Productivity and the Substitution between Labor and Capital in Postal Organizations

Abstract

Postal organizations are very labor-intensive. The personnel share of total costs is still very high, about 60 percent in many organizations, although ten years ago this share was about 20 percent higher. The requirements of better service quality have grown concurrently with the increase of postal volume. Large investments have traditionally been concentrated on transport, sorting installations and facilities. Nowadays, however, the automation of systems and data management also calls for sizeable investment and technological know-how. Throughout the 1980s and 1990s, the average level of investment in postal organizations was about 10 percent of revenue (Pimenta, Santos and Lagoa 2000). How is it possible to substitute labor by capital in this kind of business? Given that the cost structures of postal organizations are usually very inflexible, is substitution in fact even possible? New technology requires a new kind of know-how, and even if the size of staff were to decrease, personnel costs would probably increase, because of the higher level of wages required by the new knowledge workers.