Postal Service
Employee Issues Associated with the Potential Closure of the San Mateo IT Center Gao ID: GAO-03-205 January 31, 2003While the U.S. Postal Service (USPS) rationalizes its infrastructure, it is weighing a proposal to close and sell its Information Technology (IT) center located in San Mateo, California. According to USPS, closing the IT center and selling the facility should save USPS about $74 million over the next 10 years and result in increased efficiency. All IT union employees and about half of IT management employees will be offered the opportunity to relocate with their jobs to other postal IT centers. The San Mateo IT Center also houses an Accounting Service Center whose functions and staff are to be moved into leased space in the San Francisco Bay Area. GAO undertook this study to, among other things, identify the process USPS is following in making its decision about closing the IT center and determine the impact such a closure would have on IT employees at the center.
USPS is following its Investment Review and Approval Process in reaching a decision about closing the San Mateo IT Center. To support the investment needed to close the IT center, the process requires--and USPS prepared--analyses based on prevailing economic and other conditions. However, these conditions have changed since USPS prepared the analyses in 2000. In 2001, USPS announced plans to automate and reengineer its field accounting activity, which will result in USPS closing its 85 district accounting offices and consolidating the residual activities into its 3 Accounting Service Centers. USPS has not updated its analyses to reflect the changed conditions, but said that it planned to do so. San Mateo IT employees anticipate mostly negative social impacts if they relocate and mostly negative economic impacts if they stay in the Bay Area. Of the 213 San Mateo IT employees who responded to our survey, 36 (17 percent) indicated they would likely relocate, although most would be offered jobs at other postal IT centers. In 2000, USPS' economic analyses included an assumption--and San Mateo IT employees believed--that local jobs would be available for those individuals who did not want to relocate. However, local postal jobs are no longer available, and nonpostal IT job opportunities have tightened considerably in the Bay Area. GAO has previously noted that progressive organizations that are restructuring often provide job placement assistance to employees faced with losing their jobs. USPS plans to offer job assistance to management employees seeking nonpostal jobs. However, USPS does not plan to offer job assistance to union employees because such assistance is not covered by their collective bargaining agreement. Because the employment outlook in the Bay Area has changed dramatically, union employees who decide not to relocate may encounter difficulty finding employment in the Bay Area.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-205, Postal Service: Employee Issues Associated with the Potential Closure of the San Mateo IT Center
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
January 2003:
Postal Service:
Employee Issues Associated with the Potential Closure of the San Mateo
IT Center:
Postal Service:
GAO-03-205:
GAO Highlights:
Highlights of GAO-03-205, a report to the Ranking Minority Member,
House Committee on Government Reform and Other Requesters
Why GAO Did This Study:
While the U.S. Postal Service (USPS) rationalizes its infrastructure,
it is weighing a proposal to close and sell its Information Technology
(IT) center located in San Mateo, California. According to USPS,
closing the IT center and selling the facility should save USPS about
$74 million over the next 10 years and result in increased efficiency.
All IT union employees and about half of IT management employees will
be offered the opportunity to relocate with their jobs to other postal
IT centers. The San Mateo IT Center also houses an Accounting Service
Center whose functions and staff are to be moved into leased space in
the San Francisco Bay Area. GAO undertook this study to, among other
things, identify the process USPS is following in making its decision
about closing the IT center and determine the impact such a closure
would have on IT employees at the center.
What GAO Found:
USPS is following its Investment Review and Approval Process in
reaching a decision about closing the San Mateo IT Center. To support
the investment needed to close the IT center, the process requires--
and USPS prepared”-analyses based on prevailing economic and other
conditions. However, these conditions have changed since USPS prepared
the analyses in 2000. In 2001, USPS announced plans to automate and
reengineer its field accounting activity, which will result in USPS
closing its 85 district accounting offices and consolidating the
residual activities into its 3 Accounting Service Centers. USPS has
not updated its analyses to reflect the changed conditions, but
said that it planned to do so.
