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I have a rather lengthy statement, Mr. Chairman, but in the interest of time, and so that we can devote the majority of time to any questions that you might have, I think it would be helpful if I were to summarize it, and then just to enter the statement into the record, so you would have in more detail an explanation of some of the more technical points.

The CHAIRMAN. That is satisfactory to the committee.
Mr. MURPHY. Thank you very kindly, Mr. Chairman.
(The prepared statement of Mr. Murphy is as follows:)

STATEMENT OF RICHARD J. MURPHY, ASSISTANT POSTMASTER GENERAL, BUREAU

OF PERSONNEL, POST OFFICE DEPARTMENT

Mr. Chairman and members of the committee, allow me to express my appreciation for the opportunity of appearing before you this morning to give you the views of the Post Office Department on the needs of postal employees for a salary increase.

In reviewing the history of pay administration in the postal service I believe that the last 50 years may be characterized as years spent in search of a formula for wage setting. Our employees and their representatives were well aware of one thing—higher salaries than those being paid were needed. Postal officials, on the other hand typically testified before committees of Congress on behalf of the status quo. Up until this administration postal officials have tended to hold fast against any pay increase no matter how justifiable; first because of the gap between revenues and expenses and the fact that expenditures for salaries have represented about three-fourths of the total postal budget; second, because many past administrations were not generally as alert to the needs of its employees as the present administration; and third, past administrations had not developed a firm yardstick to establish whether a pay change really was necessary, or if so, how much should be given.

While salaries still represent about three-fourths of our budget, I sincerely believe we are now taking a mature, positive attitude toward labors' needs. The cost of a pay increase in the postal service is always large because of the numbers involved. At present, each 1-percent increase raises our cost by about $38 million. But we now recognize that these costs are necessary adjuncts of conducting one of the largest business enterprises in the world. Economies must and will be made in all phases of postal operations, but they should not be made at the expense of decent wages for our employees. Labor is worth its hire. We should not ask our employees to indirectly subsidize the running of the Post Office Department by paying them less than their hire is worth. We would not expect that of workers in private industry, and we should not ask it of employees in the Federal Government. The big question though has been, How do you determine the worth of labor?”.

In the past, there was no formula available to Congress under which the value of labor could be determined. Employee organizations made their representations in terms of need, while postal officials countered in terms of cost and attempted to belittle the needs of employees. The issues on each occasion were joined in varying degrees of acrimony, regardless of the political character of Congress or the executive branch. Emotions often reached a fever pitch on both sides and under such circumstances logic was not merely hidden, it was often lost. Wonder of wonders, however, was the ability of committees such as this to sift the fitting arguments from the counterfeit and to provide a pay formula that met the occasion.

I have dwelt at some length on this historical sidelight to emphasize how dramatic a change has taken place in the basis for setting postal pay. Today, you do not have the scene I have just described of two opposing groups acrimoniously debating each other. Today, you have the happier and more sensible scene of both the executive branch representing management, and various employee organization leaders being in substantial agreement, not only on the need for a basic pay adjustment, but also as to the pay schedule itself.

We have been able to reach a common understanding on pay because at long last we have a common formula or yardstick for determining labor's worth in Government employment. That formula is the comparability principle which was developed before this committee in 1962 and established by this committee

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M H and PPS-90 receired no increase with a hic

*** catchup adjustments an be made for the higher er dernis H.R 11049 contains a number signitut K

***** HAY mint istration. These changes relate to it the st r eets HMTE ** *** dollars of receipts for class of online and the ***unt of ****** ***** MAHN to salary levels (2) a new base for paring ******** * the

**WIN (3) a new fee system in the delivery or s lal delivery wil 1. Rerenne units Since the earliest days of postal operations the volume or hunt

* been measured in terms of the dollars of rerenie opired met W were the sole basis for setting postmaster salaries and plan op defa n thu number of employees to be authorized in a particular unit and the main many supervisors. Years ago receipts were a fair sin for much to

Dut with the changing complexion of mail transactions and new opomnimi apa for post offices, it became clear that a measuring device other than se, was needed. In 1955 Congress enacted the Ptal Field Morri

n ho Act which eliminated receipts as the sole factor for softin salarios in all but the fourth-class post offices. In that law (HongToen de daltoni factors : Total complement of employees to accomplish the work of the wall witte number of delivery routes, number of stationn and branchen, mint punher on Government vehicles. Receipts, however, continued as an important to

In 1958, Congress passed the Postal Policy Act (l'ublie law AD 480) Who raised postal rates in most categories. As you will reonll that wan the measure

which increased the cost of mailing a first class letter from 3 to 4 cents. Increasing postal rates automatically increases receipts. In order to avoid a situation whereby many postmasters would have their office raised in class or their salaries raised in pay level because of an “unearned” increase in receipts, the Postal Policy Act also included a receipts adjustment clause. (Section 211, Public Law 85–426).

That proviso does two things. First, it requires the Postmaster General annually to adjust or discount the receipts achieved by a particular post office by a factor which would recognize the increase in receipts due solely to increases in postal rates. For example, actual receipts for calendar year 1959 were adjusted to 82 percent for offices of the first and fourth classes, and to 81 percent for offices in first-class offices, 80.4 percent in second-class offices, 80.5 percent in third-class offices, and 82.4 percent in fourth class offices.

The purpose of this receipts adjustment or discounting provision is to avoid promoting a postmaster because of "unearned” revenues. The second feature of the section is a "savings" clause. It does not permit reduction in class or in compensation of the postmaster below the level attained as of July 1, 1958, if reduction can be avoided by giving the office full undiscounted credit for postal receipts.

