Blogs & Comment

20 reasons for ending Canada Post’s monopoly

There are lots of reasons why Canada Post should be privatized and/or postal services opened up to competition.

Locked-out postal workers picket outside a Canada Post office, June 17, 2011 in Montreal (Photo: Paul Chiasson/CP)

Reasons for disbanding Canada Post’s monopoly in mail delivery include:

1. Other Crown corporations such as Air Canada, CN Rail and Petro Canada have been privatized—doesn’t the logic carry over to Canada Post, as well?
2. Many countries, such as Germany, Netherlands, Sweden, and Austria have privatized their post offices or opened their postal systems to competition—and studies say the changes led to lower costs, higher productivity and better service.
3. Postal services are increasingly becoming a global market; Canada Post faces escalating competition from leaner, more efficient postal services.
4. Canada Post’s obligation to provide universal service doesn’t require a state monopoly; it can be met by private companies operating within an appropriately designed regulatory framework (a solution used in other industries).
5. Canada Post has a history of troubled labour relations (at least 20 strikes, lockouts and walkouts between 1965 and 1997), resulting in a succession of service disruptions—most of which would have been a lot longer and more damaging if they hadn’t been resolved by back-to-work legislation.
6. Despite its monopoly position, costs have escalated such that Canada Post has earned annual net income of less than 2% of revenues for the past 15 years, not enough to pay for necessary capital improvements that would stem low productivity.
7. Productivity, one study concluded, is adversely impacted by high rates of workforce absenteeism—60% above the Canadian average for manufacturing employees in 2005.
8. Compensation is 15% to 20% greater than private-sector counterparts, according to a former CEO of Canada Post.
9. Canada Post continues to hike stamp prices, year in and year out—in 2009, it announced a 20% increase to be phased in over the five years to 2014.
10. A recent study by the Montreal Economics Institute found that stamp prices declined in countries after de-regulating or privatizing mail delivery.
11. Some may defend Canada Post as a profitable operation but profitability should be no surprise for a government-sanction monopoly able to raise prices at will.
12. A 2007 study by professor Edward Iacobucci and colleagues concluded that monopoly status and the interests of unions prevented Canada Post from responding adequately to the: i) rise of new communication technologies such as electronic mail and ii) need to upgrade process technology in the areas of sorting, logistics, and information systems (and privatization was needed).
13. Professor Douglas Adie found in his study that Canada Post failed to provide Canadians with expedient and reliable services, and he recommended following the example of New Zealand, where the struggling postal service moved to a profit by cutting costs 30% while enhancing delivery times.
14. Thanks to the enhanced bargaining position enjoyed by a union in a monopoly industry, Canada Post’s unions has been able to marshal considerable resources for lobbying campaigns and other actions that disproportionately influence public debate and policy makers.
15. Government calls for public comments on postal service, as occurred during the federal government’s review of Canada Post in 2009, are likely to show lopsided support for public monopoly status given the unions’ ability to organize and orchestrate a response.
16. A majority government is in a position to weather the inevitable political and union opposition.
17. Governments are running huge deficits and one relatively painless way to get them under control (compared to cuts in government programs like health care) is to sell off public assets such as Canada Post.
18. The benefits of privatization are well established in the academic, peer-reviewed literature; a 2001 review in the Journal of Economic Literature concluded that taxpayers gained through revenues from the sale of government assets and longer-term, privatization improved firm performance and increased economic growth.
19. Professor Anthony Boardman and colleagues found that Canadian Crown corporations privatized between 1985 and 1996 (including Air Canada, CN Railway, Petro-Canada, etc.) increased profitability, efficiency, and capital expenditures while reducing debt ratios.
20. Fewer monopolies in Canada would result in a more efficient and competitive economy, leading over time to greater national wealth and employment.

Selected Sources:
Michael Warren 
Professor Edward Iacobucci et al. 
Charles Lammam and Niels Veldhuis