Posties On The Edge

Commentary, Crown Corporations, Frontier Centre, Uncategorized

Just the mention of a postal strike in previous days would have politicians quaking in their boots and the business community in a panic. But times have changed.

Telephones, fax machines, and e-mail technology absorb an ever increasing share of our communications dollar. The post office, specifically Canada Post, is not critical any more. So while there has been the odd mention of a postal strike here and there in the media, public reaction has mostly been indifferent. A postal disruption is inconvenient, but it won't be the end of the world. Not any more. Chances are that this will be the last hurrah for the unions, who fail to recognize just how vulnerable they have become.

This vulnerability rests on one delicate fact: the "Posties" labour power is protected by Canada Post's statutory monopoly on first class mail. A stroke of a pen will end that monopoly – probably sooner than later.

Monopolies don't work well unless you work inside one. Their customers have no choice but to take what it decides to offer. In Canada Post's case, one law blocks out cheaper and more innovative alternatives by legislating that only one choice shall be offered Canadians. As you learned in economics 101, costs and prices are higher where monopolies exist. Absurd work rules, cushy benefits, and elaborate wage arrangements characterize Canada Post's operations. Its labour costs are 25% higher than postal operations in other countries. The corporation itself estimates that it would save over $200 million each year if its wage costs were at the average of comparable organizations. On top of this, high operating costs have also been accompanied by service reductions. New subdivisions must put up with the inconvenience and second-rate service represented by community mailboxes. Most Canadians get mail delivery to the door.

Canada Post shows that monopoly has not been good public policy. Governments have achieved the greatest increases to community welfare by removing legislated monopolies in favour of competitive markets. Competition favours efficiency and higher living standards by rewarding organizations that innovate, use resources more effectively, and improve service. Substituting competition for monopoly in the telephone business, for example, has produced substantially lower prices for consumers, more choice, and better service.

Which brings us to Canada Post.

More governments now recognize that the postal monopoly is a dinosaur in the new technological reality. They are stopping the drain on public resources and improving service.

One such country is New Zealand, a place where all political parties embrace the reasonable proposition that the public sector must use resources as efficiently as possible. As part of its wider public sector overhaul, its Labour Government jettisoned the low-performance post office model in 1987, with its overstaffing, chronic losses, and big public subsidies.

While still retaining its first class mail monopoly, NZ Post moved to add customer service and efficiency to its operations. Costs per piece of mail delivered have plummeted by 30%; employee productivity has doubled. And while the company has generated millions for the government, over $84 million in dividends and $37 million in taxes in 1995. Mail gets delivered 6 days a week. Special rural delivery fees have been abolished. The price of mailing a standard letter was cut in 1995 from 45 cents to 40 cents. The number of employees fell from 12,000 to 6,800.

In April, New Zealand's Communications Minister announced the deregulation of the NZ Post Office. When the necessary legislation is passed next year, private companies will compete head on with NZ Post. In the country's biggest city, Auckland, private competitors already deliver business mail. Prices are falling as choices proliferate. Service will increase. The wider community will benefit, proving that competition is again better than monopoly.

What would our mail service look like today if Canada Post had undergone a similar experience in the last ten years?

One stroke of the pen. That's all it takes.