Multiple factors may cause TFP growth to vary in the short term. Expenditures to enhance service and improve customer satisfaction may cause short-term declines in TFP growth. TFP can fluctuate from one year to another because of time lags between making major investments and realizing the associated savings. Consequently, when assessing short-term productivity performance, the factors affecting TFP growth should be taken into consideration. Because TFP can be volatile over the short term, analyses and assessments are best made over fairly long periods of time.

     Traditionally, Postal Service TFP has been benchmarked against Multifactor Productivity (MFP), an index of private nonfarm business productivity reported by the Bureau of Labor Statistics (BLS). In recent years, MFP has become less useful as a benchmark measure for comparison of postal productivity because, as the United States economy has become more heavily weighted with high technology goods and services, MFP results have been more heavily influenced by that business sector. Productivity growth in the high-tech sector far outstrips that of the industrial and service sectors that are more akin to the Postal Service.

     Table 3-6 shows annual and cumulative TFP and Output per Workhour compared to MFP for the years 1990 through 2003. Over the long run, a successful organization will average positive growth in productivity, as has the Postal Service, but year-to-year fluctuations in TFP and Output per Workhour are common. In 1990 and 1993, TFP and Output per Workhour showed exceptional growth. Slow growth or declines followed in 1994 through 1996 and positive growth was displayed again in 1997. In 1998 and 1999, TFP declined while Output per Workhour increased. Since 2000, the Postal Service achieved strong growth in both TFP and Output per Workhour.

     The Postal Service's TFP growth of 1.8 percent in 2003 marks four consecutive years of positive growth. Output per Workhour growth was 2.3 percent. The TFP result is equivalent to $1,196 million in expense reductions. Cumulative from 2000,

TFP growth is 6.7 percent, which is equivalent to $4.4 billion in expense reductions. Output per Workhour over this same period grew 8.2 percent.

     When compared to years with strong positive TFP growth prior to 2000, the achievement of 2003 is significant. In previous years, strong TFP growth was fueled largely by workload growth. During the 1990s, TFP grew 0.2 percent annually, on average, while workload grew 1.9 percent annually, on average. In 2003, however, strong productivity growth was achieved through substantial restraint on resource usage growth. TFP growth of 1.8 percent was achieved in spite of a 0.6 percent decline in workload. The Postal Service effectively managed its use of resources to achieve a 2.4 percent reduction in total resource usage. Labor and materials usage declined by 2.9 percent and 1.4 percent, respectively. This achievement was in addition to the significant 2002 reductions in labor usage of 4.0 percent and materials usage of 0.6 percent.

     The Postal Service plans to continue to improve TFP over time. The objective is balanced against the need for service improvements to improve customer satisfaction and remain competitive in the marketplace.

     Worksharing discounts to mailers affect Postal Service productivity performance. Worksharing incentives have shifted a greater proportion of the workload associated with automation compatible mail to business mailers. Worksharing discounts provide cost savings for the Postal Service and enhance the productivity of the economy as a whole. Worksharing, however, transfers the Postal Service's prime opportunities for productivity improvement to its partners, the mailers. In contrast, the Bureau of Labor Statistics measure, multifactor productivity (MFP), does not factor out self-service or worksharing on the part of the customer. Rather, MFP captures the whole of the economy, including productivity that has been transferred between segments.