Postal Service Set to Stop Saturday Deliveries: Financial Impact

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Saturday postal deliveries will end in August. What are the financial implications for the Postal Service and its employees? Image credit: Billy Alexander.

Saturday postal deliveries will end in August. What are the financial implications for the Postal Service and its employees? Image credit: Billy Alexander.

The U.S. Postal Service has set out plans to stop Saturday mail deliveries from 5th August, 2013. What are the financial implications of ‘No Post on Saturday,’ and who will be affected by this change?

Why Stop Saturday Deliveries?

The proposal comes as the Postal Service struggles with the $15.9 billion of losses it incurred in the last financial year. With the service reportedly losing around $25 million per day, the Postmaster General is hoping to implement the change in order to avoid the severe financial difficulties projected to hit the service in October, should the rate of decline continue at the current rate.

The Postal service has already used its borrowing authority of $15 billion, and cutting back on services may be the only option left to restore financial stability. It is predicted that the Service could face possible insolvency as soon as October 2013 if cost-cutting initiatives are not set into motion this year.

Post Office Loses Money Because of the Internet

The financial hardship of the Postal Service can be attributed, mostly, to the rise in popularity of e-commerce, online payments, and email. The volume of mail processed by the Service is currently 26% less than in 2006, a figure set to decline further if trends for online services continue.

Plans to cut Saturday deliveries do not include packages, however, meaning that online retailers who rely on the postal system to deliver parcels ordered over the Internet will not be affected. The volume of packages has increased by 14% in recent years, and could prove vital in sustaining the Postal Office as it adapts to changing business needs.

USPS: Savings and Cuts

The move to end Saturday deliveries will save an estimated $2 billion annually. With some businesses who still rely on the postal system to deliver smaller products not classed as ‘packages’ concerned about the impact of delivery limitations on their profitability, it seems that postal staff will be those paying the highest price.

The proposals would see 22,500 full time postal workers of the current 521,000 lose their jobs, despite plans to keep post offices open on weekends and continue the delivery of packages and parcels.

Changing the Post Office

Patrick Donahoe, Postmaster General and CEO, feels he has the support of the nation in proposing changes to the delivery system. “The American public understands the financial challenges of the Postal Service,” he said. “The Postal Service has a responsibility to take the steps necessary to return to lon-term financial stability and ensure the continued affordability of the US Mail.

Sources:

Postal Service Press Release. Postal Service Announces New Delivery Schedule. (2013). Accessed February 8, 2013.

Keane, A. US Post Office Plans to Stop Saturday Mail Deliveries. (2013). Bloomberg. Accessed February 8, 2013.

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