Community Mailboxes, Fiscal Balance, and Canada Post

In 2014, Canada Post will begin implementing changes to its mail operations in urban neighborhoods. The crown corporation announced this past December that it developed a five-point plan to economize and improve postal services across the country. Canada Post will implement these changes gradually in order to stabilize its financial position by 2019, despite warnings that they will only worsen its decline. The full effect of Canada Post’s proposed changes, however, remains unknown and there is still an opportunity for success.

Canada Post published its five-point plan on 11 December 2013 on its website:

1) Community Mailboxes

Beginning in 2014, the proportion of Canada’s population that receives door-to-door mail delivery will have their mail delivered to community mailboxes: “This change will provide significant savings to Canada Post and will have no impact on the two-thirds of Canadian households that already receive their mail and parcels through community mailboxes, grouped or lobby mailboxes, or rural mailboxes. The transition is expected to take 5 years to complete on a national scale.” Despite complaints about this transition, Canada Post already services rural Canadians using community mailboxes and it appears as though the model is successful.

2) Stamp Price Increases

The price of stamps will increase revenues and incentivize bulk purchasing, resulting in a larger price increase for those who purchase stamps individually. Canada Post’s price for first-class mail delivery will increase from $0.63 to $1: “Under these changes, the majority of Canadians, because they buy stamps in booklets or coils, will pay $0.85 per stamp. The minority of consumers who purchase stamps one at a time will pay $1 per stamp.” It is important, however, to view this price increase as necessary for achieving fiscal balance.

3) Expanding the Postal Franchise

Canada Post plans to open franchises in additional retail locations across the country: “This will allow busy Canadians to do more shopping in one place. Canada Post will also continue to align its corporate post offices to customer traffic patterns.” In 2008, there were over 90 Canada Post outlets opened in Shopper Drug Marts across the country. These outlets provide convenience to consumers and adding new outlets into various retail locations should increase this accessibility.

4) Streamlining Operations

Due to technological advances, Canada Post will reform its internal operations to facilitate more efficient mail service delivery. Canada Post plans will serve customers better through a more elaborate and effective method of parcel tracking and central processing. The changes include quicker mail sorting equipment, consolidating operations, and using fuel-efficient vehicles: “Improved operations will yield cost-effective and more reliable delivery to Canadians, along with better parcel tracking capabilities.” To retain customer loyalty, Canada Post’s operations must reflect current realities and these changes demonstrate its willingness to tailor their operations to new demands.

5) Labour Costs

The most controversial initiative is Canada Post’s plan to cut its workforce and renegotiate the company’s employee pension plan. There are agreements between Ottawa and Canada Post that safeguard the pensions of current employers, however, future employee pension plans are at risk. Because these changes require less labour, Canada Post is hoping to reduce unemployment through attrition, as opposed to layoffs (which reduces the risk of involuntary and unexpected unemployment).

Technological innovation is primarily responsible for declining demand of mail services delivered traditionally by couriers, such as Canada Post. For example, online banking is a cheaper alternative to paper billing and email services are more efficient than first-class mail deliver. Parcel delivery, however, is expanding due to the popularity of online shopping. These shifts and their economic consequences have compelled Canada Post to seek a new direction in order to avoid an estimated $1 billion in financial losses.

The reality, of course, is that measures to increase efficiency can reduce short-term employment. It is arguable that competent service-delivery justifies this result. Trimming Canada Post also lessens the burden placed on Canadian taxpayers. These changes are necessary in order for Canada Post to operate both competitively and competently. The five-point plan demonstrates at least some willingness to adapt to current realities with as little disruption as possible. Institutions must acclimatize to customer preferences and Canada Post is gearing to improve their services in a practical, convenient manner.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

The Tawdry Tale of Canada Post-asaurus

It’s 2013, mail in Canada is still run by the government and it seems nothing can usher in transformation at Canada Post. The crown corporation which handles mail in this country has a remarkable ability to survive and resist every innovation reality throws at it. If the rest of the dinosaurs were as resilient and stubborn as Canadapostasaurus we mammals would be at the bottom of the food chain today, frustratingly trying to etch out a living in a world still ruled by reptiles. Meteors? Canadapostasaurus would eat those for breakfast, Climate change? Terrifying disease? Minor inconveniences which make the lengthy, sluggish stroll to the local watering hole a little lengthier. A makeover is desperately needed; the time has come for the Federal Government to privatize Canada Post.

From an economic point of view there’s really nothing too special about mail delivery, it’s a business that’s been around for a while. Yes it’s tedious and organizationally and logistically complex, but it doesn’t necessitate state control by default, there is no inherent market failure in mail delivery. Mail has largely been dominated by governments for a simple reason: they want their monopoly to grab our money, nothing outlandish about that at all. Unfortunately for the government, Canada Post incurred losses of $1.5 billion from 1982 to 1999. When the company does generate profits, they are usually very low in comparison to other public and private competitors. It’s true that these profits head directly for Federal government coffers, and yes, they pay for services which Canadians expect and depend on. The problem though, is that the money which Canada Post produces comes out of the pockets of ordinary Canadians through higher prices because of the absence of competition.

No competition also means that service quality and efficiency are abundantly lower than in a free market. If Canadapostasaurus competed with the other mail giants, the resulting absence of tax revenues would simply result in more money in the pockets of Canadians through lower prices and better service. Postal privatization and market competition has been introduced in a number of advanced, developed economies including Sweden, New Zealand, Germany, Japan, and Argentina. The German and Japanese cases, both full on privatizations, have been extremely successful, and Deutsche Post now competes with DHL and FedEx. The Conservative-Liberal Democratic coalition in Britain has announced plans to privatize the Royal Mail in 2013. Deregulation has almost always resulted in lower prices, higher quality service, and greater operational flexibility.

Apart from the economic basics and the need for heightened service efficiency, there are several central truths which should inspire privatization here in Canada. The first is that technology, email, texting and other digital mediums are resulting in lower and lower volumes of mail – the result will be falling revenues. Canada Post is also in desperate need of private capital to modernise and enter the 21st Century, a quick trip to a local post office should validate this claim. Canada Post has a $3.3 billion pension deficit, is it not fair for taxpayers to foot this bill given the fact that Canada Post employees already enjoy solid benefits and exceptional pay.

Finally, Canada Post is riddled with ineffective, lazy management and an aggressive, nasty, uncompromising and greedy union. Hard working front line staff and taxpayers suffer when the two clash, the inexcusable three week long 2011 labour dispute is a perfect example. A successfully privatized Canada Post would end further liabilities for the taxpayer, deliver lower costs, better service, and a stronger, freer economy overall.  The time has come for Canadians to emancipate themselves from the superstition that Canada Post should affectionately remain in public hands, it’s time to let this dinosaur roam free.

-Dino Alec