The U.S. Postal Service is raising rates on letters, magazines and marketing missives as much as 6.9 percent this summer, sending the cost of a first-class stamp from 55 to 58 cents, as the agency leans into an expansive restructuring plan that codifies slower mail delivery and streamlines agency operations.
The rate structure announced Friday represents the latest installment of Postmaster General Louis DeJoy’s plan to erase a projected $160 billon in liabilities over the next decade. The agency has struggled for the better part of a year with inconsistent delivery service and soaring package volumes that have gridlocked its processing network. The Postal Service’s on-time delivery scores have not topped 90 percent since July 2020.
DeJoy’s 10-year “Delivering for America” plan, announced in March, calls for longer delivery windows, shorter post office hours and fewer staff. The agency sent out “reduction in force,” or layoff, notices to hundreds of management-level employees Friday morning.
An agency spokesman could not say how many workers would be affected, and Brian Wagner, president of the National Association of Postal Supervisors, said in a Friday interview that he had not been informed of the figures, either. Many impacted employees could accept vacant positions or demotions to stay on with the Postal Service.
“I’ve told our members that we will work through these challenging times with this restructuring and this [reduction in force],” Wagner said. “We’ll support them through all this. But there’s plenty of open positions for people who want one.”
Experts worry the price hikes and layoffs could derail a unsteady agreement in Congress on legislation to reform the Postal Service’s finances and relieve it of annual $5 billion payments on retiree health-care benefits. The “Postal Service Reform Act” has bipartisan support in both chambers, but both Democrats and Republicans have expressed concern to postal officials about making the mail more expensive.
“Legislation is always tentative and always fragile,” said Paul Steidler. To come out at a time of a pandemic and a lot of ppl are still hurting economically that they’re going to come out with something that’s double the past year’s inflation, it invites a lot of things to go haywire.
More rate increases could be on the way. The Postal Service on Friday raised prices exclusively for “market dominant” mail, or items such as letters, postcards and marketing mail over which it maintains a monopoly by law. The agency has signaled it will raise prices on other products — including package shipping, on which it competes fiercely with UPS, FedEx and Amazon — in the coming weeks. (Amazon founder Jeff Bezos owns The Washington Post.)
The prospect of higher prices and slower service standards have spooked mailing industry executives and consumer advocates, who worry they will collectively drive lucrative mail volume away from the Postal Service and worsen its financial condition. Volume of first class mail, the agency’s most profitable item, is will probably take the biggest hit, experts say, as businesses encourage customers to avoid the Postal Service.
“First-class mail is going to continue to go away, but the impact of service standard changes and the impact of rate increases just raises the focus of making that happen faster,” said Todd Haycock, president of the Major Mailers Association trade group. “And for smaller businesses, many were just going along and paying the rates and doing what they need to do, but this brings these changes to the attention of those businesses and they’ll start to move away.”
The Postal Service sets modest price increases tied to inflation on certain mail products every year, but Friday’s change represents a new paradigm. The Postal Regulatory Commission adopted new rules on the mail service’s pricing authority in November. It allows the agency to continue its annual inflation-based increases, plus include a corresponding bump based on the growing number of delivery points mail carriers must visit six days a week.
It also can charge more each year when it begins paying down its current $136.1 billion in federal debt — payments it hasn’t made since 2011 — and can charge 2 percent for each mail product that doesn’t cover its own costs.
On certain mail products, those increases, which compound annually, will have more severe consequences. Rates on flat mail, such as larger envelopes or catalogs, rose 16 percent, compared with the 1.9-percent hike enacted in 2020.
Rates for local periodicals went from 11 to 12 cents, and for nonlocal periodicals, from 27 to 30 cents. The rate for postcards jumped from 36 to 40 cents.
Package services and nonmailing products saw some of the highest increases. Media and library mail went from $3.71 to $4.11, a 40-cent bump. Money orders went from $1.30 to $1.45.
Mailing groups are challenging the new rates in the District of Columbia Circuit Court of Appeals. The changes will take effect in Aug. 29.
Some experts are skeptical that the Postal Service needs to raise prices to generate revenue. The agency predicted close to $10 billion in losses in the current fiscal year, but halfway through the marking period, it is only down $448 million, according to its most recent filing with the PRC. Mail volume in 2021 is up 11 percent over internal year-to-date estimates.
Marketing mail, a crucial driver of volume that fell sharply in 2020, has roared back as businesses restart advertising campaigns. Volume in April rose 56 percent over the same period in 2020, and revenue jumped 61.2 percent. The agency’s package business also remains brisk. Revenue year-to-date climbed 37.2 percent compared with the year-ago period.
The Postal Service is flush with cash, with $25 billion in liquid assets, and it is on track to receive more financial help from Congress, where a bill to relieve the agency of $5 billion annual payments to prefund retiree health care costs appears to have a filibuster-proof majority in the Senate.
“Why at a time when we’re coming out the pandemic — when businesses need to thrive, when advertisers need to expand — why would you want to choke them out of mail by raising rates?” said Art Sackler, manager of the Coalition for a 21st Century Postal Service, an industry group whose members include Amazon, eBay and other commercial mailers. “The stars seem to be aligning for the Postal Service as it is.”