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chapter 3
financial highlights

Table 3-8 Productivity Since 1990
blank Total Factor Productivity Output per Workhour1 Multifactor Productivity2
blank Annual3 Cumulative From 1972 Annual Cumulative From 1972 Annual Cumulative From 1972
1990 2.9 8.6 3.4 13.9 (0.0) 11.3
1991 (1.8) 6.8 (0.1) 13.7 (1.0) 10.2
1992 0.4 7.2 1.0 14.8 2.0 12.2
1993 3.8 11.0 4.6 19.3 0.5 12.7
1994 (0.2) 10.9 0.8 20.2 1.0 13.7
1995 (1.9) 8.9 (1.3) 18.9 0.4 14.1
1996 (1.3) 7.6 (0.1) 18.8 1.4 15.5
1997 1.3 8.9 1.7 20.5 1.0 16.5
1998 (1.0) 7.9 1.2 21.7 1.2 17.7
1999 (0.1) 7.7 0.9 22.6 0.7 18.4
2000 2.2 9.9 2.0 24.6 1.4 19.9
2001 1.7 11.6 1.7 26.3 (1.1) 18.8
2002 1.0 12.6 2.2 28.5 2.0 20.8
2003 1.8 14.4 2.3 30.8 2.7 23.5
2004 2.4 16.8 2.4 33.3 2.8 26.3

1. Output per Workhour measures the changes in the relationship between workload (mail volume and deliveries) and the labor resources used to do the work. The main output is delivering mail and services to an expanding network.

2. 2002-2004 MFP Data are estimates of Global Insights, Inc. BLS data for these years have not yet been released.

3. Historical data is subject to revision as certain data used in calculating productivity are periodically revised. Price indexes released by the BLS and the Bureau of Economic Analysis that are used to calculate resource usage are subject to historical revisions by these agencies. When historical revisions are released, they are incorporated into the TFP calculation, which can result in historical TFP revisions. TFP for the reporting year is also subject to revision when final Postal Service cost data for the reporting year are available. Generally, this revision occurs in April of the following year.

First-Class Mail (EXFC) overnight service scores that increased from 82 percent in 1992 to 95 percent in 2004.

B.Total Factor Productivity

The Postal Service measure of productivity, Total Factor Productivity (TFP), includes all factors of production. TFP, measures the growth in the ratio of outputs and the inputs, or resources, expended in producing those outputs. By tracking outputs and resource usage, TFP provides a historical measure of efficiency.

The Postal Service's main outputs are mail volumes and servicing an expanding delivery network. To account for variations in resources used to process different types of mail, TFP weights each mail type according to its workload content. The weighting is determined by factors such as size, weight, mailer preparation including bar coding and presorting, and mode of transportation used, such as air or highway. In addition to labor, TFP also measures capital and materials inputs, such as mechanized and automated equipment, facilities, transportation, and other non-personnel costs. The

Output per Workhour component of TFP uses only labor input as a measure of resource use.

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 non-farm 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 the U.S. economy has become more heavily weighted with high technology goods and services. Therefore, MFP results have been more heavily influenced by that business sector. Productivity