Striking Canada Post employees are seen at a Canada Post mail sorting facility during nation-wide strike action in Ottawa, on Nov. 18.Spencer Colby/The Canadian Press
Larry MacDonald is an economist, freelance business journalist and author of several business books, the latest being The Shopify Story, published in October of 2024
The current strike by the Canadian Union of Postal Workers brings to mind the decades-old debate concerning the need to privatize or undertake a major restructuring of Canada Post.
The strike elicits a certain sadness: the 55,000 unionized employees at Canada Post Corp. are trying to maintain their living standards when the employer’s ability to finance the living standards is being eroded by the relentless march of technological change. It could be said there are no bad guys in this movie, yet something has to give in the face of the tectonic shifts unleashed by technical progress.
I recall the old days of going daily with a sense of anticipation to the mailbox. Was there a letter from a friend or a relative? Perhaps even a cheque for some work performed? Then came the convenience of e-mail, texting on the phone and digital e-transfers of payments. Gradually the mailbox had fewer and fewer letters; the cheque was not in the mail any more.
Direct-marketing mail, known as junk mail to those who receive it, did rise up and fill the mailbox, which I complained mightily about to family members. Now, I visit the mailbox no more than two or three times a month to pick up the odd letter or two.
Canada Post’s latest annual report revealed that the Crown corporation suffered a loss of $748-million in 2023, making it the sixth consecutive year of losses that now total $3-billion since 2018. With financial results like this, it appears Canada Post’s current business model is having a Wile E. Coyote moment – running off a cliff and defying gravity for a time running in mid-air.
Ian Lee, a professor at Carleton University’s Sprott School of Business, wrote a report on Canada Post recently for an industry lobby group. Among the changes he expects to see is an elimination of an estimated $800-million in annual costs by substituting community mailboxes for the door-to-door delivery of mail still permitted in 25 per cent of residences in urban cores across the country. We might consider an even more substantial restructuring given how much the situation has deteriorated.
Canada Post and union sit down with mediator, but ‘a lot of ground’ remains between them
No, I’m not advocating wholesale privatization. But the governmental hand in mail delivery does need to be smaller, and some private partnerships might be needed.
True, Canada Post enjoys ample profit margins on letter-mail delivery thanks to a government-sanctioned monopoly that blocks competition on this product line. However, the spread of computers, the internet and smartphones have driven down the volume of letter-mail in Canada every year for nearly two decades, to 2.2 billion in 2023 from 5.5 billion in 2006 (as noted in Canada Post’s 2023 annual report). This downtrend still has further to go.
Canada Post also delivers materials other than letters, such as parcels and direct-marketing mail. But it does not possess a monopoly in these segments and has to compete with private-sector companies. Lacking the incentive and agility of enterprises faced with the discipline of a bottom line, Canada Post’s share of these markets is in steady decline, as mentioned in the corporation’s annual reports.
In the case of the delivery of parcel and similar materials, the Crown corporation has lost 50 per cent of its market share over the past four years in urban areas. In the case of direct-marketing mail, physical volumes have slid to 3.9 billion pieces in 2022 from 4.9 billion pieces in 2015.
Numerous studies have appeared over the years recommending privatization of post offices in Canada and around the world. Several countries have, in fact, adopted these recommendations. But most of the countries, especially those in Europe, have high population densities and do not face the challenge of providing universal service to remote areas at the level that legislation and geography requires of Canada Post.
Remote regions in Canada are uneconomic areas for private companies in Canada to service, so a much slimmer Canada Post may still have a role to play in maintaining universality of service. A caveat is that initiatives launched by the government sector to equip distant locations with broadband Internet service have progressed considerably and may soon render it less imperative to provide remote letter-mail delivery.
What remains is parcel and related deliveries, which could be modelled after the U.S. concept whereby the post office partners with private-sector couriers. The latter can drop off packages and similar deliveries at regional hubs for the post office to collect and take to remote residences. It’s not a particularly attractive outcome but it would be better than having the post office disappear completely.