Washington, D.C. – A new analysis prepared by economists Debra Aron, Ph.D. and Justin Lenzo, Ph.D., with Charles River Associates quantifies the damaging effects of recent proposals to significantly increase prices on Postal Service package delivery services on businesses, consumers, and the Postal Service. The analysis demonstrates that these proposals would force the Postal Service to exit its profitable package delivery business, depriving the Postal Service of tens of billions in profits and revenues while harming businesses and consumers who would face higher prices and fewer choices.
Key Findings in the Report:
Implementing above-market price increases would force the Postal Service to exit the package delivery business and threaten the financial viability of the U.S. postal system.
At a 50% price increase, the Postal Service is estimated to lose 84% of its package volume.
At increases of 100%, 200%, or 300%, the Postal Service would lose all of its package volume.
The estimated package volume losses would cost the Postal Service over $100 billion in revenue and up to $38 billion in contribution (profit) over the next 5 years.
Under the reasonable assumption that higher prices at the Postal Service would lead to competitors raising their own prices, the analysis estimates that consumers would pay between $7.86 and $16.95 more per package delivered to them.
Package price increases would result in small businesses facing reduced sales and reduced profits of $27 billion to $49 billion over five years. Many smaller retails would be forced to close entirely.
The analysis estimates that in the aggregate consumers would pay between $473 billion and $865 billion more for delivery services over the next five years. This amounts to an income redistribution from captive consumers to large private express delivery companies.
“Package rate increases by as much as 50% would devastate the ability of the postal service to offer competitive package delivery services, which are a critical lifeline for American small businesses and consumers, particularly those in rural areas,” said Package Coalition Chairman John McHugh. “This paper demonstrates why these radical proposals would be harmful to small and midsize businesses, consumers and the Postal Service. Now more than ever, our economy depends on the continued access to the affordable and reliable services of the United States Postal Service.”