Wednesday, August 27, 2014

Will the Postal Service be our Model for Reform?

Should things be logical? When we do an analysis, we think we can see congruity in data. For example, if we decrease the speed limit on the interstate, most of us would likely think that should lead to fewer accidents. 

Somehow, things are not working out that way for the U.S. Postal Service. In an August 19, 2014 report cited in the Federal Times the workforce at your United States Postal Service (USPS) is shrinking. In 2008 the service employed 663,000 people, and by 2013 that has been reduced to 491,000; that is 172,000 jobs lost in about five years. About 26% of a workforce eliminated, or about 5% annually on average. 

With reductions in workforce, one might reasonably expect that the expenses associated with the workforce would likewise decrease. According to the Inspector General the Service's workers' compensation costs have grown by 35%. The report identifies several issues that could be contributing to this incongruity. 

The report notes that "light duty" jobs are harder to find within the Postal Service. This agency has moved to leverage technology over the last several decades as has much of the American employment sector. Without a doubt, there are robots and machines doing so much today that was performed by people just ten or twenty years ago. I watched a documentary recently about a robot that retrieves parts in a warehouse to fill orders. It never occurred to me, but they said a major savings with this automation is that they do not air condition the warehouse anymore, and they turn off the lights. The robot works on, apparently oblivious to the working conditions that would not please you or me. 

The report also notes that there is a degree of their cost increase attributable to the fact that their workforce is older. The say that us older people are "more prone to injuries and slower to recover."

Curiously, they also report that somehow the cost of workers' compensation became disparate between the government and private industry. According to the Inspector General, private industry pays about $.73 per work hour for private workers' compensation, while the Postal Service pays about $1.16.  That is a difference of about 60% more paid by the USPS.

According to the USPS it cost $.03 to send a one-half ounce letter in 1863. The measure changed to a rate ($.02) per ounce in 1885. Thus, rates for mail were decreasing (think of the expanding nature of rail in that era; technology can change things for the better). According to Westegg's inflation calculator, that $.03 in 1865 should be $.45 in 2013. According to the USPS, the rate was actually $.46, so their fees for service over a very long period (150 years) is pretty consistent with inflation. 

The problem with that analysis is that the USPS is losing money at the rates they are charging. How much? As much as $25 million dollars per day in the  last quarter of 2012. In August 2013, the New York Times reported that had vastly improved with the USPS losing only $8 million per day in the third quarter of 2013. The improvements in their losses are attributed to "cost cutting measures and strong growth in e-commerce deliveries." As an aside, the USPS spent $32 million sponsoring Lance Armstrong's cycling team (did anyone learn of the USPS services or decide to use them through this strategic advertising?). 

The Inspector General has reportedly suggested that the workers' compensation trend might be ameliorated if "it capped workers' compensation benefits by time and amount." There is also a contention that forcing injured workers to "take generic drugs for prescriptions when available" would have positive effects on the bottom line. These are not actions which the USPS can take unilaterally. These "would require Congress to pass legislation amending the Federal Employee Compensation Act."

As Congress considers that, if they do, will they weigh in on the constitutionality question? There is suggestion from south Florida recently that changing the quantum or duration of benefits can lead to the conclusion that the "great compromise" is no longer a valid quid pro quo. (See also, a "work in progress," Rethinking the Great Compromise). There is a perceived combination of erosion and accretion that leads some to conclude that workers' compensation is not the compromise that it once was. 

There is the perception that rights have accumulated where they did not exist, in such manner as the decline of contributory negligence provisions, replaced by comparative negligence alternatives. There is also discussion, though, that legislative efforts to restrict benefit levels beyond whatever restriction existed in earlier statutory expressions likewise changes the equation or alters the "deal" that is the "great compromise." 

Over the years, burdens have been added to employers in some workers' compensation systems, benefits to employees have been altered or reduced in some systems. It now remains to be seen whether such legislative changes can be made to responsibilities and rights without impairing the exclusive remedy, that is protection from tort liability, that was a major benefit that business received in the "great compromise." 

If changes can be made within the constitutional construct enunciated by the Miami trial court, what changes? Will there be some judicial standard, or will it be governed similarly to Mr. Justice Potter Stewart's now infamous "I know it when I see it" standard in Jacobellis v. Ohio back in 1964?

It appears that some programs will face these debates in coming years. States are striving to continue to do much with decreasing revenue streams. The Boomers are retiring, birth rates are down, economic growth is elusive, and the Whopper may move to Canada. 

In the instant context, will rates for postage be increased to cover the existing costs? Will the postal service just keep bleeding red ink? Will the federal workers' compensation benefits be reduced or contoured to reduce the costs? Are all of these options even on the table? In the broader context, how will states deal with the parallel issues in our systems. I know I am getting older, and in that may be part of a problem. Can we also be part of the solution?

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