Postal Price Inflation: New Increases Hit Small Businesses

By at 3 August, 2022, 9:42 am



By Karen Kerrigan –

Postmaster General Louis DeJoy recently announced that the United States Postal Service (USPS) would accelerate plans to close and consolidate facilities across the country in the hopes of reducing costs, increasing revenue and boosting efficiency.

This comes on the heels of postal consumers – including small businesses – absorbing a big price hike for USPS services. On July 10, USPS increased letter mail rates as the price of a First-Class Mail Forever stamp went up 2 cents to 60 cents. Postcard stamps will jump from 40 cents to 44 cents. During a time of high inflation and declining revenues, every penny counts for struggling small businesses, so this increase indeed will be felt by our nation’s smallest firms.

The rate hike is in line with the Postal Service Reform Act of 2022 signed into law on April 6th. That new law sets the stage for somewhere between $35-$52 billion in higher prices that USPS customers – read: small businesses – will pay between now and 2030. If you recall, letter mail rates were also increased in 2021 and in 2019.

The Postal Service Reform Act is supposed to boost the agency’s long-term fiscal outlook. Along with price increases, changes to USPS infrastructure that includes the closing of facilities are being implemented. USPS also has a goal of delivering packages seven days a week at below market pricing.

It will be interesting to see whether these facility consolidation plans will enhance or harm the Postal Service’s mandated mission to deliver letter mail. Regrettably, private companies are not allowed to compete with the Postal Service in delivering letters because of the agency’s status as a government-sponsored monopoly, so consumers have no other options for mail delivery if this effort falls flat. In our modern economy, it is a real head-scratcher as to why this monopoly is allowed to continue.

We know that the USPS continues to hemorrhage losses, and several of its core operational problems remain. For example:

● USPS reported a loss of $1.7 billion in its most recent quarterly report.

● USPS still has problems delivering mail and packages.

As SBE Council has argued time and again, USPS needs to be focusing on its core mission of delivering mail. It should not be using its mail delivery profits to subsidize package delivery, and placing those costs – whether through higher prices, poor service, or a slowdown in service – on the backs of postal consumers, including small businesses.

Postmaster DeJoy recently said that postal consumers should prepare for “uncomfortable” price increases on its monopoly mail products until the Postal Service can be self-sustaining. Such actions are hard to justify given the USPS has recently benefited from a $50 billion Taxpayer Bailout as a result of the new “reform” law.

The Postal Service is touting its new USPS Connect, which could be a positive program for small businesses. The rollout is in its pilot stage and we are still awaiting results as to how the program is working for small businesses and meeting their needs. It is designed to create discounted rates for small businesses, but it may come at the expense of its market dominant letter mail service, which – again – small businesses are paying more for under the new and higher rates.

The decision to close facilities in order to consolidate USPS services may yield some savings, but will it resolve the agency’s financial turmoil that stems from their attempts to make inroads within competitive markets? We can only hope that these efforts create efficiency in delivery, but they should also yield lower – or at least stable – prices for small businesses. What they do in competitive markets should also reflect the actual costs of service and delivery. At this point that does not appear to be the case, and reforms efforts in the future need to demand this type of accountability.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.


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