Forum Right, 2/28/12

Time, Technology March On

By David H. Landon

Last week there were two announcements that affected employment in the Miami Valley. First, there was the announcement by Eastman Kodak that it would trim its Kettering workforce by 80 jobs from their film processing operation. Second, the United States Postal Service (USPS) announced that it was closing the Dayton Processing and Distribution Center and consolidating that operation at a facility in Columbus. According to the plan, the 330 employees of the Dayton operation will have to transfer to other processing facilities in Columbus or Cincinnati, take other jobs within the Dayton postal operation such as at a local postal branch office, or take retirement.  These are two seemingly unrelated stories, but when the angst over the personal turmoil of the affected workers is set aside, a strikingly similar narrative emerges.

Founded by George Eastman in 1880, Kodak turned photography into a mass commodity in which consumers of all levels of skill could participate. Since the beginning of the 20th century Kodak became known for its Brownie and Instamatic cameras and its iconic yellow-and-red film boxes. While cameras were an important market, it was the selling and processing of film that helped Kodak grow into a Fortune 500 company and dominate the industry for nearly a century. And it was disruptive, new digital technology that allowed for the capturing of images on devices without the need for film and caused this industry giant to file for protection under the US Bankruptcy Code in January.

As a private company, Kodak will have to make adjustments to their business plan or they will ultimately go out of business. There will be no bailout by the federal government if they don’t find a way to turn around the company, which hasn’t seen a profitable year since 2007.  Kodak has attempted to avoid bankruptcy by trying to focus on their digital business. They have already transitioned from their traditional film processing operations by closing 13 manufacturing plants, 130 processing labs, and reducing their workforce from 70,000 to fewer than 19,000 since 2002. Kodak is attempting to adjust to the disruptive technology that has so dramatically changed its industry.

This now brings us to a discussion of the USPS, a second industry sending pink slips to its employees last Thursday. However, the USPS is different from Eastman-Kodak.  The USPS isn’t a private enterprise. The USPS is a quasi-governmental agency with a government-protected monopoly on first class mail.  The Post Office is also losing money. To be fair, the Post Office has always lost money, it’s just that it was never in such staggering amounts. From 2006 to 2010, overall USPS mail volume dropped by 20 percent, from 213 billion pieces of mail to 170 billion. During the same period, the USPS incurred $20 billion in losses. It lost nearly $11 billion more in 2011. Obviously, the trend of red ink cannot be allowed to continue.

There are several forces at work. One is the disruptive technology that is affecting Ben Franklins’ favorite agency.  The drop in first class mail, always the agency’s bread and butter, is the result of the rapid growth of email and the World Wide Web. Revenues shrank from $74 billion to $67 billion from 2008 to 2010. Mail volume plummeted from 202 billion to 170 billion pieces during that same stretch, a 22 percent fall. The increased use of the internet suggests that even a robust economic recovery probably won’t lead to an increase in First Class mail volume.

Another factor is the high employee cost associated with the USPS. The average salary nationally for postal workers is $52,000, with only slightly lower figures for Dayton postal workers. Although the USPS is supposed to be financially self-sufficient, any shortfall of the retirement and health care costs will undoubtedly fall on the U.S. taxpayer.

The USPS on Thursday unveiled its plans to close the Dayton Processing and Distribution Facility, and to send processing duties and those 330 jobs to their Columbus facility. The nationwide consolidations are expected to result in a loss of roughly 35,000 jobs, which the Post Office hopes to achieve mainly through attrition.

Local postal unions and area politicians are protesting the loss to the Dayton workforce represented by the consolidation. That’s to be expected.  That’s their job. In fact, the union officials are pointing out a clause in their contract that prohibits requiring postal workers to transfer to any job of a distance of greater than 50 miles. There is a question of how these workers who wish to continue working can be accommodated.

While it’s tragic for the loss of even one more job from the Dayton area workforce, and it can’t help but further burden Dayton’s overall economy, the contraction of the USPS is an unstoppable force. I’m not sure why Dayton should be closed while Columbus and other cities remain open, but the shrinking revenues dictate that cuts and consolidations have to occur somewhere. The USPS has suffered the effects of technology. If it were in private business it would have to adjust or close its doors. The fact that it’s a government agency should not mean that a bad business model ought to be constantly bailed out by taxpayers.

After all, when’s the last time you saw an advertisement for a buggy whip? Time and technology march on.

David H. Landon is the former Chairman of the Montgomery County Republican Party Central Committee. He can be reached at DaveLandon@DaytonCityPaper.com.

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