Three certainties: death, taxes, and rising postage

Photo by Ali Bakhtiari on Unsplash

Three things in life are certain: death, taxes, and the United States Postal Service (USPS) raising first-class postage. On April 9, the USPS filed notice with the Postal Regulatory Commission of price hikes that will take effect July 12. According to America’s mail carrier, “the new rates include a 4-cent increase in the price of a First-Class Mail Forever stamp from 78 cents to 82 cents.” Metered mail rates and postcard prices are also increasing; in all, mailing service prices will rise by approximately 4.8 percent.

While the USPS claims that these hikes are necessary because of the “severe financial crisis facing the Postal Service and continued rising operational costs,” the truth is that the agency has plenty of tools at its disposal to correct course without making the mail more expensive. Taxpayers and consumers deserve a USPS that can deliver at an affordable price.

If the USPS is going to get serious about reducing annual net losses—which totaled $9 billion in fiscal year (FY) 2025 and $9.5 billion in FY 2024—it needs to start by reducing labor costs. Compensation and benefits alone cost the agency more than $55 billion per year, or about 60 percent of total operating expenses. This figure is up sharply from $44 billion ten years ago, largely because the USPS added (on net) 40,000 career employees since 2015 and compensates them at higher rates.

It doesn’t have to be this way. The USPS could save significant sums of money by focusing on non-career (or what it calls “pre-career”) hires. A 2021 analysis by the Government Accountability Office estimates that the compensation gap between career and pre-career employees is around $25 per hour, though this total shrinks to $8 per hour when comparing similar types of workers with similar experience. Even after controlling for these factors, the USPS saves nearly $2 billion per year by retaining 115,000 non-career workers.

Doubling the proportion of pre-career workers would likely double these annual savings. This formula would follow the success of private-sector delivery companies, which have a tried-and-true approach of maintaining a stable base of career employees and bringing on tens of thousands of seasonal and part-time workers to respond to sudden upticks in demand. The USPS has actually been moving away from that strategy, hiring fewer seasonal workers than it used to. Reversing this trend would yield significant savings for taxpayers and consumers.

One thing that will not succeed in shoring up finances is repeatedly raising stamp prices. According to a 2024 analysis conducted by the economic consultancy NDP Analytics, “Under the current process, the USPS proposes new rate increases before the impact of prior increases can be fully realized. USPS demand models, which are used to justify rate increases, have never been tested in this way. USPS stands to lose considerably from miscalculating its customers’ sensitivity to price.”

They estimate that these flawed revenue projections cost the USPS $1.8 billion annually, or one-fifth of 2025 losses. The report also notes that the USPS has been making large-scale changes to its demand model — “in FY2024 there were 63 items in its change log” — without showing sensitivity analyses indicating how changes in forecast design can lead to different results.

Instead of repeatedly raising stamp prices, the USPS needs to focus on changing its hiring practices and enacting other commonsense reforms. It’s long past time for America’s mail carrier to take responsibility for its failures and turn things around.