A Canada Post worker arrives for work in Montreal on Dec. 17, 2024.Christinne Muschi/The Canadian Press
Whether or not Canada Post’s workers decide to go out on strike this week will matter a great deal to those who depend on its services. It will not, alas, matter a great deal to many Canadians, who have long since given up on the post office. Neither will it matter a whit to the corporation’s survival, which is in grave doubt, strike or no strike.
In part, that is a function of Canada Post’s long history of previous strikes: at least 12 since 1965, depending on how you count these things. After each, the post office loses thousands more customers to competing services, never to return. But this is only an acceleration of trends that would be in force regardless: the migration of letter mail to e-mail, of direct mail to digital marketing, of parcel mail to the hundreds of private couriers now offering their services.
Every one of Canada Post’s main lines of business is in jeopardy. Letter mail, which accounts for a third of its revenue, is rapidly disappearing: Canada Post now delivers just two billion pieces of mail annually, barely a third as many as it did 20 years ago. Direct mail is headed in the same direction. Parcel mail volumes are up, especially post-pandemic, but market share is down, sharply: from 62 per cent in 2019 to less than half that today. Strikes have been part of that. So has the corporation’s between-strikes history of shrinking service and escalating prices.
The last strike, six months ago, was cut short by a back-to-work order from the Canada Industrial Relations Board, which appointed a commission of inquiry into the corporation’s future. The commission, led by veteran labour arbitrator William Kaplan (disclosure: we are friends), issued its report last week. It makes for grim reading.
Had the government not granted the corporation a billion-dollar emergency lifeline in January, the commissioner writes, Canada Post would have soon found itself “unable to meet payroll and its other current obligations” – broke, in other words. Having suffered losses in each of the past six years – $3-billion in total – with no prospect of turning things around, “Canada Post is facing an existential crisis,” he writes. “It is effectively insolvent.”
The question is what to do about this. Whatever their differences, it is important to understand that the corporation and its union are essentially on the same side: The corporation should continue as a going concern, and somebody else should be forced to pay for it. For the union, the corporation should dig itself out of its current troubles by expanding into more services – banking, issuing passports and other government documents, even grocery delivery – with any resulting losses covered by the taxpayer.
For management, the solution involves further cuts in service – door-to-door service delivery, already restricted to fewer than one in three Canadian homes, would be eliminated altogether, in favour of community mailboxes – coupled with accelerating price hikes: the same formula it has been pursuing for the last several decades, only more so.
The commissioner’s recommendations take a little from each. Canada Post, he agrees “should continue to exist as a public service, including letter mail and parcel delivery.” However, insisting on door-to-door letter mail delivery is an exercise in futility: the decline in letter volume is irreversible, which will end not in “a levelling off, but almost certain and eventual extinction.” Union dreams of invading other markets are fantasies: they are either “unrealistic or would duplicate services already provided by others.”
Management must have a freer hand to compete in the freewheeling parcel delivery market, including by delivering (gasp!) on weekends; it must also be able to (horrors!) reassign workers who finish their rounds before their shift is over. On the other hand, “preserving this public service will require significant capital expenditures … There is little prospect of Canada Post not depending on government appropriations for years to come.”
What all sides in this debate take for granted is that the problem to be remedied is Canada Post’s finances. With the greatest respect, that is not so. No one, possibly not even the union, wants Canada Post to go on losing billions of dollars, in perpetuity, at the taxpayers’ expense. But the first priority is to provide better service to the post office’s consumers. That, surely, is the point of having a post office: not to give postal workers something to do, but to deliver the mail as swiftly and cheaply as possible. If the post office cannot do that in a financially sustainable way, then it is not financial sustainability we should give up on: it’s the post office.
