This Graph Explains Why the U.S. Postal Service Is About to Cut Saturday Mail Delivery

By Jordan Weissmann

With its business hemorrhaging billions and Congress seemingly incapable of crafting a rescue plan, the U.S. Postal Service went rogue this morning and announced that it would end most Saturday mail delivery in order to save costs. This comes as a bit of a shock, as USPS is required by law to do its job six days a week. But desperate times apparently call for desperate measures.  

And things are desperate. Over the last three years, the post office has lost almost $30 billion. A bit more than half of that can be blamed on Congress' financially ruinous decision to force the agency to pre-fund its retiree health benefits through 2056 by making roughly $5.5 billion in annual payments. But leaving that absurd obligation aside, the truth is that delivering mail to every corner of the country, six-days a week is becoming an untenable business model, as is illustrated plainly in this graph below from a post office financial report.

Total mail volume has fallen by 25 percent since 2007. Revenues, meanwhile, has tumbled 13 percent, and are now outstripped by its basic operating expenses, even if you don't include the retiree health payments. (Be careful how you read the chart -- neither the left or right axis starts at zero, which makes the drop-off look a bit more dramatic visually than it is financially). 

Post_Service_Revenue_Volume_USPS.PNG

So why should nixing Saturday mail -- with the exception of packages -- be part of the answer? The post office's biggest expenses are labor and transportation, and eliminating a day of service would cut down on hours worked and truck fuel burned. In the end, past estimates have suggested that the move could save the agency anywhere from around $1.6 to $3.1 billion

This article available online at:

http://www.theatlantic.com/business/archive/2013/02/this-graph-explains-why-the-us-postal-service-is-about-to-cut-saturday-mail-delivery/272912/