US Postal Service bad news continues with plan to terminate 120,000 workers

The business model that served the US Postal Service for these past decades is increasingly collapsing as a viable strategy.
Written by David Gewirtz, Senior Contributing Editor

The news just getting worse and worse for the U.S. Postal Service -- and for we Americans who rely on it. This time, the USPS is considering cutting up to 120,000 jobs.

See also: US Postal Service plans to close 3,653 post offices. Here's a list.

It gets worse. In the draft document, the USPS acknowledges that to cut those jobs, it has to break labor contracts. The USPS further wants to cut costs by terminating the health care plans for its pensioners and many active employees, putting them into a USPS-administered plan.

See also: Is the U.S. Postal Service obsolete?

This move is only the latest in a desperate attempt by one of the nation's largest employers to rein in spending and cut costs. Unfortunately, it's unlikely to be the last.

As I've discussed before, the business model that served the US Postal Service for these past decades is increasingly collapsing as a viable strategy.

The agency is under pressure from all sides. Its personal communications business (the revenue from letter carrying) is collapsing as more and more of us communicate through email and social networking. Speaking personally, I can't remember when I last sent a letter, and I even get and pay bills via electronic transactions.

On the package carrying front, UPS and Fedex are increasingly competitive, capturing more and more of the market for the package business.

So, while revenue is dropping on one side of the equation, costs are going up on the other. Fuel prices are unpredictable, but health care and benefits costs continue to rise without any sign of relief.

Many Americans know the romanticized history of mail carrying in the United States and most of us hold a special place in our hearts for the Rockwellian image of the postal carrier.

But those times have changed, and this is why the future of the USPS is such a tech-centric story. Our digital technology has disrupted the postal service model as much as it has disrupted other industries, from newspapers and classified to the music and media businesses undergoing such radical transformation.

If you separate out the romantic view of whether the USPS "should" survive and you look at it in the cold light of whether it "can" survive, it becomes clear the US Postal Service is on a precipitous slippery slope.

A fundamental service that's survived since Benjamin Franklin's time might not make it another ten years -- unless the agency makes some radical changes to its business model and even fundamental approach and mission.

Only time will tell.

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