San Mateo IT employees anticipate mostly negative social impacts if
they relocate and mostly negative economic impacts if they stay in
the Bay Area. Of the 213 San Mateo IT employees who responded to
our survey, 36 (17 percent) indicated they would likely relocate,
although most would be offered jobs at other postal IT centers. In
2000, USPS‘ economic analyses included an assumption”and San Mateo
IT employees believed”that local jobs would be available for those
individuals who did not want to relocate. However, local postal jobs
are no longer available, and nonpostal IT job opportunities have
tightened considerably in the Bay Area.
GAO has previously noted that progressive organizations that are
restructuring often provide job placement assistance to employees
faced with losing their jobs. USPS plans to offer job assistance to
management employees seeking nonpostal jobs. However, USPS does not
plan to offer job assistance to union employees because such assistance
is not covered by their collective bargaining agreement. Because the
employment outlook in the Bay Area has changed dramatically, union
employees who decide not to relocate may encounter difficulty finding
employment in the Bay Area.
[See PDF for figure]
[End of figure]
What GAO Recommends:
GAO recommends that USPS review and update, if appropriate, the
analyses used in support of closing the San Mateo IT Center to better
reflect current conditions before making its final decision about
closing the center. GAO also recommends that if USPS decides to close
the IT center, it should consider offering to help union employees
find local jobs if they decide not to relocate. USPS did not comment
on GAO‘s findings, but it agreed with GAO‘s recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-205.
To view the full report, including the scope and methodology, click
on the link above. For more information, contact Bernard L. Ungar
on (202) 512-2834 or at ungarb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
The Service Is Following Its Investment Review and Approval Process:
Relocation Experts Report that Negative Economic and Social Impacts
Generally Accompany Plant and Facility Closures:
New York IT Center Employees Reported Economic and Social Impacts as a
Result of the Closure:
San Mateo IT Center Employees Anticipate Mostly Economic Impacts if
they Opt to Stay in the Bay Area and Social Impacts if they Opt to
Relocate to Another Postal IT Center:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Comparative Demographic Data and Options for
San Mateo and Displaced New York IT Center
Employees:
Appendix II: Comments from the U.S. Postal Service:
Tables:
Table 1: Demographic Data for San Mateo Employees Compared with
Displaced New York Employees‘ Demographic Data:
Table 2: Likely Options/Opportunities for San Mateo IT Employees
Compared with Options/Opportunities that Were Available for Displaced
New York IT Employees:
Figures:
Figure 1: The San Mateo IT Center:
Figure 2: Overview of Postal Service‘s Investment Review and Approval
Process:
Figure 3: Options Selected by Displaced New York IT Center Employees in
1993:
Figure 4: Options San Mateo Employees Expect to Pursue if Staying in
the Bay Area:
Abbreviations:
APWU: American Postal Workers Union
BLS: Bureau of Labor Statistics
CIC: Capital Investment Committee
COO: Chief Operating Officer
CPC: Capital Projects Committee
DAR: Decision Analysis Report
EAS: Executive and Administrative Schedule
ERC: Employee Relocation Council
HQ: Headquarters
IT: Information Technology
IT Department: Information Technology Department
NYC: New York City
OIG: Office of Inspector General
PCES: Postal Career Executive Service
PMG: Postmaster General
VP: Vice President:
United States General Accounting Office:
Washington, DC 20548:
January 31, 2003:
The Honorable Henry Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives:
The Honorable Chaka Fattah
The Honorable Tom Lantos
House of Representatives:
This report responds to your request for information about the U.S.
Postal Service‘s Department of Information Technology (IT Department)
proposal to close its San Mateo, California, Information Service
Center, including the social and economic impacts that the closure
would have on affected postal employees and their families. As you
know, the Service has experienced significant financial difficulties in
the past few years, and the Service is in need of transformation.
Rationalizing the Service‘s vast infrastructure will be critical to its
success in addressing its financial difficulties, which means the
Service may have to close or consolidate certain postal facilities.
Within this context, the Service is considering closing the San Mateo
Information Technology (IT) Center.
In 2000, the Service‘s IT Department proposed closing the San Mateo IT
Center and transferring IT functions performed at the center to other
postal IT centers in order to reduce costs and make operations more
efficient. The proposed closure would affect about 240 employees--about
170 bargaining unit and about 70 Executive and Administrative Schedule
(EAS) employees.[Footnote 1] Closing and consolidating IT functions are
not new activities for the Postal Service. For example, in 1993, the
Service closed its New York IT Center and transferred functions
performed at that center to other postal IT centers.
