Postal Service Compensation and the Comparability Standard

Abstract:     
Compensation for U.S. Postal Service workers is determined through a process of collective bargaining and mandatory interest arbitration in the event of impasse. 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 evidence to assess the comparability of postal and private sector compensation. The evidence points to a substantial postal premium. Cross-sectional analysis for 1994, 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.

JEL Classifications: J45, J31, K31

Accepted Paper Series