At the end of June, USPS announced that it would raise rates a second time this year. This second 2021 price increase only applies to certain services, like First-Class Mail, Media Mail, Signature Confirmation, and select others. Most of the rates for the Postal Service’s popular shipping services will not change. However, lawmakers have warned Postmaster General Louis DeJoy that it is “premature and counterproductive” to raise mail prices while USPS revenues are increasing.
Lawmakers Argue Pushing the Second 2021 Price Increase Will Aid Small Businesses
To keep up with the rate of inflation, USPS already increased its “market-dominant” (aka mail) prices in January by 1.8%. This second planned price increase would raise the price of sending a First-Class letter from 55 cents to 58 cents. Across the board, the price of First-Class Mail is set to increase by roughly 6.8%. Magazines, newspapers and catalogs, on the other hand, will see an 8.8% price increase.
Raising the price of mailing products is an obvious strategy to boost revenue for USPS. However, lawmakers have cautioned that it will also result in significant job losses, stemming from significant reduction in the amount of small businesses that rely on the Postal Service’s mailing products. Put simply, they argue that many already-struggling small businesses cannot afford yet another price increase this summer.
When speaking on the effect of the Postal Service’s second 2021 price increase on small businesses, lawmakers said the following:
“Many…small businesses, cannot afford a second [price] increase, saying such action will reduce revenues and lead to job losses. We believe it is vital that the Postal Service not take any action that will weaken its long-term financial success by chasing customers out of the mail market.”
Postponing the Increase Will Also Give USPS “Greater Clarity”
Currently, the Postal Service has over $22 billion in cash on hand. Still, Postmaster General DeJoy has stated that USPS will run out of cash by 2022 unless the agency follows his 10-year plan to the letter. DeJoy argues that the Coronavirus pandemic only accelerated the decline of mail volumes for USPS. This, in turn, has led to significant losses for the agency’s market-dominant products.
House lawmakers, on the other hand, argue that the long-term effects of the Coronavirus pandemic on USPS are still unclear. While mail volume and revenue has declined, package revenues are consistently on the rise. According to them, postponing the second 2021 price increase would give the Postal Service more time and clarity to see how the pandemic has affected sales and revenue in the long-term.