Thursday, March 17, 2011

Is the APWU Contract Good for Creditors and Shareholders?

Up till now all of the information about the new 4 1/2 year agreement between the American Postal Workers Union (APWU) and the Postal Service has come from the union.  With an agreement in hand, the union needs to sell its members that the contract is good for them so that rank and file members approve it.  The APWU has an aggressive effort to sell the contract to members which has included so far the APWU news bulletin on the contract, a PowerPoint presentation, a Web post answering questions, as well as the use of Facebook and Twitter.   Given the amount of information coming from the union, no one should be surprised that press reports in the Washington Post, Direct Marketing News, and most other news outlets focus on what employees got from the agreement and ignore the benefits that agreement provide the Postal Service.

If the Postal Service was a public company with shareholders and bondholders it would now be making an aggressive, and in most cases a public effort, trying to explain to them why this agreement is good for shareholders and bondholders.   This effort would include briefings with investment analysts and the business press.  It has not done that even though Congress effectively acts as the representative of the Postal Service's shareholder and its largest creditors, the Office of Personnel Management and the Department of Labor.  Congress's role as the representative of the creditor should be of particular interest as the Postal Service has already stated that it will default on these obligations.

The Postal Service's press release uses only 74 words to explain why the contract improves its financial situation.    Without a greater effort, the Postal Service leaves the impression that the contract was a giveaway to employees that will make necessary improvements in its cost structure.   Private sector stakeholders whose businesses and jobs depend on the long-term survival of the Postal Service should be concerned that this effort has not been made as their future may depend on Congressional actions to reform the Postal Service's business model and adjust the Postal Service's retirement obligations.

To fill in this vacuum, this rest of this post will review the public information on the Postal Service - APWU contract and identify how provisions in the contract will affect the Postal Service's cost structure.  

New Definition of Full Time Employee

All employees will operate under new rules defining what constitutes a full time schedule.  These new rules give the Postal Service a significant increase in flexibility in scheduling employees.  
  • New employees hired after signing of the current contract
    • Employees are only guaranteed 30 hours per week and can work as much as 48 hours per week
    • Shift on any day can be as few as 4 hours and as many as 12 hours.
    • Split shifts will exist only in Post Offices level 20 and below.
  •  Current employees:
    • Full time employment is defined as between 40 and 44 hours per week
    • Shifts can have as few as 6 hours and will could have as many as 12 hours;
    • a week must have at least 2 days off (a schedule with four 6 hour days and two 8 hour days would not be permitted)
    • Current full time regular employees can voluntarily agree to work under the new definition of "full time" that applies to new employees.
Conclusion:  The new contract gives the Postal Servicie more flexibility to match hours to actual work.   The speed at which it can have a workforce that works under the new definition of "full-time employment," will determine how much these changes save the Postal Service.

New Employee Classification

Non-Career Assistants replace casual and transitional employees.  This new class of employees will represent up to 20% of all APWU members not in the Maintenance and Motor Vehicle Crafts.  The new class of employees will represent 10% of Maintenance and Motor Vehicle Crafts.  These employees will have a different pay schedule and employment relationship with the Postal Service than current employees have.
  • Non-career Assistants are hired for only 360 day assignments.  (This is equivalent to a contract that last for only 51 of the 52 weeks in the year.)  It is unclear regarding what the Postal Service obligations are to rehire Non-career Assistants after the contract expires but it an employee is good it is unlikely and there is work it is unlikely that the USPS will refuse to renew the contract.
  • Additional pay steps were added for Non-career Assistants with lower starting salaries than what now exists.  On average, starting salaries for Non-career Assistants will be 15% below current starting salaries and it will take new employees between 6 and 8 steps to earn the current starting salaries.
    • 12.4% of all APWU members will be paid at the lowest rate when the contract starts.
  • Non-career Assistants have lower benefits that current full-time regular employees
    • Health care benefits require 1 year of employment
    • USPS will only pay 75% of the PWU Consumer Driven Plan premium for these employees.   (This is 11% below what the Postal Service will pay for full time regular employees)
    • Retirement benefits will be limited to a 401-K plan that does not have matching funds. (The retirement benefit should provide significant savings over FERS.  It is unclear from information provided what happens if these employees become full-time regular employees.)
  • Non career assistants will accrue leave.  However, it is unclear whether they will accrue leave at the same rate as current APWU members
  • Non career assistants will have a "full-time" job as described above
Conclusion: The difference in wage and benefit levels make Non-career Assistants significantly cheaper than current employees.  The sooner the Postal Service can maximize its use of Non-Career Assistants the faster it will be able to lower the costs of work performed by APWU members.

