John Hoffmire: Why not sell the Post Office to its employees?

Published: Tuesday, Aug. 13 2013 12:15 a.m. MDT

In this Dec. 5, 2011, file photo, a customer places first class stamps on envelopes at a U.S. Post Office in San Jose, Calif.

Paul Sakuma, File, Associated Press

As the United Kingdom prepares to sell 10 percent of their Royal Mail delivery system to its employees and privatize the rest, an interesting question is: why doesn’t the U.S. do the same? While I do not want to be perceived as saying bad things about government employees, there is little doubt that greater productivity, lower costs to users and higher job satisfaction could be achieved under a system whereby the employees became owners.

So, what are the facts?

Reuters reported on Aug. 9 that “The financially troubled U.S. Postal Service lost $740 million in its third quarter that ended June 30, as aggressive cost-cutting measures helped it narrow its losses, the agency said on Friday. The mail carrier lost $5.2 billion during the same quarter last year.”

But, does anyone believe that their trials will end anytime soon?

The news report goes on to say, “Despite the improvement, the Postal Service said it still needs to save at least $20 billion annually or risk requiring a massive taxpayer bailout.”

One can argue that price increases for postal service or massive bailouts are just to be expected in an era when email and other electronic communications are taking the place of traditional mail delivery. But, there are plenty of examples of industries, including ones in the service sector, where the long-term trend of overall costs and prices is down, not up.

The key question is whether there is a good example within the U.S. government where a major service was privatized through employee ownership. It turns out that there is. In 1996, I was involved with the transfer of part of the background checking service of the U.S. government to the employees.

While there are some interesting questions about the sale price, which was zero, the transaction brought many efficiencies to the process of checking the backgrounds of prospective government employees. In fact, there were so many transformations uncovered by the business, by the time it was first sold by the employees to other private interests, it brought over $1 billion and then was sold again to another buyer for over $2 billion.

As the Brits contemplate the sale of Royal Mail to employees and public shareholders, it is not that there won’t be cries of opposition. The rank and file employees of Royal Mail recently voted in a poll to oppose the privatization by a 96 percent to 4 percent ratio. But, this should not hold back the U.S. government and Americans from examining a variety of options for the U.S. Postal Service involving a privatization and employee ownership.

Even if the price to sell the Postal Service was zero, the American taxpayer and the average client of the Post Office would probably be better off if it sold.

John Hoffmire teaches at SaÏd Business School at the University of Oxford.

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