time workers, which the report mentions parenthetically: “If reasonably increased workforce flexibility is allowed (by allowing some retail clerks to work a half day, for example), the business need for coupling could effectively disappear.” Don’t you just love that? Allowing some retail clerks to work a half day. As if there are thousands and thousands of postal workers who are just dying to work half time for half-time pay.
Decoupling would also provide, says the report, “significant opportunities for space consolidation savings.” In other words, decoupling is not just about who does what work — it’s about space, i.e., post offices. As the report explains: “Decoupling could occur first organizationally, with separation of managerial responsibility, and subsequently, it could potentially support physical separation where it made business sense.”
A post office is already separated spatially into retail at the front and everything else in the back, so what the report means by this is that these functions don’t need to take place in the same building. The Postal Service discovered the benefits of "space consolidation" long ago. How many times have we seen the Postal Service consolidate the carriers and other workers from a large downtown post office to another postal facility, typically an annex on the outskirts of town? It can make sense — the facility is probably closer to the highway, access is less congested, there’s more parking for workers, etc.
September 14, 2011
One of the main problems with closing thousands of post offices is that the cost and pain are not evenly distributed among the population of the country. Some people get hurt more than others. As with most government cutbacks, it’s the poor who get hurt the most. They’re the ones who live in low-income urban neighborhoods and hardscrabble rural areas where most of the closings are taking place.
While a few affluent communities may lose their post offices, they represent a small percentage of the total slated for closure, and when the well-to-do lose a post office, it’s not such a hardship — they’ve got the time and gas money to drive a few miles to another post office in their nice car.
But it’s not just the poor who get hurt. Think about all the middle-class people who own small businesses that depend on the post office, the retired seniors who walk to a post office, the people of all incomes who look to the post office as a source of community identity and social fabric, and all the postal workers who will be out of a job.
Let's think a little more about who suffers when thousands of post offices close. The Postal Service certainly doesn't seem to be thinking about it.
People without Internet
All you hear from the media is that the Postal Service is closing post offices because everyone is doing email and paying bills online. But it’s not everyone.
According to the US Census for 2010, 31% of U.S. households have incomes of less than $30,000 a year. And according to Pew Internet, 60% of these households do not have broadband at home, and almost half don’t use the Internet at all. That means 19% of the country’s households do not have home access to the Internet because they cannot afford it or because they live in a low-income or rural area where there’s no broadband available. That number may actually be larger, since a third of the households earning $30,000 to $50,000 don’t have home broadband either.
That 19% means over 22 million households don’t have home Internet. If the Postal Service closes 4,000 post offices — one out of eight — how many of those 22 million households will find themselves without a nearby post office and without Internet? Given that many of the post offices on the list are in low-density areas, let’s just say one out of twenty. So we’re talking about over a million households near or below the poverty level ($22,000 for a family of four) with no Internet and no local post office. Those are some of the people who will be hurt most by the closing of thousands of post offices.
Poor people without Internet can’t just go online for email, bill paying, and news. These are the people who go to the post office to buy a money order to pay the electric bill. These are the people who will feel it the most when they have to put some extra gas in the tank to drive to a post office three or five or ten miles away, or who have to take an extra bus ride across town to the post office that’s still open. These are the people who experience the post office as a real place in the real world, not just an abstraction they read about in the virtual world of Internet news.
The Postal Service has not broken down its lists of post offices being studied for closure in terms of population density. In fact, it says it’s not looking at census data as a criterion — it doesn’t want to consider whether the area served by a post office is low-income, has a higher-than-average minority or senior population, or anything else that might suggest the Postal Service is discriminating against a particular part of the population. It says the relevancy of such data is too hard to determine, since no can know how many people in each census group are using the post office, and in what ways.
Nonetheless, even a cursory look at the closing maps and news items about impending closures reveals that a large portion of the post offices slated for closure are in rural areas. Three thousand of the 3,650 on the Retail Access Optimization Initiative (RAOI) closing list have annual revenues of less than $27,000, and almost all of these are probably rural. And there are also many small rural post offices on the non-RAOI list of 727 slated for closure.
Say 3,000 small rural post offices close, and say these post offices serve towns with an average population of a thousand people — about 400 households (the census says the average household is 2.6 people). When their post office closes, those 400 households will need to drive to a post office in another town. Since we’re talking rural, the nearest post office could easily be five, ten, or twenty miles away, but to be conservative, let’s say five. It’s hard to figure how often each household will need to go to the post office, and how many of those trips will be an extra trip as opposed to “we were going to Optimo anyway.” But let’s say that each household needs to make an extra ten-mile round trip twice a month.
