Dead Letter Department: How Privatization Could Save Canada Post, and Taxpayers Too

Simultaneous with the disappearance of letter mail has been a vast expansion in the parcel delivery business, driven by the growth of online shopping. Given its expertise in delivering things door-to-door, it might seem plausible that Canada Post could shift its focus from letters to parcels and chart a way back to profitability. Unfortunately, its reliance on expensive unionized labour means this is not possible.

Lee estimates that full-time employees who belong to the Canadian Union of Postal Workers (CUPW) make between $50 and $60 per hour. And they only work weekdays. Established private-sector courier companies such as UPS and FedEx pay around $40 to $50 per hour and offer greater flexibility. An even bigger threat is posed by private contractors, such as Intelcom, that rely on part-time gig workers earning between $20 and $30 per hour. Plus, these workers often drive their own vehicles and are available seven-days-a-week. Due to its high-cost, inflexible labour force, observes Lee, “Canada Post is massively, massively uncompetitive” in parcel delivery.

Caught between these two powerful trends – the disappearance of its core letter-delivery business and the proliferation of more competitive parcel-delivery services – Canada Post has become deeply unprofitable. Since 2018 it has reeled off six consecutive losses totalling $3 billion. And the situation keeps getting worse. When CUPW went on strike yet again this past November, it only served to reinforce the public’s perception that “snail mail” is now irrelevant to their lives. Many paper-bill holdouts finally switched to online billing and almost no-one sent Christmas cards, further dooming the letter-mail business. About all that’s left is pizza flyers.

As a self-financing Crown Corporation since 1981, Canada Post has so far paid for its growing deficits by drawing down its capital reserves and taking out loans, essentially burning though the remnants of its once-profitable self. But this can’t go on forever. Last year Canada Post executives warned Ottawa they were in danger of running out of cash sometime in 2025. Making good on that prediction, in January the federal government lent Canada Post $1 billion “to maintain its solvency and ensure it can continue operations.” With bankruptcy now a very real possibility, this billion-dollar loan ought to be regarded as the first step in a looming and massive taxpayer-funded bailout of Canada’s failing postal system. Here’s how to prevent that from happening.

An End to Door-to-Door Delivery

Lee has been studying Canada Post since he wrote his PhD dissertation on it in 1989. He says the solution to its financial crisis lies in radically changing the requirements of its job. Currently the federal Canadian Postal Service Charter (what is called a “Universal Service Obligation” in other countries) mandates that Canada Post provide five-day-a-week service to all 17 million Canadian residential and business addresses. For reasons of political expediency, the federal government has occasionally added additional requirements to the Charter, such as requiring that Canada Post maintain existing levels of door-to-door delivery and forbidding it from closing unprofitable rural post offices.

Lee figures all this has to change if Canada Post is to survive. In a 2024 report for the National Association of Major Mail Users, he proposed eliminating door-to-door delivery altogether, ending five-day-a-week service and closing all stand-alone post offices, which would be replaced by additional franchised outlets in grocery stores and pharmacies. By dramatically reducing the mail carrier’s service obligations, Lee figures his “major surgery” could reduce Canada Post’s headcount from the current 65,000 to around 15,000 workers, cutting its financial losses in sharp fashion.

Reforms of this sort are already happening around the world, reflecting the global collapse in letter mail. Last year, for example, Australia Post switched all its customers to alternate-day delivery, while Finland moved to three-days-a-week. Denmark recently abolished its Universal Service Obligation entirely, allowing the market to set its own standards for frequency and speed.

Despite this ample supply of precedent, imposing such reforms in Canada will be difficult, predicts Lee. “It’s going to take a legislated solution,” Lee observes, noting that if the federal government removes or modifies the Postal Charter, it will have to deal with a very angry and volatile CUPW. Rural residents are also likely to bristle at the loss of frequent mail delivery and local post offices, and take their own political action. “It’ll get ugly,” he warns.

Even with a substantial reduction in obligations and workforce, however, Lee isn’t convinced taxpayers can avoid subsidizing Canada Post. He figures political necessity and the interests of social cohesion will require maintaining an unprofitable level of service across small towns and remote areas. So even after major surgery, a state-owned Canada Post is still likely to need taxpayer assistance forever.

Freeing Taxpayers

If the overarching goal of postal reform is to completely remove the burden of Canada Post from taxpayers’ shoulders, then just reducing its service obligations will clearly not be sufficient. The only way to guarantee a future without perpetual public postal deficits is to get rid of it entirely – by selling it to the private sector.

Vincent Geloso is a professor of economics at George Mason University in Virginia, senior economist at the market-based Montreal Economic Institute and a vocal supporter of privatizing Canada Post. “There’s no particular reason why the government should be in charge of mail delivery,” Geloso says. “Canada Post has always been a political entity that takes from taxpayers.”

Public monopolies such as Canada Post inevitably deliver low-quality, expensive service, Geloso observes. Unions keep wages up due to the constant threat of strikes, which in turn pushes up the price of stamps. And as a Crown Corporation with a monopoly over letter mail, it is insulated from competitive forces. Further, its operations are ultimately backstopped by taxpayers, forestalling any drive for greater efficiency. “As consumers we end up paying high prices. And when this produces deficits, we are potentially on the hook for bailouts as well,” Geloso gripes. “We’re screwed either way.” The solution, he says, is a bracing round of “market liberalization and privatization.”