The U.S. Postal Service proposed on Wednesday to increase its rates more than the standard, inflation-based cap that typically constrains price bumps, citing its financial condition and the uncertainty of legislative action to justify the emergency measure. Known as an "exigent rate increase," the Postal Service Board of Governors must demonstrate to its regulatory body — the Postal Regulatory Commission — "either extraordinary or exceptional circumstances" that require higher rates.
There are problems with the U.S. Postal Service's analysis of postal price elasticities. The study lumps all types of mail together and concludes that raising postal rates will result in a net increase in revenue. The study downplays the nearly 10 to one difference in price elasticity between First Class mail and Carrier Route mail. The study defines price elasticity to mean that a cost increase will result in a short-term net increase in revenue because the revenue increase will be more than the lost mail volume.
In a keynote presentation yesterday at the NEMOA directXchange Fall Conference in Providence, R.I., Nagisa Manabe, chief marketing and sales officer of the U.S. Postal Service, addressed attendees about updates to the USPS’ five-year plan and the urgency of action needed among business mailers.