The perils of postal privatization

Little has been heard of the proposal to privatize Philpost in recent months, but it would be a mistake for employees to become too complacent. They would be well-advised, in fact, to read a study published by the post and logistics section of the UNI Global Union.

Released in May, “What has postal liberalization delivered?” is based on case studies from Argentina, Canada, Germany, Japan, Morocco, the Netherlands, New Zealand, Sweden, Switzerland, Tunisia, the United Kingdom and the USA.

Liberalization, say the authors, stems from four sources. In New Zealand and Sweden, the catalyst was economic crisis and the belief by “reformists” that application of the Washington Consensus (basically the package of medicine regularly forced down the throats of countries which turn to the World Bank and IMF for “assistance”) would solve all problems “by the unimpeded operation of the free marketplace mechanism…”

As in Sweden and Germany , technological change is a further driver of liberalization, as the wider use of information technology reduces the volume of letters. Then again, for members of the European Union, the EU Commission has imposed liberalization as one of the requirements of the “internal market.” In Argentina, on the other hand, liberalization and privatization were requirements of the World Bank’s structural adjustment plans (for which, in 1980, the Philippines acted as a guinea pig).

In most countries, the process of postal liberalization begins with conservative governments conducting a review of the service, followed by recommendations for free-market “reforms,” although these are not always implemented.

Normally, the national operator is transformed into a corporation and then split into several companies. Privatization may then follow. Liberalization is often introduced piecemeal, with the private sector being handed a slice of the pie at each stage.

The effects on the incumbent national companies have been varied. In New Zealand, the state-owned corporation has improved its profitability, as has that in Japan. UK’s Royal Mail, however, made its first operating loss in 2007-2008 since its reorganization six years earlier, the introduction of competition having reduced its profit.

Often, liberalization results in a flood of new competitors, many of which then disappear. In Sweden, the number of new companies grew from four in 1994 to 105 three years later, but was reduced to 31 a decade hence. Even so, the new competitors have only managed to grab a modest market share — from a mere 0.1 percent in Japan to 10.4 percent in Germany.

While the liberalizing zealots predicted that competition would drive innovation, the UNI study finds that competition is often based on price, as a result of which many new companies home in on niche targets and “cream-skimming,” as when they concentrate on business to business, business to consumer, or bulk mail. In the UK, the Royal Mail had previously been able to use the profitable bulk mail business to cross-subsidize unprofitable but socially necessary deliveries to remote areas, but private competitors have snatched 40 percent of the bulk mail, as a result of which the Royal Mail’s 233 million pounds profit in 2006-07 was transformed into a loss of 279 million pounds the following year.

Privatization and liberalization have resulted in huge numbers of job-losses and exerted pressure on wages and conditions. Between 1996 and 2006, Germany’s Deutsche Post axed over 21,000 full-time and 12,000 part-time jobs. In Argentina, while the number of postal items increased by 245 million, the number of workers was reduced by 8,400.

In some cases, the employment situation has been transformed beyond recognition. In Holland , the 27,000 mail deliverers employed by the three major companies have service contracts rather than employment contracts. Thus, they are without employment protection, holiday pay, disability insurance or entitlement to unemployment benefits. In Germany, only 18 percent of the jobs created by Deutsche Post’s competitors are full-time. Decent-paying jobs at Deutsche Poste have been lost, reappearing as “precarious jobs” with the competitors.

Although postal wages in New Zealand have kept pace with inflation and have picked up again in Sweden, after privatization Deutsche Post cut average pay by 30 percent. But things are even worse with the new competitors, where delivery workers earn 40 percent less than their Deutsche Post colleagues in western Germany and 50 percent less in the east. This problem may now be reduced by a legislated minimum wage for the postal sector. The disparity is starker still in Holland, where the total payroll cost for a mailman employed by the main operator is 23 euros an hour, compared to just 7.60 euros an hour (11 euros if covered by a collective agreement) for one working for the competitors, which pay by the piece.

The UNI report looks at union strategies to avoid liberalization and privatization (lobbying consumer groups, parliament, politicians and parties as well as mobilizing members to campaign among the general public). When the legislative battle is lost, however, the most effective way of coping with the unpleasant reality is to organize the workers employed by the new companies.

In Sweden, the SeKo union had previously represented only members employed by the incumbent national company, Posten AB, but now it began to organize workers at Bring Citymail. It encountered several problems, including a measure of distrust by those they were seeking to organize and their existing members, who felt they were being let down. (Such problems always occur when a union has been associated with a single employer.) Having won a collective agreement at Citymail, SeKo’s aim now is to achieve “competitively neutral” agreements with all postal companies so that they are unable to play off one set of workers against another in their drive for profit. –Ken Fuller, Daily Tribune

UNI can be found at www.uniglobalunion.org.

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