Or at least, it’s the post office’s monopoly. This is described, cursorily, in the commissioner’s report – the “exclusive privilege,” guaranteed by statute, to carry a letter within Canada (that is, for anything up to three times the prevailing postage rate: Private couriers are allowed provided they charge more than that) – together with its accompanying responsibilities, known collectively as the Universal Service Obligation (USO). These include the requirement to provide the same service to every one of Canada’s 17 million addresses, and, crucially, to do so at exactly the same price. Strange but true: Whether you want to mail a letter across town or across the country, the price of a stamp is, and by law must be, the same.
These work together in an interlocking, mutually reinforcing way. As the commissioner’s report notes, uniform pricing, “regardless of location or distance,” acts as a gigantic cross-subsidization scheme: users on high-volume, low-cost urban routes pay more so that users on low-volume, high-cost rural routes can pay less. This has in turn been the traditional argument for preserving the post office’s legal monopoly. Without it, advocates insist, private carriers could “cream off” the urban routes by undercutting Canada Post, leaving it to serve the high-cost rural routes – and lose buckets of money doing so.
Of course, that would only apply so long as Canada Post were still bound by the obligation of universal pricing, while its private competitors were not. (They would presumably have no interest in entering the market if they were.) That unspoken assumption should give you a clue to what’s really going on here. Officially, the argument is that Canada Post’s monopoly is needed to sustain the universal service obligation, including universal pricing. But what’s clear is that it is universal pricing that sustains the monopoly. Without it, the argument for monopoly collapses.
The first point we should note about this is that the post office is not providing universal service now: I repeat, most people in Canada do not receive home delivery today. The second point, as the commission’s report is at pains to emphasize, is that the cross-subsidization model is breaking down.
Put simply, “fewer letters must now be delivered to more addresses” – while the average number of letters received by each household has declined from seven per week to two, the number of addresses has climbed by three million. With less revenue to burn subsidizing rural routes, then yes, something has to give: the post office must either cut service, or raise prices – or lean on the taxpayer even more heavily.
Or … it could get out of the cross-subsidy game, abandon universal pricing, and do what any normal business does: vary its prices in line with marginal cost. If nothing else, that would be a lot fairer. Why should every urban customer, rich or poor, be forced to subsidize every rural customer, poor or rich? Lots of things cost less in rural areas. Why shouldn’t postal service be one of the few things that cost more?
More to the point, it would instantly dissolve any remaining argument for monopoly. Once the post office were free to do as its competitors did, charging less on urban routes and more on rural routes, it would no longer have to spend billions of dollars cross-subsidizing the second with the first, and there would no longer be any inherent conflict between service delivery and financial sustainability.
Mind you, the more the post office acted like a private courier, providing services in a competitive market, the less argument there would be for having a post office, as such. (Why is Canada Post still in the parcel delivery business?) But that’s the point. There’s no such thing as a route that “only” Canada Post will serve, even if Canada Post actually served them. Private couriers will deliver to every address in Canada, provided they are allowed to charge – and consumers are willing to pay – a price sufficient to cover the cost. If consumers don’t want to pay the full cost, it’s not clear why they should be subsidized to do so – especially when the price of subsidy is the maintenance of a monopoly that serves nobody well. And especially when Canada Post increasingly refuses to do so, even with the subsidy, and the monopoly.
Is the extinction of letter mail really so inevitable? Two billion letters annually may be a fraction of the volume Canada Post used to deliver, but it’s still a lot of letters. Could part of the decades-long decline of letter mail be explained, not merely by the arrival of e-mail, but by the deteriorating speed, vanishing frequency, and escalating prices of traditional letter delivery? Letter mail volume, it is true, has declined in other countries, where competition has been legalized. But not by nearly as much as it has in Canada. Maybe a little competition – faster, more frequent delivery, at lower prices – might get us back in the habit.
Rather than presenting Canadians with a false choice between billion-dollar deficits and the end of home mail delivery, why not address the problem at its roots, abolishing both the monopoly and the universal pricing regime that is its rationale? Or are we really going to pursue the current policy to its absurd conclusion – enforcing a legal monopoly for Canada Post on a service it refuses to provide?