Under the IT Department‘s closure proposal, most of the IT functions
being performed by the San Mateo IT Center are to be transferred to the
Service‘s other Information Service Center located in Eagan, Minnesota.
The remaining IT functions are to be transferred to the Service‘s
Integrated Business Systems Solutions Centers located in St. Louis,
Missouri and Wilkes-Barre, Pennsylvania.[Footnote 2] The San Mateo IT
Center also houses an Accounting Service Center whose functions and
staff are to be moved into leased space in the San Francisco Bay Area
(Bay Area) if the Service decides to close the IT center. Because
closing postal facilities is controversial, the Service said it would
postpone making a final decision regarding the closure of the San Mateo
IT Center until after we have issued this report and postal management
has had a chance to review the results of our study.
To provide you information on the impact that closing the San Mateo IT
Center would have on postal employees working at that facility--and
their families--we agreed with your offices to address the following
objectives:
* Describe the process the Service is following in deciding whether to
close the San Mateo IT Center and consolidate its functions into other
postal IT centers.
* Determine experts‘ views on the social and economic impacts that
plant and facility consolidations and closures have on affected
employees and their families.
* Determine the social and economic impacts that affected postal
employees and their families encountered when the Service closed its
New York IT Center in 1993.
* Determine affected postal employees‘ views on the social and economic
impacts that they and their families would likely encounter if the
Service closes the San Mateo IT Center.
We also provide information on how selected organizations have assisted
affected employees during downsizing.
To meet these objectives, among other things, we administered a
questionnaire to 243 San Mateo IT Center employees and received 213
responses, resulting in an 88 percent response rate. We also
administered two separate questionnaires to 145 current postal
employees who were displaced by the 1993 closure of the New York IT
Center.[Footnote 3] One questionnaire was mailed to 66 displaced
employees of the New York IT Center who had relocated to similar
positions at other postal IT centers outside the New York City area. We
received 49 responses from this group, resulting in a 74 percent
response rate. Another questionnaire was mailed to 79 displaced
employees who had transferred to other postal positions in the New York
City area following the IT center‘s 1993 closure. We received 46
responses from this group, resulting in a 58 percent response rate. We
did not attempt to locate displaced employees of the New York IT Center
who no longer work for the Service.
Additionally, we identified and reviewed (1) the IT Department‘s
economic analyses and assumptions, (2) the U. S. Postal Service Office
of Inspector General‘s (OIG) November 2000 audit report on the IT
Department‘s proposal and economic analyses, (3) applicable Postal
Service policies and procedures relating to facility closures and
capital investments, (4) our prior reports on restructuring and
downsizing, (5) available private sector relocation studies, and (6)
applicable portions of the U.S. Code and the Service‘s collective
bargaining agreement with the American Postal Workers Union (APWU) to
identify legal requirements and entitlements associated with a postal
facility closure. We also interviewed key stakeholders familiar with
the closure, including (1) various postal officials at Headquarters and
at the San Mateo IT Center and (2) national and local representatives
of the APWU. Finally, we interviewed eight experts familiar with
relocations. We identified these experts from available studies,
articles, and referrals.