The application of section 211, Public Law 85–426 appears to be simple. It would be, except for changes—changes in the particular office causing it to go up in receipts 1 year and down the next; changes in the mix of mail and transactions unrelated to receipts; and increases in postal revenues again in 1962. As you recall, last year the rate for a first class letter went from 4 to 5 cents. In addition, there has never been a completely rational base for defining receipts. For example, receipts exclude fees received from money orders, but include fees received from the telephone company for the operation of a telephone booth in the lobby.

I guess you can well imagine the plight and confusion of many of the small postmasters regarding this receipts business : “Why are some items included and others not?” “Why are my receipts discounted so heavily?” “Why can't my heavy money order business be recognized ?” “Why was my classification saved last year but not this year?”

Because of the apparent inappropriateness of continuing under the present system of receipts, adjusted for changes in postal rates for 1958 and 1962 (except when necessary to save a classification or level of a particular post office), a new base for measuring dollar volume of business is needed.

These are the current dollar reakpoints for class of office: Class of office:

Adjusted postal receipts 4th class

Under $1,500. 3d class_

$1,500 to $7,999. 2d class_

$8,000 to $39,999. 1st class---

- Over $40,000. The Postal Field Service Compensation Act of 1955 established a range of salary levels for postmasters of different sizes of post office. In order to differentiate one size of post office from another, that act set forth a series of key positions. Each key position is a description of a postmaster's duties and responsibilities and for each salary level the magnitude of receipts changes as follows: Key position :

Receipts | Key positionContinued Receipts 18 PFS-5--

$1, 700 36 PFS-13---------- $1,000,000 20 PFS-6----4, 700 38 PFS-14_--

2, 700, 000 22 PFS-7----6,000 40 PFS-15---

4, 470, 000 25 PFS-8----

16, 000 43 PFS-16-----

8, 400,000 27 PFS-9-----

63, 000 46 PFS-17----- 16, 900, 000 29 PFS-10---------129, 000 48 PFS-18---

48,000,000 31 PFS-11---

314, 000 49 PFS-19---------- 140,000,000 33 PFS-12----

797,000 | In prescribing the dollars of receipts necessary for placement into one of the four classes of office, and in prescribing the size of receipts typical for various key positions and salary levels, Congress gave the Postmaster General a standard within which decisions could be made. For example, if an office has $7,825 of adjusted annual receipts it is in the third class. As for salary level, on this one factor it is closer to PFS-7 ($6,000) than to PFS-8 ($6,440). If other service factors in the office were typical for the level, the postmaster's position would be ranked in PFS-7.

----

Because, as explained earlier, we are not able to use unadjusted receipts, a new standard is needed. We think that the revenue unit system, which I will shortly explain and which is incorporated in H.R. 11049, provides an appropriate substitute standard.

The term "revenue unit” is not a phrase that is now in use. It is a term we are proposing to use for the special purpose of classifying offices and ranking positions. Each year we make a recapitulation of total revenues received by the Postal Establishment from all sources. In addition, we make a summary of the grand total of all mail and special service transactions we accomplished in the same period. The division of total revenue by total transactions provides a good annual index as to the overall business accomplishments of the Post Office Department.

The Annual Report of the Postmaster General contains these figures among others :

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If the total revenue received in 1 year is divided by the total mail and special services activity, the result is the amount of revenue received per transaction. This we can term "revenue unit.” Thus, if the $21/2 billion in revenue received in 1958 is divided by the 60-billion-plus transactions, the result is $42.16 of revenue per 1,000 transactions. If the $3.8 billion in revenue received in 1963 is divided by the 68 billion transactions for that year the result is $55.89 of revenue per 1,000 transactions.

Earlier I listed the amount of receipts necessary for placement in a certain class or certain PFS level. The revenue unit system is simply a new figure to be substituted for the cited figure. The new figure is obtained by dividing the old figure by the revenue per transactions index for 1958 ($42.16)--the last year before the postal rate increase. Here then is how classes and positions would be allocated : Class of office:

Revenue units 4th class_

Less than 36 ($1,500 divided by $42.16). 3d class_

36 but less than 190 ($8,000 divided by

$42.16). 2d class.

190 but less than 950 $40,000 divided by

$42.16). 1st class

950 and over. KP-18, PFS-5_

40 KP-20, PFS-6_

110 KP-22, PFS-7---

140 KP-25, PFS-8_

380 KP-27, PFS-9_

1,490 KP-29, PFS-10.

3, 060 KP-31, PFS-11

7, 450 KP-33, PFS-12_

14, 350 KP-36, PFS-13_

23, 700 KP-38, PFS-14_.

64, 000 KP-40, PFS-15.

106, 000 KP-43, PFS-16.

200, 000 KP-46, PFS-17

400, 000 KP-48, PFS-18_

1,000,000 KP-49, PFS-19

2,500,000 The figures you see in the revenue units column are the figures which we believe will provide a suitable standard for class and salary level differentiation. These revenue unit figures are the ones contained in H.R. 11049. If this bill is enacted, these figures will become our new standard of measure.

If H.R. 11049 is enacted, each year we will derive the new value for the revenue-transaction relationship. In 1958 the value of a revenue unit was $42.16. In 1962 it was $52.29, in 1963 it was $55.89. Each year we would announce the dollars of revenue necessary for classifying offices and evaluating the revenue

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