About two and a half years ago the United Kingdom sold 10% of their Royal Mail delivery system to its employees and privatized the rest. This raises an interesting question: why doesn’t the US do the same? While I do not want to be perceived as saying bad things about government employees, there is little doubt that greater productivity, lower costs to users and higher job satisfaction could be achieved under a system whereby the employees became owners.
So, what are the facts?
On November 13the of last year, the U.S. Postal Service announced a $5.1 billion loss for its just completed fiscal year, it’s nothing new.But, does anyone believe that their trials will end anytime soon? For many years, the Service has been saying things like: “Despite the improvement, the Postal Service said it still needs to save at least $20 billion annually or risk requiring a massive taxpayer bailout.”
One can argue that price increases for postal service or massive bailouts are just to be expected in an era when email and other electronic communications are taking the place of traditional mail delivery. But, there are plenty of examples of industries, including ones in the service sector, where the long term trend of overall costs and prices is down, not up. The key question is whether there is a good example within the US government where a major service was privatized through employee ownership. It turns out that there is.
In 1996, I was involved with the transfer of part of the background checking service of the US government to the employees. While there are some interesting questions about the sale price, which was zero, the transaction brought many efficiencies to the process of checking the backgrounds of prospective government employees. In fact, there were so many transformations uncovered by the business, by the time it was first sold by the employees to other private interests, it brought over $1 billion and then was sold again to another buyer for over $2 billion.
As the Brits found with the sale of Royal Mail to employees and public shareholders, it is not that there won’t be cries of opposition in the U.S. if something similar is attempted. The rank and file employees of Royal Mail voted in a poll to oppose the privatization by a 96% to 4% ratio. But, this should not hold back the U.S. government and Americans from examining a variety of options for the U.S. Postal Service involving a privatization and employee ownership. Even if the price to sell the Postal Service was zero, the American taxpayer and the average client of the post office would probably be better off.
John Hoffmire teaches at SaÏd Business School at the University of Oxford.
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