Postal Service Compensation and the Comparability Standard

The directive of the Postal Reorganization Act is to maintain compensation similar to that awarded for comparable levels of work in the private sector. This paper examines a wide array of recent evidence to assess the comparability of postal and private sector compensation. The evidence points to a substantial postal premium. Cross-sectional analysis controlling for worker characteristics indicates that bargaining unit postal employees receive wages 28% higher than similar private sector workers. A premium estimate of 34% is obtained following an accounting for occupational skill requirements and working conditions, while inclusion of fringe benefits increases further the size of the premium. Longitudinal evidence from the Postal New Hire Survey, matched CPS panels, and Displaced Worker Surveys indicate wage gains of 30%-40% among postal entrants. Data on quit rates and applicant queues reinforce the conclusion that postal workers receive substantial rents. We explore in depth methodological issues, with particular attention given to the choice of the comparison group with whom postal workers are most directly compared. Many of the issues analyzed here have general applicability to studies of wage comparability. The authors are, respectively, E.M. Stevens Distinguished Professor of Economics, Trinity University, San Antonio, TX; William B. Johnson Professor of Law and Economics and Director of the Institute of Law and Economics, University of Pennsylvania, Philadelphia, PA; and Economist and Principal, Standard and Poor's DRI, Washington, DC. We acknowledge computational and data assistance from Timothy Gill and David Macpherson. We have benefitted from the suggestions of two anonymous referees and seminar participants at Florida State University and Princeton University, and discussions with Ted Clark, Andrew German, Donald Develin, D. Richard Froelke, and David Macpherson. The authors have been employed as economic consultants by the U.S. Postal Service during labor negotiations. The views in the paper reflect those of the authors and not necessarily those of the U.S. Postal Service.