Since its introduction in 1775, the U.S. Postal Service has played a vital role in American history. Recent headlines have underscored the urgency of reform.
The USPS recently requested a rate hike for stamps and mail services, its sixth price increase in less than five years, placing a heavier burden on consumers while still operating at a multi-billion-dollar loss. In contrast, United Parcel Service has proven itself a leader in safe and effective delivery of mail and goods, as well as the logistics behind the international transportation and delivery management industry.
In an ever-changing economy, the shift toward privatization proves compelling because of its relation to market competition and public choice theories.
The USPS has been operating at a net loss for decades. According to a Government Accountability Office report in 2021, the USPS has incurred more than $87 billion in losses since 2007. These losses have primarily been driven by its inability to adapt to various climates and conditions. With increased usage of online mail in the past decade, the USPS has seen a significant drop in first-class mail. In 2020, it delivered half as much first-class mail as in 2001. Private companies such as UPS and FedEx have dominated the industry in new shipping standards.
The USPS primarily uses its vehicles and contracted air, rail, truck and ground services. Concerns are growing over its ability to serve rural areas and keep up with urban delivery demand. Meanwhile, private companies have ramped up quick access to deliveries.
In 2021, the USPS announced that it would slow delivery times for certain first-class mail and periodicals as part of its “Delivering for America†plan, affecting 40% of first-class mail. Although intended to cut costs, this instead alienated what remained of a loyal customer base. Its failure to modernize, along with market competition, shows the USPS should be privatized, promoting growth through private firms’ ability to thrive in environments that demand transportation efficiency and immediacy.
Two private companies dominate: UPS and FedEx. Both have grown across international markets and created strong union jobs, contributing to economic growth through faster shipping and receiving. UPS, in particular, generated $100.3 billion in revenue in 2023, making it one of the largest delivery companies worldwide. In comparison, the USPS earned $81.9 billion and operated at a loss of $4.9 billion, while UPS posted a $13.1 billion profit. This is mainly because UPS has adapted to all terrain types, ensuring fast and reliable service.
UPS operates the second-largest cargo airline in the world, with 570 aircraft, allowing it to streamline shipping. The USPS, by contrast, relies on contracted and commercial carriers, a less-efficient model. UPS regularly rolls out innovations like battery-powered bikes in New York City and four-wheel-drive pickups for rural routes. These examples highlight a significant difference between the USPS and UPS: adaptability that reduces costs, improves customer satisfaction and creates a competitive advantage.
Even as UPS continues to navigate a challenging economic environment, it continues to demonstrate strategic leadership. In its first-quarter earnings report, UPS announced a reduction in its workforce of 20,000, in addition to the closure of 73 buildings. In return, this will save the company $3.5 billion, allowing UPS to come out on top of a shifting economy and competitive industry.
There are, however, a few counterarguments worth addressing. First is the fear of a monopoly. USPS, UPS, FedEx and Amazon make up the leading shipping players. Removing the USPS could leave only three, risking market dominance by one if another fails. This could bring the United States back to a scenario reminiscent of the Gilded Age, when a few companies controlled entire markets. To avoid this, the sale of the USPS would require oversight. The Federal Trade Commission and the Justice Department’s Antitrust Division would step in to ensure continued market diversity.
Unionization is another concern. USPS employees are represented by the American Postal Workers Union, while UPS workers are mainly backed by the Teamsters. Amazon is only partly unionized, and FedEx has little to no union support.Â
Still, a USPS sale could spark more competition. UPS, FedEx and Amazon would fight harder for market share, leading to faster deliveries, lower costs and better service. One could argue this walks a fine line between monopolistic consolidation and competitive expansion. Still, the data speaks for itself: UPS has and will continue to innovate ahead of its competitors.
Everett Noakes is a political consultant from New York. He wrote this for InsideSources.com.
