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The Progressive Economics Forum

Canada Post’s vow to ‘protect taxpayers’ needs a reality check

This piece was first published in the Globe & Mail.

In a move that caught everyone off-guard, Canada Post announced a five point “action plan” last week that included phasing-out home delivery of the mail over the next five years, making Canada the only G7 nation to do so. Why? To “protect taxpayers.”

Of all the reasons that merit discussion as to whether letter carriers belong to a redundant class of workers, like the milkman or iceman, taxpayer protection isn’t one. This Crown corporation is more likely to make money than lose it.

Canada Post and the Minister responsible, Lisa Raitt, both say the reason for cutting service is to avoid Canada Post becoming a burden on the taxpayer because of “continued losses.” But financial statements show, over the last 17* years, Canada Post has added money to the public purse in every year except one. That was 2011. That year balance sheets bled red ink due to a rolling strike followed by a lockout; costs related to a Supreme Court ruling on pay equity; and a recalculation of pension liabilities.

Since then sales are up, costs are down. So far this year, losses are $110-million (half last year’s losses), on annual revenues of over $5.8-billion.

Holiday season traffic would easily transform those losses into profits, unless extraordinary capital acquisitions are made in the fourth quarter.

Cutting delivery to the last five million Canadian homes that get to-your-door postal service seems an alarming response to this non-crisis. It means Canada Post will need between 6,000 and 8,000 fewer people.

There will be no flurry of pink slips. It’s estimated about 15,000 people will leave over the next give years, due to normal turnover and retirement.

Still, it’s not clear that cutting delivery and spending who-knows-how-much on community mailboxes is a more efficient move than reducing days of service.

What is clear is that thousands of jobs with decent wages, good benefits and pensions for ordinary people will be lost, with scant hope that similar jobs will be created to replace them.

You may think it was only a matter of time that it came to this.

Letter volumes are down, in Canada and around the world, as we communicate more with our phones and computers, and companies nudge us from paper to online billing.

Yet other countries whose postal services face the same dilemma haven’t stopped home delivery. That’s because they have cashed in on the growth in parcel delivery, as online shopping soars.

Canada Post has seen double digit growth rates in the parcel business too, along with Purolator, which was bought by Canada Post in 1993.

The post office is adjusting its facilities and equipment to transform its capacities, and that plan to modernize has been called out for not being fully funded. But the story being told is that the cost of workers – particularly their pension plan – is wrecking the game.

Canada Post’s pension fund (one of the biggest in Canada, with assets over $16-billion) is not in deficit and is fully funded on a going–concern basis. But if Canada Post shut down next year, it would face a $6.5-billion solvency deficit.

There is no chance of Canada Post going bankrupt (which is why Finance just waived its obligation to make special payments for the next four years). But this phantom deficit will continue to cloud the story, even as Canada Post improves efficiency, expands business, and, oh yeah, raises prices.

More cost, less service. It’s what a company does just before it loses market share to competitors. Privatization, here we come.

Only a few weeks back, the Throne Speech said the government would make life better for consumers. You think a private company will charge all Canadians less than, or be in as many places as Canada Post?

Maybe we don’t need as many letter carriers. But given the growth in the population and in parcel mail, maybe we’ll need some of those about-to-be-axed jobs.

Are the cuts appropriate? There’s no time for discussion. The Harper government has been clear that it wants to trim the size and function of public agencies. Another crown corporation, the CBC, saw a 10-per-cent budget reduction last year. The Canada Post cuts would lop off about 10 per cent of its work force.

Though Canada Post is supposed to operate at arm’s length, this looks like a government decision, delivered right after our elected representatives went home for the holidays; a fait accompli like so much of what happens in Ottawa these days. Canada Post could be riding a wave of technological change towards success, rather than being swamped by it. Switzerland, Australia, and Germany have harnessed change to enhance service, not shrink it. Why not here?

Because this government is more focused on spending less than improving service. It’s a Scrooge of a message. With no questions. Period.

*Update: My bad.  Canada Post hasn’t been profitable for 16 of the past 17 years.  It’s been profitable for 17 of the past 18 years.  For six of the past 10 years it has added hundreds of millions of dollars into the public treasury.  Is the crown corporation on life support?  Nah, more like it’s being murdered. 

Want to watch a blistering debate about this? The Big Picture Panel tackled Canada Post changes on CBC’s Lang & O’Leary Exchange on Dec.12, 2013. Fire up the popcorn machine and watch the video, here.

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