Biden AdministrationUkraine InvasionInflationEnergyCybersecurity

As the USPS faces privatization, here’s what it can learn from Canada

January 24, 2020, 4:30 PM UTC

After 13 straight years of losses, the United States Postal Service (USPS) could partially privatize this year.

The Postal Service’s Board of Governors is currently on the hunt for a new Postmaster General and, shortly after appointing one, is slated to create a package of structural changes intended to make the organization more profitable. Megan Brennan, the current Postmaster General, was originally set to retire on Jan. 31, but she has agreed to delay her departure in order for the USPS to have more time. The Board of Governors remains in the throes of conducting a “nationwide search” to find someone to fill her spot, they announced in a Jan. 6 release

Privatizing parts of the USPS is at the top of the list of anticipated structural changes following the appointment of Brennan’s replacement, according to the American Postal Workers Union (APWU), which does not endorse the idea. 

A representative from the USPS declined to comment, instead pointing to a November 2019 statement where Brennan noted: “Revenue growth in our package business will never be enough to offset imbalances in the Postal Service’s business model, which must be addressed through legislative and regulatory reforms in order to secure a sustainable future.”

The move would make the U.S. one of many countries worldwide with a semiprivate postal service—including Denmark, Switzerland, Spain, and France, each of which has seen varying degrees of success in doing so.

Canada also falls on this list. Since becoming a public corporation in 1980, the organization has attempted to replace door-to-door delivery with community mailboxes, contracted services out to private retailers, and faced its fair share of labor disputes with the Canadian Union of Postal Workers (CUPW) that have resulted in losses for the company. If Canada’s 40 years with a semiprivate postal service indicate anything, it’s that privatizing is neither a smooth nor an easy fix.

While neither the USPS nor Canada Post receives taxpayer funding, the former has lost money every year for over a decade, while the latter has remained fairly and consistently profitable. This is largely due to a U.S. congressional mandate ordering the USPS to budget retiree health care for every new employee as soon as they’re hired. As retirement costs grow, so have worker compensation costs; the upfront health care mandate is the source of 80% of the USPS’s debt. It’s unclear how privatization would affect this requirement. Canada Post does not have to fulfill this requirement, though the CUPW ensures Canada Post employees have competitive benefits

Like the Canadian Broadcasting Corp., the Bank of Canada, and national passenger rail service Via Rail, Canada Post is a crown corporation: a hybrid public-private entity that’s state-owned and regulated, yet given the autonomy to operate the way a corporation would. Canada Post does not have to submit an annual operating budget for federal approval before making decisions in the interest of beating out private competitors, like FedEx. Crown corporations submit quarterly financial reports, and their management is subject to federal intervention should any red flags arise.

Canada Post fulfills public sector goals “using private sector methods,” like cutting wages, raising prices, and contracting out services, says Robert Campbell, president and vice chancellor of Mount Allison University and author of two books on contemporary postal systems. “It’s attracted better talent. It’s attracted better expertise. Its thinking is much more market-oriented,” he says.  

While its mandate has been reviewed by the federal government every five years since it corporatized, over time, the company “has acted increasingly like a private corporation, and less like a bureaucracy,” Campbell says.

A representative from Canada Post declined to comment.

Canadian crown corporation status is typically given to entities that offer an essential public service that would not be economically viable if run by private corporations alone. Postal delivery fits this criteria to a tee: Canada Post couriers serve as “the eyes and ears of the public,” says Megan Whitfield, president of the Toronto chapter of the CUPW. Beyond delivering citizens vital pieces of mail like disability and social security checks, mail carriers also socialxize with seniors and check in on people living in isolation. “Nobody knows more about the people than their letter carriers,” Whitfield says.

Yet, operating in Canada—a sprawling landmass where, similar to the U.S., nearly 20% of the population lives in rural communities—is a huge economic challenge, one that Canada Post has struggled with amid pressure to break even each year. 

Canada Post debated slashing routes as a cost-cutting measure, but its attempts have always been met with criticism. As recently as 2013, emboldened by the support of Conservative Prime Minister Stephen Harper, Canada Post announced plans to phase out home mail delivery in favor of community mailboxes. The move would have saved the organization an estimated $700 million to $900 million, but it would have ended door-to-door service for approximately 5 million Canadians, including senior citizens and people with disabilities who would have difficulty traveling to public mailboxes, critics of the reforms argued.

“You’d be devastating communities,” Whitfield says. “It’s not just about losing your mail. It’s the trust issue. It’s the door-to-door. It’s the services [postal workers] provide. It’s the network.”

After major public backlash, a grassroots campaign by the CUPW, and the eventual election of Liberal Prime Minister Justin Trudeau in 2015, a moratorium was placed on discussion about ending door-to-door mail delivery. 

But many Americans fear that a privatized USPS would make similar moves, like cutting routes in unprofitable areas and increasing prices for consumers. While the USPS is limited in how quickly it can raise rates, the task force President Donald Trump called in 2018 to identify solutions to make the Postal Service more profitable has proposed charging more for “commercial services,” including advertising mail and Amazon orders—a move critics fear will hit small businesses especially hard. The task force has recommended retaining uniform pricing on essential services, however, including the mailing of pharmaceuticals and government notices.  

Another cost privatized postal services commonly slash in an effort to boost profit margins are jobs and wages. The Netherlands, which privatized its postal service in 1989, cut 12,000 jobs in doing so, while Germany, which privatized in 1995, cut 38,000. Private postal services across Europe have also seen wages drop and benefits slashed, Alan Barber, then director of domestic policy at the Center for Economic and Policy Research, reported in a 2018 paper.

According to the APWU, the Trump administration is likely to begin privatization by selling off pieces of the Postal Service—a move Canada Post has also made, but at the expense of workers, Whitfield says. The Canadian postal service sells contract bids to retailers with a postal service center in the building, like pharmacy giant Shoppers Drug Mart. In these situations, postal employees work for the host company, not for Canada Post, and they work under conditions set by the retailer. Many staff who work at Canada Post desks at these franchises are paid far less than direct employees of the postal service, and nearly all lack the right to unionize, Whitfield estimates.

Indeed, Trump’s task force has recommended rolling back workers’ collective bargaining rights. But if history is any indication, this move could be disastrous, says Robert Hebdon, professor emeritus in organizational behavior and industrial relations at McGill University in Montreal.

He predicts that an illegal strike, similar to the one in which approximately 200,000 U.S. postal workers participated in 1970, could be on the horizon. While USPS workers currently do not have the right to strike, Hebdon is not ruling out the possibility of an illegal walkout.

“If workers are generally unsatisfied with their conditions, as we’re seeing with Amazon, they’ll still take action,” Hebdon says. “They’ll do something about it. And you won’t be able to stop it, and you won’t be able to predict when it will happen.”

The long history of labor disputes between Canada Post and the CUPW only affirms this assertion. Postal workers held rotating strikes most recently in the fall of 2018 after a year of contract negotiations that failed to reach an agreement. The disruption in working patterns led many Canadian consumers to turn to competitors for package delivery, causing Canada Post to report a loss of $270 million for 2018.

“[The U.S.] government seems to want to return to some kind of unregulated model where workers don’t have rights, and believe me, we’ve been there,” Hebdon says. “That doesn’t work.” 

Correction, January 26, 2020: A previous version of this story misstated the number of Canadians who would have been affected by the 2013 plan to phase out home delivery.