Two unions representing workers for the financially strapped United States Postal Service (USPS) began negotiations over a new labor deal this month.  

Faced with declining mail volume and an unsustainable business model, the USPS is asking for wage and benefit concessions for employees who enjoy  better benefits than other public-sector workers. But the steady downturn has already caused many mail service workers to either retire early or have their jobs phased out through attrition. Unions are looking to prevent further reductions.

The USPS began talks with the 213,000 member American Postal Workers Union (APWU) on September 1, followed by initial negotiations with the National Rural Letter Carriers Association (NRLCA) last week. The four-year contracts for both unions expire in November.

There have been workforce reductions for 84,000 employees through retirements, cutting overtime and operational changes, much to the dismay of the NRLCA and APWU, which represents mail clerks, mechanics, drivers and custodians. The APWU says labor costs have been already reduced by 30 percent over the last three years through reduced hours.

Despite delivering half of the world’s mail, the postal service faces a $7 billion shortfall this fiscal year. Four years ago, mail volume peaked at 213 billion pieces. But it fell to 177 billion last year, the largest decline since the Great Depression, and is expected to fall to 150 billion within 10 years.

The agency doesn’t receive any tax funding and the revenue it generates from postage, mail products and services hasn’t been enough to cover costs. The steep decline in mail volume and the rise of online services and private competitors like UPS and Fed-Ex have pushed USPS's budget into the red.

As a result, it is trying to cut costs by trimming wages and benefits, which represents 78 percent of USPS costs. The service says that with mail services declining and labor costs high, it's trying to move to a workforce with fewer full-time workers and more part-time and seasonal hires.

One problem contributing to the shortfall is a law requiring the postal service to contribute funds to future retirees in advance, something no other federal agency is mandated to do.

In 2006, Congress passed a law requiring the USPS to deposit $75 billion dollars for the fund until 2016. The USPS also pays 78 percent of health premiums, six percent more than other sectors. The postal service is pushing Congress to restructure the mandate, and neither side seems to like the provision. In March, APWU president William Burrus said this law is hindering the USPS.

“The requirement to pre-fund retiree healthcare payments would shift more than $75 billion from postal rate-payers to the federal budget over a 10-year period, at a rate of more than $5 billion per year,” he said.

Worried about their jobs, postal workers have started to rally. In Kentucky, union workers started a petition to keep their processing plant open. Workers in Detroit gathered in August to march against a proposal to eliminate Saturday services. Consumer groups like the Affordable Mail Alliance have also spoken out against plans to increase postage rate increases up to ten times the inflation rate, which they say will hurt small businesses.

The editorials in support of concessions have been far and wide since the negotiations started, adding to the false perception that public union employees are straining budgets. But it should be noted, as the APWU points out, the wage increases for mail carriers have actually been in line with inflation. While wages have continued to stagnate throughout much of the rest of America's economy, the postal service has actually been resilient: the starting salary for mail carriers is $42,611. It isn’t that the workers are overpaid, it’s just that the rest of America is behind.

But that doesn’t lessen the postal service’s financial crisis. The Government Accountability Office (GAO) called USPS’s financial status “high risk” last year. In a recent report released by the independent agency, that the current model is not sustainable and total losses could exceed $238 billion. In an effort to pare down costs, the report suggests wide-ranging changes to the business model. It suggests possible monetary relief with congressional approval, modifying the retiree health plan, and revising the collective bargaining framework that considers the financial status of the USPS.

The latter recommendation doesn’t bode well for the union workers. Since postal employees work in the public sector, they are prohibited from striking and face a different negotiation process than their private counterparts. If the initial talks fail, negotiations will continue with a mediator. If the two sides still can’t come to terms, the talks will proceed into arbitration where a three-member panel - including a neutral party and representatives from both sides - will decide.

The chief labor negotiator for the USPS told the Washington Post that "everything is on the table," while the APWU's Burrus said in a statement that previous contract provisions have always had a "give and take." Which way the scale will tip will be determined during the next few months.

An earlier version misstated the work status of the 84,000 USPS employees.  There were workforce reductions, not layoffs as originally stated.