CHARLES LAMMAM & AMELA KARABEGOVIC
Guest Columnists / Troy Media
With the breakdown in negotiations between Canada Post management and the Canadian Union of Postal Workers, many cities across Canada have been subjected to rotating strikes by the mail carriers. Naturally, it is Canadians who rely on the Crown corporation for mail delivery that are adversely affected. It doesn’t have to be this way. To protect consumers, the solution is to privatize Canada Post.
Canada Post has the exclusive right to deliver letters by “snail mail,” meaning that its services are protected from competition by law. Canada Post has a monopoly on certain mail services. Private firms such as FedEx and UPS, however, are permitted to deliver goods, newspapers, books/magazines, and “letters of an urgent nature” or express mail.
Time to open it up to competition
Postal services need not be delivered by a public monopoly protected from competitive pressures. In fact, Canadians would benefit tremendously from privatizing Canada Post and opening up all postal services to competition.
Piles of real world evidence show that private firms typically outperform their public sector counterparts. Research that has looked specifically at Canada Post suggests privatization would greatly improve services and benefit consumers.
The Mail Monopoly, an in-depth analysis of Canada’s postal service published in 1990, found that Canada Post has failed to provide Canadians with expedient and reliable services. As an example of poor service, the author, professor Douglas Adie of Ohio University, noted that it took about the same amount of time to deliver a letter in 1990 as it did 200 years before.
Adie pointed to New Zealand’s experience with privatizing postal services as reason for Canada to follow suit. After the New Zealand Post Office was privatized, it moved from a loss to a profit by reducing its staff by 20 per cent and its costs by 30 per cent. It also sped up mail delivery and increased “on time” delivery by 15 per cent. Professor Adie concluded that postal services are not likely to improve in Canada until Canada Post is privatized and subject to competition.
In a 2007 study, University of Toronto professor Edward Iacobucci and his colleagues also concluded that privatizing Canada Post would result in efficiency gains and improvements in service quality. The study found that labour issues, particularly the presence of the Canadian Union of Postal Workers, make it difficult for Canada Post to improve efficiency and productivity.
For instance, in 2005 Canada Post lost 16 days per full-time employee to absenteeism in delivery and mail processing operations. This was 60-per-cent higher than the Canadian average for manufacturing employees and 20-per-cent higher than the rate for all unionized employees.
After reviewing the performance impacts of postal deregulation in other countries such as Sweden, Finland, New Zealand, the Netherlands, Australia, Germany, and the United Kingdom, the Iacobucci study found that postal companies increased service quality, adapted products and services to demand, introduced several mail-related innovations, reduced employment, and improved labour performance following deregulation.
Privatizing Canada Post will also result in decreased stamp prices. A recent report from the Montreal Economic Institute summarized the European experience with privatization and competition in postal services and found Austria, Netherlands, and Germany experienced an 11- to 17-per-cent decline in the price of stamps for letter mail after privatization.
The benefits of privatization result from key differences between how private sector firms and crown corporations behave and the incentives each faces.
Monopolies have no reason to innovate
Crown corporations typically operate in a state-provided monopoly shielded from competitive discipline. This means they are not required to constantly update technologies and production processes or offer innovative products and services to customers.
In addition, it is impossible for Crown corporations to go broke, as governments generally bail them out. If private businesses incur sustained losses, the decline of capital will push them into bankruptcy. As a result, the private sector must provide customers with the quality of goods and services they demand, in a timely manner and at affordable prices. The public sector simply does not face the same pressures.
Canadians have much to gain from the privatization of postal services; the current union strike only strengthens the case. It’s time to privatize Canada Post.
— Charles Lammam and Amela Karabegovic are economists at the Vancouver-based Fraser Institute.