Sunday, May 10, 2009

USPS: Unconscionable Stamp Gouging?

WASHINGTONThe Governors of the U.S. Postal Service have approved new prices for mailing services, including a 2-cent increase in the price of a First-Class Mail stamp to 44 cents. Prices for mailing services are reviewed annually and adjusted each May. The new prices will go into effect Monday, May 11.

Over the last 90 years, the average retail price of gasoline has increased about 8.5 times, from 25.5 cents per gallon in 1919 to $2.16 per gallon in 2009, according to annual price data from the EIA. Over the same period, the price of a first-class stamp in the U.S. has increased 21X, from 2 cents in 1919 to 44 cents in 2009 (starting tomorrow), according to historical stamp price data available here.

The chart above compares stamp prices to gas prices using an index that is equal to 100 in 1919 for both series, and includes the CPI index from 1919-2009, also equal to 100 in 1919.

If stamp prices had increased over time at "only" the rate of gas prices, a first-class stamp would only cost only 17 cents today instead of 44 cents. If stamp prices had increased at the same rate as consumer prices in general, stamps today would cost about 25 cents.

When gas prices rose last summer, Rep. Bart Stupak (D.-MI) introduced "The Federal Price Gouging Prevention Act," which would make it a crime to "sell crude oil or gasoline at a price that is unconscionably excessive." Shouldn't we now investigate "unconscionably excessive stamp prices" of the postal monopoly?


At 5/10/2009 10:41 AM, Blogger Bruce Hall said...

Perhaps this is a case of making up for lost volume through higher prices.

If only automobile manufacturers could do the same thing... a $150,000 "economy" car.

At 5/10/2009 10:43 AM, Anonymous Chris said...

How do you think the USPS pays all of its supervisor bonuses? If they're investigated for price gouging, then they also need to have Bawney Fwank and Chris Dodd tax those bonuses at 90%. They get the bonuses despite the fact that the USPS is bleeding cash a la GM and Chrysler.

At 5/10/2009 10:51 AM, Blogger Colin said...

The USPS keeps raising prices, loses money and can't even maintain their stamp vending machines.

But I'm sure it will be a completely different story when the government runs health care.

At 5/10/2009 1:03 PM, Anonymous a Duoist said...

First Class mail rates are used to subsidize Second Class 'junk mail.' And with the Internet, why pay for First Class anymore...except on Mother's Day?

At 5/10/2009 2:39 PM, Blogger bix1951 said...

Labor intensive

prices have gone up more in labor intensive businesses


health care

walking around delivering mail...
labor intensive

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At 5/10/2009 2:54 PM, Anonymous Anonymous said...

Bulk mail is profitable so its not a case of first class mail 'subsidizing' bulk mail. Its about charging different people different prices. No reason you shouldn't get a discount on volume either..

Stamp Gouging has a lot to do with the need to pay for a huge number of postal employees (which are unionized) while experiencing declining mail volume.

At 5/10/2009 2:59 PM, Anonymous Anonymous said...

How else can the bloated salaries and benefits of its workers be paid for? They've spent billions on automation and unlike every other business that automates, operating costs haven't gone down.

At 5/10/2009 4:59 PM, Anonymous Postal Worker said...

This article is rubbish. The reason stamps were so cheap in 1919 is because the Post Office was directly subsidized by taxpayers to the tune of 23%. The subsidy was phased out gradually between 1971 and 1982. The Postal Service is now self sufficient. A more accurate comparison would be stamp prices in say 1983 and today, That would track with inflation!

Another thing, the United States of America is BIG Country, the number of places the Postal Service delivers to increases every year, that requires more fuel, man-hours etc.

At 5/10/2009 6:03 PM, Blogger Hot Sam said...

This comment has been removed by the author.

At 5/10/2009 6:14 PM, Blogger jjm said...

I would like to see college tuition and K-12 costs (both on a cost per student basis) for added interest.
Nice graph. Thanks!

At 5/11/2009 7:22 AM, Anonymous Anonymous said...

"Postal workers make 23.2% more than a year ago, bringing them up to an annual salary of $54,550."

A pretty nice raise considering most private businesses either froze salaries or issued pay cuts over the past year!

At 5/11/2009 9:06 AM, Blogger Colin said...

walking around delivering mail...
labor intensive
Delivering packages is labor intensive and yet UPS and Fedex turn a profit.

At 5/11/2009 11:43 AM, Blogger QT said...


Bulk & package delivery are the profitable segments. First class letters are the "Amtrak" of the mail business. If anything, more automation is needed ie. barcoded letters.

Ironically, monopoly status seems to ensure that the least profitable business remains government run while the post office has lost marketshare on the profitable segments.

It is quite true that productivity gains have not been accompanied by reductions in labour and it is difficult to understand why working in a post office or delivering mail should be better paid than a cashier at grocery store.

Weighing a package, sticking postage on the sucker and collected the amount of money specified on the computer screen, and giving change again as specified by the computer or place mail in a slot isn't exactly rocket science.

At 5/11/2009 2:09 PM, Blogger John said...

I like the comparison of the rising price of a postage stamp to the price of gasoline, but perhaps look at it a little differently. My personal recollection dates from the purchase of my first car in the early 1970's. A postage stamp ran 6 cents and a gallon of gas was 35 cents. Today, the stamp is 44 cents (7.3 times higher) and they want $2.35 for regular (6.7 times higher), so the price rise is somewhat more comparable.

When you go back to 1919, you take in the Depression period of the 1930's where there was a lot of price deflation, which was not reflected in a lower price of a postage stamp. They actually raised the price of a stamp from 2 cents to 3 cents in 1932.

At 5/11/2009 10:57 PM, Blogger Jack McHugh said...

Forever stamps would be a great investment except that the transaction costs of trying to liquidate the investment would kill you.



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