The U.S. Postal Service recently announced plans to adjust postage rates upwards starting January 2022. This includes increasing the rates for Priority Mail and Priority Mail Express services by 3.1%. The planned increase is part of the Postmaster General’s strategy to implement the controversial 10-year plan aptly called “Delivering for America.” The reasons for the increase in postage rates include:
To Raise Extra Revenue
For more than a decade now, U.S. Postal Service has been incurring huge financial losses annually. For instance, in the fiscal year 2020 alone, USPS made a staggering $9.2 billion in losses, making the total losses incurred in 14 fiscal years surpass the $87 billion mark. Through his 10-year plan, Louis DeJoy, the current Postmaster General is determined to make the service profitable again. Therefore, the increase in postage rates is aimed at raising extra revenue for the USPS. The extra revenue is meant for the following:
- Cover infrastructure maintenance costs – The USPS has retail centers and delivery units across the U.S. which require maintenance practices such as fixing roofs and air conditioning systems. Due to a lack of finances, the Postmaster General has raised postage rates to raise money for the repair and replacement of these and other infrastructures.
- Cover additional operational costs in the holidays – The U.S. Postal Service largely relies on the sale of its products and services to finance its operations. Operating on a deficit, it is difficult for the service to manage increased operational costs during holidays. That’s why postage rates have gone up for the holidays, albeit temporarily. This is necessary to ensure that the service has enough funds to provide efficient postage services and reduce possible delays. Lack of enough funds created massive delays in December 2020 where 3.5 million packages picked in a day didn’t reach their destinations on time. This year, the Postmaster General is determined to improve performance by availing enough funds to hire enough workers, purchase enough equipment, eliminate delays, and improve efficiency in general.
To Stay Competitive
The USPS Postmaster General DeJoy has raised postage rates to competitive levels. This is because, during holidays, the demand for courier services typically goes up, and this means that businesses in this industry have to increase their prices to strike a balance in the market. Therefore, the increase in the postage rates is also aimed at keeping USPS competitive against other courier services in the U.S.
To Reduce Red Ink
Due to massive losses over the years, the U.S. Postal Service has been operating in debt, and this has made service delivery difficult. The pandemic even made the situation worse by increasing demand for deliveries. Also, the COVID-19 recession further made operations difficult for the service. To revive the service and reduce losses, Postmaster General DeJoy opted to increase charges starting January 2022.
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