The recession has hammered just about every big institution in the American economy, and none harder than the U.S. Postal Service.

Already suffering from competition with alternative modes of communication — from Federal Express to instant messaging — the Postal Service lost huge amounts of business mail, much of it solicitations for credit cards and subprime mortgages that are, shall we say, no longer in vogue.

Total mail volume plunged from 213 billion pieces in 2006 to 177 billion pieces in 2009. Much if not most of this business will never return. The Postal Service is on course to lose $7 billion in its current fiscal year and has declared its business model “unsustainable.”

Having slashed costs in almost every way Congress will allow, the Postal Service now seeks concessions from its employees in labor negotiations that began last Wednesday. Given that labor costs, at $56 billion per year, make up 78 percent of the company’s budget, we think that management has a strong argument.

No one would contend that postal workers lead a cushy existence. But their compensation is, in some respects, more generous than that received by others in comparable situations.

They are protected by a no-layoff clause. The company pays 79 percent of each employee’s health insurance premiums, as opposed to the 72 percent that other federal agencies pay. (The average private employer pays 70 percent.) Eliminating this discrepancy would save more than half a billion dollars per year.

Given the declining volume of mail, it also makes sense to use more part-time and seasonal workers.

Not surprisingly, postal unions disagree and are promising to push back in negotiations. Federal law forbids the unions to strike but otherwise strengthens their hand.

For example, the law gives unions a veto over any reduction in their fringe benefits. Disputes go to binding arbitration, in which a panel essentially decides what would be a fair settlement. It does not have to take into account the impact on the Postal Service’s financial condition. This makes no sense, and it has to change — lest taxpayers ultimately be saddled with another costly bailout.

Several recent bills have proposed requiring arbitrators to consider the service’s financial predicament in adjudicating contract disputes, a vital reform Congress must enact to help save the Postal Service from what looks more and more like an inevitable crisis.

The Washington Post