Friday, 15 July 2016

Its time to let Canada Post fail

Either mail carriers are worth more than their peers - Or they make more than their worth.

As long as I can remember, i’ve heard people joke that getting a job as a mail carrier is like winning the lottery. As the stereotype goes people who deliver mail make a great annual salary, don’t work weekends, retire on a goldmine, and the only requirement to get the job is a high school diploma and a drivers license. Considering 80% of Canadians over the age of 15 have a high school diploma or equivalency I guess I understand the lottery comparisons.

Accuracy of the punchline aside, this can’t all be true, can it? Well because the postal workers union is refusing to binding arbitration, the story piqued my interest. After all, what are postal workers so afraid of?

Whether you agree that it might be time to let this bloated giant fail or not, the reason I write today is because after researching for this article i’ve come to the conclusion that Canada Post is afraid we might realize getting job there is exactly like a lottery win, except its one Canadians foot the bill for. We pay out this lottery even though it appears we can pretty much to without them. Postal workers are afraid if they even give an inch in this fight, Canadians will realize its time we let them fail. 

Lets start with the Salary. The median Canadian income is about $27,000. For those who have a trade, or some level of apprenticeship its about $8,000 more or close to $40,000 a year. For those with post secondary, they can earn $20,000 more than the median or very close to $50,000 annually. So what do postal workers earn on average? 

The Canada post website is pretty cagey, offering hourly rates and an apparent base salary of $22,000.


 According to some 300 reports from sites like GlassDoor and PayScale, combined with my basic math, the average income (not starting salary) for someone employed at Canada post is about $68,000. You can take some issues with my math, I don’t claim to be an expert in that regard. However, its pretty clear that regardless of your skew, Canada Post employees make quite a bit more than the average Canadian. This combined with the fact that they don’t have to go through the costly, and time consuming process of achieving a college degree to increase their chances at a good salary, makes getting a job at Canada Post the lottery win i've mentioned. 

I should also mention the pension program at Canada Post. This program characterized as "unaffordable by any employer",  has become a sticking point for workers. There’s a good reason they want to keep it (Full disclosure, I study political science, not finance. So if I make some glaring mistake PLEASE comment or message me on twitter as I really do hate being wrong and would like to asses all new information as a glean it). 

Postal Workers in Canada enjoy a type of pension unheard of in the modern private sector, and even quite rare in the public sector. They have what’s called a defined benefit pension. A conventional plan pays out based on what a person put in to the fund, and how well the fund itself did as an investment. So this way if the market falls, those in the fund do not abscond with all of the money leaving the next generation of employees with empty coffers. To make it fair to the next stakeholders in the pension fund, a percentage based on how much an individual put in, relative value of the fund is paid out to an employee when they retire. Now, it does suck pretty badly if you decided to retire just before a market collapse. Suddenly your pension doesn’t bring in nearly what you thought. However, this is the reality and furthermore the only reason you get a positive rate of return on a pension fund to begin with is because the money you put in is invested along with many other individuals money, and it can generate greater interest, which in turn increases the value of the investment more than would occur with solely your own funds invested in the market. Sure on paper it looks like a nice idea to put have a pension plan that eliminate the risks of bad investments and pays out what people are “owed” in consistent amounts over time. This is a Defined Benefit. Defined benefits pensions seem nice, but if the market does poorly and people still take the same amount out, this leaves the fund empty and screws the next generation. This is why the private sector has all but eliminated defined benefit pensions.

 To put it in simple terms, regardless of how their investments do, postal workers will get the same benefits at the end of their tenure, even if it screws their peers and we the taxpayer have to make up the difference (remember Canada Post is a crown corp). This makes postal workers the 1% of pensioners in Canada, and all us normal joes whose retirements are at the whim of the market the 99%.

One must assume that if we’re treating a sector of employees so much better than the average worker, they must be pretty essential right? 

Well maybe not so much. See, Canada Post threatened to strike as soon as Monday July 11th. Many businesses were worried the shutdown might affect them if they had no mail delivery. What could possibly be done ?

Business switched to using other services. Here’s a quote that sums up the effects of simply  proposing a shutdown of the mail 

In their press release, Canada Post cited three of the negative effects of the current negotiations. First, nearly all of Canada Post’s largest e-commerce clients have moved to other delivery services resulting in a 75% decline in volume fro these costumers. Second, letter mail is down as much as 50% in some facilities and over the weekend commercial customers deposited half the amount of mail usually deposited. Finally, there has been such a large decline in parcels that “there are often not enough parcels to last an entire processing shift.

So, basically we as Canadians collectively called Canada Post’s bluff, and guess what?

It looks like we don’t really need them. 

Postal workers are seriously over paid for the skill set they posses, and I’m not sure how many people really knew the extent, until during this controversy workers were forced to justify their bloated salaries and wacky pension plans.

Its time we let this bloated behemoth die, and see what the free market manages to pull from the blubbery carcass of Canada Post.

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