Wage Levels
  • Wage levels for current APWU members are frozen at current levels until November 17, 2012.
  • Wages of current casual and transitional employees who are hired as Non-carrier assistants will rise to fit equivalent levels on the Non-Carrier Assistant schedule.
  • All employees hired after the contract is signed starts at a lower rate than now exists.
  • All employees hired after the contract is signed have a lower top salary than current employees even after they become career employees.
  • New hires have to progress between 6 and 8 steps before they reach the current starting salary levels of APWU employees. Her are few examples:
    • Grade 3 - Starting salary drops from $16.74 to $12.34 per hour (-26%)
    • Grade 4 - Starting salary drops from $16.82 to $12.95 per hour (-23%)
    • Grade 5 - Starting salary drops from $18.65 to $15.91 per hour (-15%)
    • Grade 8 - Starting salary drops from $20.80 to $18.20 per hour (-12%)
  • Wage increases after that point will come on the following schedule
    • November 17, 2012 - 1% increase
    • March, 2013 - COLA increase based on COLA calculated for implementation in March 2012 and COLA calculated for March 2013
    • September 2013 - COLA increase based on COLA calculated for implementation in September 2012 and COLA calculated for September 2013
    • November 17, 2013 - 1.5% increase
    • March, 2014 - COLA increase based on COLA calculated for  implementation in March, 2014
    • March, 2014 - COLA increase based on COLA calculated for implementation in March, 2014
    • November 17, 2014 - 1.5% increase
    • March, 2015 - COLA increase based on COLA calculated for implementation in March, 2015
Conclusion:   Wage increases for current APWU members are back-loaded.   The increases will benefit the Postal Service if over the life of the contract, the proportion of employees that are working under the new wage schedule increases so that the average increase in compensation per employee will be less than the wage increases agreed upon.  Also, an increase in the number of employees operating under the new definition of "full-time" could on average reduce the number of hours paid per employee further reducing labor costs.

Update 3/17/2011 4:25pm :   A comment was made that may clarify a rather confusion explanation of who gets paid what.   The Non Career Assistants do not see step increases like career employees.  The saaries identified above are the steps for career employees.  Level 5 Non Career Assistants start at $13.74 per hour which is less than the starting salary for career employees listed above.

Non-traditional Jobs
The APWU- Postal Service contract shifts at least 9,000 jobs from contractors and EAS personnel to APWU members.  This provision of the contract includes a number of provisions that the APWU and the Postal Service agreed upon that increases opportunities for APWU members, creates opportunities for higher level APWU positions (called lead clerks), and increases flexibility in defining an employee's duties.
The major changes include:
  • A shift of jobs from Postmasters, supervisors, and other administrative and technical positions to APWU members.
    • Many of these jobs will be handled by employees working in a new "Lead Clerk" position.
  • The Postal Service will have greater flexibility in scheduling employees to perform facility maintenance
    • Maintenance employees will be assigned on an installation basis and not a facility basis.  This more than likely means that maintenance employees may work at more than one facility during a day or week.
    • Maintenance activities requiring less than 2 hours per day in a facility may be assigned to an APWU member who has other job responsibilities the rest of his day.
    • Some maintenance supervisory jobs will become APWU member jobs and will mostly be filled by a person in one of the new "Lead Clerk" positions.
Conclusion: All of the non-traditional jobs and changes to job descriptions relating to maintenance employees are likely based on suggestions made by the APWU as a method to increase its membership while at the same time reducing Postal Service Costs.   It is clear from the language of the public documents that the APWU will be actively looking at ways to structure work by APWU members so that work performed by union employees is cheaper than either contractors or non-union employees.   This could represent a radical change in how the Postal Service and APWU work together to manage operations.

Limits on Excessing

The APWU and the Postal Service have agreed to limit excessing outside of an installation or craft to r0 miles in most cases and no more than 50 miles in any case.   The contract information is unclear as to what happens if there are no jobs for an excessed employee within that area. The News Bulletin states that "the parties will jointly determine what steps will be taken."  The PowerPoint presentation mentions that there is a memorandum associated with this provision but it is not public.

Conclusion:   It is unclear what impact this will have on either employees that face excessing or the Postal Service.  A good example is consolidation of facilities that are more than 50 miles from the facility that will now be sorting the mail.   This will occur in West Virginia and in most consolidation efforts outside of metropolitan areas.   Most likely the sides decided to sign a contract on all issues that they can agree on and let this issue wait for further negotiations.

 Excessing employees create challenges especially if excess employees cannot be let go.   The only other alternative is a localized early retirement program that would only apply to geographic areas where there will be excess employees.


This review of the APWU - Postal Service contract indicates that the new contract will allow the Postal Service to significantly cut its costs over the life of the contract.   The amount it saves depends upon how quickly it can raise the proportion of APWU members that are Non-career Assistants, implement the changes in maintenance job descriptions that should cut maintenance contracting and shift jobs from supervisors, postmasters, and other non-union employees to APWU members.