If you do the math, it comes to nearly 300 million miles, and $50 million in fuel costs — over $40 a year per household. In other words, the Postal Service, in its efforts to save $200 million, is just transferring a large portion of its cost savings to rural Americans, who are going to dig deeper into their wallets to buy gas.
Of course, extra driving time and fuel costs are just part of the impact of a post office closure on a small town. What hurts even more is the thing that can’t be quantified — the way a post office serves a social function in the community. It’s a social hub and a source of community pride and identity. That’s why in so many news reports about post office closings, the people in small towns say that if you close the post office, you’re putting a nail in the coffin of the town. And they mourn the loss of the post office as if were a member of the family.
September 7, 2011
In February of 2010, the Urban Institute completed a study entitled “A Framework for Considering the Social Value of Postal Services” that had been commissioned by the Postal Regulatory Commission.” When it presented its findings, the Urban Institute recommended additional research to quantify the benefits it had identified, and the PRC proceeded to commission three contractors to do six studies on various aspects of the social and economic value of the postal system.
The PRC has just released the six studies. They are in many respects exploratory, and the PRC has not commented on them or taken any positions about what they say. Also, as you'll see, not all of the studies are even completed at this point.
Following are some selected passages and a few highlights. The titles to each section are links to the original documents, all available on the PRC website, along with additional materials, here — note the link on the left sidebar. The overview is here. Also, a few months ago "Save the Post Office" did a blog post on the 2010 study, in which those social values associated specifically with post offices were extracted from the study. You can see the list of those benefits here, anbd the entire study is here.
This report discusses how the “massive infrastructure" of the Postal Service "is a unique federal asset that can be called upon during a major disaster or terrorist attack when power and phone lines are useless.” As an illustration, the study reviews what happened after Katrina hit the Gulf states in 2005: “The Postal Service moved quickly to reestablish communications, to reopen lines of commerce, and to deliver government information, relief checks, and medicine to hurricane victims living in makeshift shelters. Its extensive address database enabled it to locate hundreds of thousands of displaced persons so that they could be reunited with their families.” The report observes that “It is unlikely that any other entity could have provided the same level and scope of services as the Postal Service did.”
Because of its value in such cases, “the Postal Service has been assigned responsibilities to prepare for emergencies as though it were a full federal agency (despite the fact that the Postal Service is almost completely funded through its sale of postage, not through federal appropriations).” For example, the Postal Service is a designated deliverer of antibiotics to residents in 72 cities in the event of a biological attack, and were such an attack to occur, the Postal Service could save thousands of lives.
This report begins by making an observation that will no doubt come as a surprise to many readers: “Approximately 9 million households, or one out of every 12 in the United States, are 'unbanked' — people without a banking relationship who rely on high-fee non-bank check cashers or money transfer services. Another 21 million Americans are 'underbanked' — people who have checking accounts but often turn to higher-cost services, such as high-fee international remittances or 300 percent-interest payday loans. A disproportionately large number of these households are minority and low income.”
The report notes that “(a) the federal government recognizes that meeting the needs of the unbanked is a priority—an undisputed benefit to society; and (b) the needs of the unbanked for transaction services are immense and growing, but have not, in general, been a priority of mainstream financial institutions.”
In its conclusion, the report states, “it is fair to conclude that the money transfer services that the Postal Service currently provides to the unbanked and underbanked deliver a distinct, recognizable benefit to society.” The report discusses the types of money orders and money transfer services, and notes that USPS rates are competitive in the industry.
The report observes: “The unbanked avail themselves of the Postal Service's money transfer services to send hundreds of millions of dollars each year. Many prefer to go to a local post office rather than a bank because they consider it conveniently located, familiar, comfortable, and trustworthy. The Postal Service also sets fees at affordable rates. The Postal Service thus benefits society through its provision of safe, convenient, and affordable transaction services to the unbanked.”
In light of the immense need for additional service in this area, the report goes on to discuss several areas where “the Postal Service could dramatically increase the social benefit it provides (and its revenue streams) by expanding its money transfer services to the unbanked.” The report here turns to possibilities like expanding domestic and international money orders to include both hard copy and electronic formats, and offering money transfers for bill payments, similar to Wal-Mart's bill payment services.
“Post offices are conveniently located in every neighborhood across the nation," concludes the report, "and it is likely that many unbanked persons already frequent their post offices for international remittances or other postal services. The Postal Service is also the most trusted federal agency, charges affordable fees, and provides reliable, universal mail service, making it a familiar, non-threatening place for the unbanked to conduct financial transactions.”