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There Isn’t Always Work At The Post Office

That’s the title of Philip Rubio’s book on the vital role of the Postal Service in building an African-American middle class. The Postal Service, historically, provided an essential service. Because the government had a goal of providing this service universally at a flat rate (thereby subsidizing rural communities), it made sense for the service to […]

That’s the title of Philip Rubio’s book on the vital role of the Postal Service in building an African-American middle class. The Postal Service, historically, provided an essential service. Because the government had a goal of providing this service universally at a flat rate (thereby subsidizing rural communities), it made sense for the service to be provided by the government. And the nature of that service was that it was relatively labor-intensive and required only moderate skills.

In other words, it was a business that was tailor-made for lifting a large group of people from extremely low-wage work into the middle class. Which is precisely the role the Postal Service played in the African-American community.

Now, of course, the service provided by the Postal Service is much less essential. Much postal communication has been, and more should, be superceded by electronic equivalents. Vital physical delivery has migrated to private services like UPS and FedEx that are more expensive but faster and more reliable. And productivity growth elsewhere in the economy has raised prevailing wages, making it more expensive to employ large numbers of people at middle class wages (and, especially, benefits) in a business with low productivity (the infamous Baumol’s Cost Disease). And so the Postal Service is cutting jobs, and we’re contemplating privatization. And, as the Times cliche has it, minorities will be hardest hit.

Matt Yglesias, as always trying to temper neoliberalism’s true insights about efficiency and long-term growth with the desire to protect the interests of workers, suggests that privatization proceed by turning the USPS into a worker-owned corporation:

Given that the U.S. government has no particular need to raise funds through asset sales, it seems to me that most of the goals of [privatization] could be easily achieved by turning the USPS into a worker-owned firm. In other words, you “privatize” it by selling its shares for $0 to people who work there. Then you get Congress out of the way. That accomplishes the most important real public policy benefit of postal privatization, which is that it would encourage USPS to manage its real estate portfolio rationally. Right now that can’t be done because the decision-making is all political and no congressman wants to see any post offices closed down in his district. A worker-owned Postral Service would also be in a position to shut down hugely money-losing routes unless local governments coughed up subsidy for mail service.

Then beyond that the worker-owned Postal Service could do what it likes. It could sell itself to private investors, creating a one-time windfall for workers at the cost of job losses. Or it could maintain a large staff at the cost of depressing the value of the equity the workers own.

Let’s think about this proposal. Instead of privatizing the Postal Service in the usual way, with the gains of the sale accruing to the government – that is to say: to the taxpayer – we’d have a massive giveaway to current employees. And then we’d . . . well, we’d hope that those employees put that windfall to good use, either by selling out and investing their profits wisely, or by running the worker-owned Postal Service as a kind of private non-profit, running things inefficiently so as to continue to provide an employment ladder for the working poor to enter the middle class.

But if we want the Postal Service to serve that function, why do we think that privatization is the right way to go about it? What’s the theory whereby current postal workers are better custodians of this public goal – providing employment at wages higher than optimal from a business perspective – than the government is? What’s the theory whereby lump-sum payments to current employees are better than a good job for keeping those employees solidly in the middle class? I don’t think he has such a theory. And if we don’t think the Postal Service needs to serve this function, then why do current employees deserve this windfall at taxpayer expense?

I happen to be sympathetic to Postal Service privatization, for the very neoliberal reasons that Peter Orszag identifies. But the cost of such a reform will precisely be that one more publicly-provided ladder to the middle class will be pulled up.

The same story is true with education reform. I’m a longstanding supporter of charter schools (a subject I’ll return to in the future and at greater length). But a key way the best charter schools achieve their success is by changing the workforce and the terms of employment. If you imagine an education landscape transformed by charterization – and transformed in the way that charter advocates hope; that is to say, where the best practices of the charter world spread, with significant returns in terms of improved education outcomes – what it would look like on the employment side is higher-performing teachers working longer hours for shorter career stints and receiving higher salaries (relative to current public school teachers of similar seniority) and lower benefits. In other words: you’re looking at a workforce that looks more like the white-collar workforce in large corporations, and less like a government workforce. Which means, in turn, that one more ladder into the middle class for workers who don’t fit the bill for corporate employment would get pulled up. Which is one reason why, even though parents in neighborhoods with lousy schools are frequently very eager to see charters open, community leaders are frequently ambivalent at best. The local pastor’s wife may well be a public school teacher. A new charter may well push her out of her job.

The usual neoliberal response to the increases in inequality that increased efficiency will bring is to use progressive taxation to overturn what the labor market has dictated. There are three big problems with this prescription. First, the neoliberal reforms that deliver greater efficiency themselves weaken the political clout of labor, which in turn weakens the political coalition that would support redistributive taxation. Second, it’s not clear that redistributive taxation, even if adopted, can achieve the intended results. Wage subsidies, for example, will be pocketed by employers in form of lower pre-subsidy wages when the prevailing labor market is weak; they will only accrue to employees when the labor market is tight – precisely when they are least-needed. And no redistributive scheme can possibly pull the middle class up, because the middle class is simply too large. Finally, there’s a question of dignity. There is a big difference between believing you have earned a living and believing you are living on the dole. Now, plenty of people who earn their living are actually being subsidized in one fashion or another; but that’s why I said it matters whether you believe you have earned your living. If you are paid $12/hour by your employer, you’ll feel you earned that money, even if $12 is actually a number negotiated by your union, or is the mandated minimum wage, and is more than you could negotiate bilaterally with your employer. If you are paid $8/hour by your employer, and $4/hour by the government, you know, directly, that you are dependent on public largesse. For all these reasons, I’m skeptical that the neoliberal prescription is adequate.

If we care about maintaining and even expanding those ladders to the middle class, we’ve got, broadly speaking, two alternatives. Either we can impose mandates or incentives on private firms to employ people they otherwise might not consider hiring (or retaining), and to run themselves less efficiently as a result. Or we can find new services that the government can run to replace those (like the Postal Service, or the nation’s overstaffed fire departments) that need to be downsized or those (like, arguably, the education sector) that need a personnel upgrade for the sake of our economic future. In the former category, I have considerable sympathy for a substantial rise in the minimum wage and for German-style incentives to retain workers during recessions. In the second category, the best idea I’ve heard is Brad Delong’s utopian and unrealistic army of barefoot nurses dispatched to provide cheaper-than-free basic healthcare services. In practice, this would not be an army of nurses; it would be an officer corps of skilled nurses and an army of much lower-skill support personnel.

But my basic point is that this is a public interest, and therefore has to be undertaken by government policy, however that policy is implemented. Windfalls to current postal employees do nothing to provide a ladder to the middle class for future workers. So there’s no public interest in handing them out.