“I am making this decision to protect the interests of all Canadians. It is not a decision I take lightly, but in this situation it is the right one.”

There is a strong chance that Canada Post workers, who have been on strike for over a month, will return to work early this week. This is not because they have resolved their demands for higher wages, better pensions, and improved health benefits.

Instead, federal Labor Minister Steven McKinnon has made a controversial decision to intervene. He wants to order 55,000 employees back to work until May. At the same time, he plans to appoint an inquiry to make recommendations for reaching an agreement.

The Canadian Industrial Relations Board must decide whether to accept McKinnon’s proposal. As of late Sunday afternoon, there was no decision. However, many believe the board will support the minister.

This labor dispute has fueled debate about the long-term direction of Canada Post.

Financial Challenges Facing Canada Post

Last year, Canada Post reported an annual loss of $748 million. This was after selling parts of its business to remain viable.

• To discuss Canada Post’s future, Jamie speaks with Ian Lee. He is an associate professor at the Sprott School of Business at Carleton University. He has studied Canada Post for many years.
• Ian Lee says the company’s business model is not sustainable. He points to evidence that Canada Post is at a tipping point.
• Lee explains that letter mail delivery peaked in 2006. Each year since then, letter volumes have dropped. The total number of letters sent has declined by 70%. Letters were the core business for over 250 years.

Parcels, the second line of business, have also struggled. Canada Post lost 50% of its parcel market share in the last four years. Both key product lines are declining. This has created a financial crisis.

The Impact of Competition and the Gig Economy

Canada Post once had a good share of the parcel market. Before the pandemic, it held about 61%. With the rise in e-commerce, however, customers demanded faster service.

Gig workers entered the market. They use their own vehicles and accept lower pay. This lowered operating costs far below Canada Post’s costs.

Independent data suggests Canada Post’s truck, driver, and fuel cost about $60 to $65 per hour. Private courier companies pay about $40 to $45 per hour. Gig operators cost about $25 per hour.

This cost gap is huge. It puts Canada Post at a severe competitive disadvantage. E-commerce companies have shifted to cheaper gig-based deliveries. Regulation of gig work might change this. But as of now, gig competition reduces Canada Post’s viability.

Considering Working Conditions and Wages

Ian Lee acknowledges that many find $25 per hour for gig workers too low. After vehicle costs and fuel, some doubt if gig workers make minimum wage.

However, Lee argues that the data shows Canada Post’s diminished relevance in urban areas. Private couriers and gig workers fill the market better and at lower cost.

Lee says Canada Post must accept this reality. It can focus on areas where private couriers do not operate. This likely means a smaller company focused on parcels, not letters, and serving rural or remote communities.

Potential Expanded Services and Alternatives

Some propose that Canada Post offer new services, like postal banking. Other countries do this. But Lee says 99% of Canadians already have bank accounts. Postal banking was closed in 1968 due to lack of demand.

• Lee also notes that offering banking would require massive retraining and expensive infrastructure. He doubts it would succeed against Canada’s strong banking sector.
• Other ideas include EV charging stations or food delivery. Lee supports the general idea of expanding parcel services.
• This includes delivering groceries, prescriptions, or even alcohol. As society ages, home delivery could be a niche.

Lee sees the future of Canada Post as delivering physical goods, not letters. It must adapt to changing markets to survive.

The Reality of Downsizing and Restructuring

Lee believes the post office must shrink significantly. There is no courier or parcel company with 65,000 employees. Canada Post’s workforce may need to reduce by tens of thousands.

He also notes that even if gig competition were regulated away, Canada Post would still be uncompetitive at its current costs. The company is losing billions of dollars and underpricing its services.

He criticizes management for paying bonuses during decline. He expects downsizing at all levels.

Urban vs Rural Perspectives and Political Considerations

Many urban Canadians no longer rely on Canada Post. Postal stations in cities are often empty. This lack of usage suggests less political will to preserve it at its current scale.

Rural, remote, and Indigenous communities still depend on Canada Post. Here, the service is essential because private couriers do not serve these areas well.

Lee believes the future post office will focus on rural Canada and smaller communities. It may still operate in cities, but it must become competitive.

Expert Insight and Conclusion

Ian Lee’s perspective is that Canada Post must accept structural change. Parcels, not letters, represent its future. It must serve areas not covered by private competition. It must become smaller and more efficient.

This conversation highlights the challenges and possible paths forward for Canada Post. The current strike, competition from gig workers, and financial losses all signal that change is inevitable.