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Privatization delivers poor services for many, enriches a few

Rochester Business Journal
August 1, 2014

I have been absent from these pages lately because of a very hectic schedule, including dealing with the attacks on the Postal Service and my own union by a postmaster general bent on privatizing and destroying the Postal Service.

Postmaster General Patrick Donahoe has lied repeatedly, not only to the media and postal employees but under oath to Congress. He has claimed he is only trying to make the Postal Service financially healthy and does not believe in privatization—is against it, in fact. While stating these things, he attempted to outsource to the private sector every postal trucking job in the state of California. My union had to go to federal court to force the issue into binding arbitration as our contract requires, and we have stopped it for now.

Donahoe also signed a secret, no-bid contract with Staples to put post offices in 80 Staples stores at first and then expand to all 1,500 Staples locations. I am sure this won’t stop with Staples. He claimed this was not privatization but only an attempt to expand postal services, ignoring that he has already closed hundreds of post offices. My union went to court, and the National Labor Relations Board let us see this no-bid contract with about 75 percent of it redacted or blacked out. Interestingly, a section not redacted states, “The pilot will be used to determine if lower costs can be realized with retail partner labor instead of labor traditionally associated with retail windows at post offices.”

This privatization of postal services is a fact, revealed in the contract with Staples. And yet most of the mainstream national media have covered the issue as a he-said, she-said story: The union says the retail postal services in Staples are privatization, but the postmaster general says he is not privatizing our Postal Service. These reports persist even though the media were given copies of this part of the contract during nationwide informational picketing in April. What happened to the search for truth in journalism?

Staples pays poverty-level retail wages to most of its employees. In the last couple of years, it also has had to pay $42 million in fines for wage theft from its employees. Creating poverty retail jobs by destroying jobs that pay decent wages with the Postal Service—the largest unionized civilian employer of veterans, women and minorities—is exactly the wrong answer for our economy, our country and the public’s postal services.

The AFL-CIO has called for a nationwide boycott of Staples.

For the record, the assault on postal services is about extreme ideology and privatization greed. The Postal Service had $67 billion in revenue last year, and arguments that it is obsolete are absurd. It uses no tax dollars, and two audits by private accounting firms show that its retirement accounts are overfunded by at least $60 billion, all from postage revenue and not taxes. Yet “pay-go” rules pushed by deficit hawks in Congress, who have been proved wrong on the economy, require budget cuts in other areas to return these funds to the Postal Service.

In 2006, under President George W. Bush and James Miller, the leader of his Postal Board of Governors, Congress passed the Postal Accountability and Enhancement Act, one of the worst pieces of legislation ever for the Postal Service. It required funding of postal retiree health benefits 75 years in advance—for postal employees not even born yet. Before this requirement, the Postal Service funded all employees’ and retirees’ health care every year out of its budget with no tax revenue. Now the surplus in this account exceeds $22 billion. The requirement to set aside $5.5 billion annually for 10 years has artificially caused the Postal Service’s current crisis.

Miller first worked for Ronald Reagan and came from the Heritage Foundation to advocate privatization. Without the prefunding requirement, the USPS made a billion dollars in profit last year and will exceed a billion and a half this year. The existing postal/private partnerships to fly our mail, maintain our vehicles and infrastructure, and support related and private-sector companies that rely on us are directly tied to a couple of million jobs and a trillion dollars in GDP.

The postmaster general has closed many post offices and unloaded historic postal buildings—many of them landmarks and in prime locations—selling them to commercial real estate developers for a song. He also has announced reduced hours in 13,000 post offices.

I recently attended a public meeting on reducing the hours of the West Henrietta post office, 14586. This is a retail facility with no letter carriers and total lease and employment costs under $70,000 per year. Total postal revenue for that ZIP code is nearly $2 million, total walk-in revenue nearly $500,000 a year. Why would one reduce retail hours in such a situation, unless he is trying to destroy this great public institution?

If we look at one of the world’s most successful economies, Germany, we see that its postal services have largely been privatized. Even though Germany’s delivery area is a little more than half the size of Texas, its first-class postage is now nearly double ours, the equivalent of roughly 90 cents for a stamp.

We elect legislators to run our government, and that means our government institutions and public services. What does privatization mean for democracy if we elect legislators and they let the private sector run our government and public services? Public services are workers’ and citizens’ unique form of accumulated wealth—unique because it is public in a world increasingly unequal. To defend democracy, one must defend public institutions and services.

For three decades, privatization in this country has been shown to be a failure for essential services and public rights. It has taken away middle-class jobs and created poverty-level jobs. And it has not addressed a significant problem with privatizing public services, which the Supreme Court described in education 60 years ago: “Separate educational facilities are inherently unequal.”

In our own county, we continue to concentrate the poor in one school district while running 18 separate and unequal school districts. In health care, a human right but largely privatized in the United States, we continue to ignore our system’s inadequacy although it delivers massively higher costs for the worst health care in the industrialized free world. We also ignore the deficiencies of privatized services like cellphone communications, cable TV and Internet access, which cost three times more here than in Europe and Japan, although we get slower and less capable service that hurts our economy.

But we should not ignore how privatization adversely affects our democracy and our rights as citizens, devaluing and selling off assets that belong to the public.

James Bertolone is president of the Rochester Labor Council, AFL-CIO. He also is president of the American Postal Workers Union Local 215.

8/1/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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