You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Should Businesses Be Run Like the Post Office?

The post office plans to raise stamp prices again. The usual groans about government inefficiency are sure to follow. But the post office doesn’t get the credit it deserves. Contrary to popular perception, it receives no federal funding for its operations, subsisting almost entirely on the fees it charges for delivering mail. It’s a great bargain: It’ll take your letter anywhere in the country for what’s still a modest fee. And when Consumer Reports compared package services, it concluded that “the good old U.S. Postal Service is often cheapest by far.”

But put all of that aside. The post office bests the private sector in another way: It’s actually put the money aside to pay for its workers’ retirements. Audits show that, at the end of fiscal 2009, it had contributed enough funds to cover all but 1 percent of future pension obligations to its current workers. The post office does this because it must: Federal law mandates that the post office, like all other federal agencies, finance pensions fully. The private sector faces a similar requirement, but many firms use loopholes to wiggle out of their responsibilities. A recent study shows that pensions among S&P 1500 companies are underfunded by 21 percent. In other words, they’ve promised workers money that may not be there when they retire.

If the companies attempt to shed their pension obligations by declaring bankruptcy, as they’ve been known to do, the Pension Benefit Guaranty Corporation will become responsible for paying the retirees—potentially putting taxpayers on the hook for tens of billions of dollars. And, even then, workers will lose out, since PBGC payments are often smaller than what corporate pensions originally promised.

The contrast with the way the post office and private sector handle retiree health benefits is even more dramatic. The post office is socking away about $5.5 billion a year in order to finance health care that its workers won't use for decades; these payments are the primary reason it’s losing so much money. And a recent report even suggests that an accounting error resulted in the post office putting away far more money than will be needed.

Private companies, on the other hand, are not legally required to pre-pay retiree health benefits the way the post office is. And the private companies take advantage of that. A 2007 survey showed that, in the previous three years, 75 percent of large employers hadn't put away a single cent toward future retiree health benefits. By the way, the PBGC doesn't protect these benefits. Workers at some of these companies could retire and end up with no health benefits at all.

Think about that the next time a politician mocks a government program as having “the efficiency of the post office.” You should be so lucky.