The Postal Service needs to provide the hard numbers that must exist that show the cost savings that I believe exist to its creditor and shareholder representatives in Congress as well its customers.  In addition they need to show how quickly these savings will accrue including the difference in costs over the current contract from fiscal year 2011 through 2015.   Finally, they need to show how those cost savings could change if it offered a VERA or had the cash to offer retirement incentives on either a nationwide or local basis.


uncommonsense said...

Nice attempt at analyzing this new contract. I think you are confused about one thing though which has caused several of your calculations to be incorrect. There are in affect 2 new categories of employees hired. The non-career assistants AND future lower scale career employees. The non-career assistants don't ever advance up the pay scale unless they get a career position at which point they would start at the bottom of the new lower career employee scale. Level 5 NCAs start at $13.74.

Donn said...

Also, the new contract stated that TE's and Casuals would be terminated when the contract becomes ratified. The people who want to become NCA's will have to pass a test to become eligible.

Anonymous said...

"The amount it saves depends upon how quickly it can..."
This is the biggest problem for the Postal Service, it NEVER does anything quickly. In fact, it is inscruciatingly slow in every way when it comes to making necessary changes. Some of this is because of Congress and outside regulatory agencies but much of it is internal.

Anonymous said...

I like the part about Non-Career Assistants getting health benefits (APWU only?) after one year. After 360 days they are let go and probably never to be rehired.

Anonymous said...

Given the excess number of workers that USPS currently has isn't the talk of low pay for new hires irrelevant. Unless mail dramatically rebounds, there are not going to be many new hires. So the focus should be on how this contract reduces the current wage costs.

Robert said...

USPS leadership can't make too big of a deal over the savings in this contract until it is ratified by the union membership. After all any and all savings WILL ultimatly come from the pockets of union members, existing and future members.

Anonymous said...

There nothing for PTF's in this contract.....our hours cut even more due to Postmasters being able to work more....the other offices around are at level 21 so now we cant even go there and were screwed either way now!!!!

Anonymous said...

In my district, I was among the last group of clerks hired. That was over twelve years ago. We've been reducing numbers through attrition for over a decade and we still have so many people that excessing is going on. Talk of what happens to new hires is very premature. Any cost savings realized over the life of this contract will be so minimal as to not even be worth mentioning for the simple fact that there will be very few new career hires.

x said...

I agree that the focus should not be on the lower wages for starting career hires. This is a red herring. Does anyone really believe that the USPS will be actually hiring new career people? Why do that when new non-career "assistants" can be brought in to take the places of those who are retiring/leaving? I don't care because I am retired, but the APWU has pretty much signed its own death sentence with this contract. It will just take a while to finally stop breathing.

Anonymous said...

not worried about future hires because they don't pay my bills for me.

uncommonsense said...

Mail volume has actually been going up slightly during the FY that started in October. There are a few offices with too many workers but there are just as many if not more with too few. Consequently OT has been increasing fairly dramatically lately. Once the early outs are taken there are unlikely to be any offices overstaffed.
When this contract is approved we can expect the USPS to offer an early out to all APWU employees with an incentive of between $15K and $25K. The tens of thousands of people that take it will be replaced by the new category of worker. Losing workers at the top of the pay scale and replacing them with “assistant” workers without benefits and or significantly lower benefits at their much lower pay rate will save the USPS over $35K per year per worker replaced. Within less than 2 years the USPS will be saving in the neighborhood of a billion dollars a year from this factor alone. The 20% caps will be filled by then and the USPS will begin realizing the additional benefits of new cheaper career employees.
There will also be productivity benefits. Because there are no limits on “assistant” workers per office the USPS can hire as many as needed in the offices currently using over time, eliminating overtime for employees at the top of the pay scale. Looking at postal clerks as an example they will immediately be able to trade $38 dollar per hour clerk overtime for $14 per hour “assistant” straight time. The savings from this factor could be huge. The limiting factor will be 20% per district but with all the district consolidations set to be announced this week this isn’t a near term concern as a limiting factor and long term it shouldn’t be a big deal.

Anonymous said...

The 20% non-career number could rise as high as 40% because new jobs are not counted. Also FTR can ce changed into NTFT employees with a work week of 30 hours instead of 40 hours. This contract will be the demise of the APWU. New hires will not join the Union because of the low wages will not permit them to afford the dues.

Anonymous said...

The contract sounds descent i still have concerns such as changing crafts if one were to bid to another craft does that employee start at the bottom of the new employee scale and if so can that employee advance to the highest step or stop at the step of the new employee? If this is the case shouldn't some of us be concerned that they can retitled the craft so everyone starts at the new employee (new craft)?