The U.S. Postal Service is raising rates on letters, magazines and marketing missives by as much as 6.9 percent this summer, sending the cost of a first-class stamp from 55 to 58 cents, as it leans into an expansive restructuring plan that codifies slower mail delivery and streamlines agency operations.
DeJoy’s 10-year “Delivering for America” plan, announced in March, calls for longer delivery windows, shorter post office hours and fewer staff.
Also Friday, the agency sent out “reduction in force,” or layoff, notices to hundreds of management-level employees. An agency spokesman could not say how many workers were involved.
Brian Wagner, president of the National Association of Postal Supervisors, said Friday that he had not been informed of the number. But many of those people could move into open positions or accept demotions to stay 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 increases and layoffs could derail a tenuous 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 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, who studies the Postal Service at the Lexington Institute, a right-leaning think tank. “To come out at a time of a pandemic and a lot of people are still hurting economically, that they’re going to come out with something that’s more than double the past year’s increases, it invites a lot of things to go haywire.”
And 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 months. (Amazon founder and chief executive 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 collectively will 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, 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 includes 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, would have more severe consequences. Rates on flat mail, such as larger envelopes or catalogues, 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 non-mailing products recorded 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 on Aug. 29.
Some experts are skeptical that the Postal Service needs to raise prices to generate revenue. The agency forecast nearly $10 billion in losses in the current fiscal year, but halfway through the marking period, it is down only $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 rose 56 percent in April compared with the same period in 2020, and revenue jumped 61.2 percent. The agency’s package business also remains brisk: Revenue is up 32.7 percent year-to-date compared with the period a year ago.
“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.”
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