Postal Service privatization

Philip Greenspun's Weblog 2013-04-06

I’m still working my way through some of lectures within “Modern Economic Issues”, by Robert Whaples. If economics is the dismal science then nothing could be more dismal than an economics lecture on the U.S. postal service. It turns out that postal workers made about $60,000 per year (back in 2006 when the lectures were recorded) either to sit at a desk at a post office or to walk/drive around and deliver the mail. At the time this was about 30 percent more than private-industry counterparts and their pensions and other benefits further elevate the 574,000 workers (wikipedia) above what they might make absent the unionization and monopoly of the post office.

One thing that was interesting about the talk was the discussion about what has happened in countries where the postal service was privatized and/or subjected to competition. The fact that productivity in the privatized postal services went up 30-40 percent was not surprising to me. What surprised me was the countries that had privatized. Americans like to think of ourselves as a relatively free market society whereas Europe, especially Scandinavia, is the land of socialism. Yet countries such as Sweden,Denmark,  Finland, Germany, Holland, and the UK have privatized or opened up to competition and the EU is somehow going to push the rest of the countries along (assuming they have money/energy left over from all of their bailouts!).

It is fascinating to me how, despite the large role that government plays in American life, Americans (including myself) still have a huge mental bias toward thinking of this country as somehow an example of the free enterprise system. I recently went to a party and talked to an MIT PhD in engineering who thought that government in the U.S. collected only about 20 percent of the nation’s total income in taxes and that this was a vastly smaller percentage than Europeans paid. The number that he had was about right, when restricted to federal income taxes, but it ignored taxation by state and local governments. A guy who writes a property tax check twice a year to the City of Cambridge had simply forgotten to add that in. A guy whose pay check every month indicates money withheld for the Commonwealth of Massachusetts had forgotten about state spending.