The plant consolidation plan: 35,000 jobs lost, and “no significant impact”?


In order to comply with the National Environmental Policy Act (NEPA), the Postal Service has prepared a Programmatic Environmental Assessment (PEA) for the Mail Processing Network Rationalization Initiative.  Although 250 communities and 35,000 postal workers will be directly affected, the PEA states that the consolidation plan will have “No Significant Impact."

The “environment” includes not just air quality, noise, land use, and waste disposal but also socioeconomic considerations, like the economic impacts on the community.  It’s hard to believe that the Postal Service thinks closing a large processing plant will have no significant impact on a community, and there’s not much in the report to support the claim, either.

As part of the report, the Postal Service has provided more detailed numbers about the reduction in the workforce than it initially included in the Request for an Advisory Opinion to the Postal Regulatory Commission (PRC).  Nearly 35,000 positions would be affected.  The breakdown is summarized in the following table.

The Postal Service has previously provided a discussion about how the workforce reduction would be achieved, given that the union contracts have no-layoff clauses.  In the materials provided to the PRC back in December, there’s testimony by Kevin Rachel, a Manager in the USPS labor relations department, so for more details about RIF, VER, eReassign, etc., see his testimony, here.

The PAE also includes a discussion about the economic impacts on communities that lose their processing facility.  As the report explains, “These impacts may be direct impacts through loss of employment and expenditures to service providers and suppliers, and indirect through loss of jobs in other sectors of the local economy and loss of sales at local trade and service businesses, such as restaurants and gas stations.  In addition, service providers who are contracted directly with the Postal Service would also be impacted.”

The following table shows how the workforce reduction breaks down in terms of dollar amounts: 

As the table shows, cutting 34,058 jobs would have a direct labor impact of $2.58 billion.  That’s nearly $2.6 billion no longer flowing into communities through the salaries of postal workers.  But that’s just the beginning of the impact.  There’s also a huge ripple effect  on the rest of the community — non-postal workers in the service and retail sectors who lose their jobs, lost retails sales, lost tax revenue, and so on.

In order to assess what that might mean to an individual community, the Postal Service turned to a study of the economic impact of job losses in Springfield, Illinois (Sangamon County), where the Postal Service has a mail processing plan slated for consolidation.  The study was commissioned by the Greater Springfield Chamber of Commerce, and it was conducted by the Regional Development Institute of Northern Illinois University.    

The study provides the following table showing the losses that closing the plant would cause:

The "direct" employment number refers to the 300 postal workers who would lose their jobs, and the “indirect” employment figure of 145 refers to service, retail, and other non-USPS jobs that would be lost if the plant closed.  The next three lines offer three different ways of calculating the losses.  The first, 'Employee Compensation," calculates the total salaries for the 300 postal workers (it uses an average of salary of $78,333, including benefits), plus the salary of 145 non-postal workers.  “Output” refers to the value of an industry’s business activities, including retail sales, that would be lost.  “Value added” refers to the gross domestic product of the county, and it includes employee compensation, rent, interest, taxes, and profit paid or earned.

The NIU study shows that you can't measure the impacts on the community by just looking at the salaries of postal employees.  The losses in "indirect" costs would be very large as well, whatever method of calculation you choose to use.  In the case of output losses, for example, the indirect losses are almost 40% of the total loss.

Just to put the losses in context, the total output losses of $42.7 million would be about 2.1% of Sangamon County's total output (in sales) of $2.1 billion.  Not a lot percentage-wise, perhaps, but still a considerable sum.

To get a sense of the impacts nationwide, we can extrapolate from the Sangamon numbers.  The Postal Service is planning to reduce the workforce by 35,000 jobs.  The Postal Service's own numbers show an impact of over $2.5 billion in salaries alone (that includes benefits).   But the output impacts, direct and indirect, would total $5 billion, and the lost wealth in terms of GDP would be about $3.7 billion. 

The PAE does not calculate nationwide impacts like this.  It simply concludes the discussion of economic impacts as follows: "The Proposed Action would result in a moderate adverse impact on local economies.  However, these impacts would not be significant.  On a national or programmatic level the economic impacts would be negligible because the overall economic system is much larger and some of the jobs lost at 'study' facilities could be offset by additional jobs at 'gaining' facilities.  Therefore, any impacts on the national economy would not be significant."

Deciding whether a particular economic impact is "moderate," "significant," or "negligible" is a qualitative judgment.  What may be "negligible" to the Postal Service may be very "significant" indeed to the community suffering the economic impacts of a consolidation.  And the notion that more economic activity in the communities with the "gaining" facilities will offset losses for the closing facilities makes little sense.  It's not as if the jobs are just going from one town to another.   The whole purpose of the consolidation plan is to eliminate 35,000 jobs.

The Postal Service says the consolidation plan will lead to "significant" cost savings for itself of $2.1 billion — about 3% of its annual budget.  In order to achieve this relatively modest cost savings, the Postal Service is willing to put 35,000 postal employees and 17,000 non-postal employees out of work and inflict $4 or $5 billion of losses on 250 communities across the country.  All so that it can save maybe $2 billion.  That’s postal math for you.

(Photo credit: Springfield IL post office & processing facility)