Results in Brief:
The Postal Service is following its Investment Review and Approval
Process in making its decision regarding the IT Department‘s proposal
to close the San Mateo IT Center, because the Service will need to make
an investment of $8 million to support the closure. The Investment
Review and Approval Process requires that a Decision Analysis Report
(DAR) be prepared as support for the investment.[Footnote 4]
Additionally, the process requires that key senior postal executives
approve the DAR. The IT Department prepared a DAR for closing the San
Mateo IT Center; and in early November 2000 the Finance Department
validated the accuracy and integrity of the DAR‘s assumptions and
economic analyses, and the former vice president for IT approved the
DAR. Separate from the Investment Review and Approval Process, the OIG
reviewed the DAR in 2000 and concurred that the proposed closure would
save the Service about $74 million over 10 years. The savings would
accrue from the sale of the San Mateo facility, staffing reductions,
and operating efficiencies. Approval by the Postmaster General (PMG)
and the Service‘s Capital Investment Committee--which reviews projects
of $7.5 million or more in capital and expense investments--has not yet
occurred. According to the Service, these approvals are the final steps
in its Investment Review and Approval Process and will take place after
our report is issued if the Service decides to pursue closing the San
Mateo IT Center. The San Mateo DAR has not been updated since 2000,
although economic conditions have changed since that time. In addition,
the DAR does not reflect the impact that the Service‘s 2001 announced
plans to automate and reengineer its field accounting activity could
have on projected savings associated with the closure proposal. Those
plans involve closing the Service‘s 85 district accounting offices and
consolidating residual activity into its 3 Accounting Service Centers.
However, postal officials said that the key assumptions used in
preparing the DAR would be updated before the Service makes its closure
decision.
Relocation experts we interviewed reported that plant and facility
closures occur throughout the nation and generally result in negative
economic and social impacts on employees and their families. They said
that following a closure, displaced employees typically experience
economic impacts, such as lost income, loss of retirement benefits, and
lower income after finding a new job. Employees who relocate with their
jobs are likely to encounter social impacts, such as marital stress,
separations from family members, and the loss of social ties. The
experts also noted that dual-income families who relocate can face
negative economic impacts when trailing spouses have to give up their
jobs in order to relocate. The experts further noted that closures tend
to have a greater negative impact on older employees. Older employees
are less likely than younger employees to be reemployed and are more
prone to social difficulties if they relocate to a new area. The
experts indicated, however, that some employees might view closures
positively because closures can afford workers the opportunity to
redirect their careers, develop new competencies, or leave unsatisfying
jobs.
Employees affected by the New York IT Center closure in 1993 whom we
surveyed reported that they experienced negative economic and social
impacts from the closure. Our analysis of the salary data provided by
the Service on employees displaced by the New York IT Center closure
showed that employees who remained with the Service in the New York
City area fared worse economically than those who relocated to other
postal IT centers. According to the Service‘s salary data, 9 years
after the closure, the average salary of postal employees who relocated
to other postal IT centers had increased about 11 percent (in constant
2001 dollars), while the average salary of employees who remained with
the Service in the New York City area had decreased about 1 percent (in
constant 2001 dollars). However, survey respondents who relocated to
other postal IT centers reported encountering more negative social
impacts than respondents who remained with the Service in the New York
City area. For example, 23 of the 49 relocated employees responding to
our survey reported that they found it difficult (1) adjusting to the
new geographic area, work environment, and local culture; (2)
maintaining or establishing social, community, and cultural ties or
finding supporting communities where they could get involved; and (3)
being away from family and friends and missing out on important family
events. Some relocated respondents also reported that since relocating,
their spouses had found it very difficult to maintain or secure jobs,
benefits, and retirement security.
San Mateo IT employees who responded to our survey anticipated mostly
economic impacts if they opt to stay in the Bay Area and social impacts
if they opt to relocate to another postal IT center. Respondents
anticipated economic impacts, varying from retiring earlier than
planned to being unemployed. They anticipated social impacts, varying
from short-term to long-term family separations. Under the IT
Department‘s proposal to close the San Mateo IT Center, all bargaining
unit and about half of the EAS employees would be offered the
opportunity to relocate with their jobs to another postal IT center.
However, only 36 (17 percent) of the 213 San Mateo employees responding
to our survey indicated they would likely relocate. Of the remaining
respondents, 167 (78 percent) indicated they would likely stay in the
Bay Area; and 10 (5 percent) indicated they were unsure what they would
do if the Service decided to close the IT center. However, the actual
decisions of the San Mateo IT Center employees may be different from
their responses to our survey because certain factors have changed
since they responded to our survey. At the time the employees completed
our survey, the Service anticipated that postal positions would be
available in the Bay Area for bargaining unit employees who did not
want to relocate. Since that time, conditions have changed, and the
Service no longer anticipates that postal positions will be available
in the Bay Area. Additionally, outside employment opportunities in the
Bay Area for employees with IT skills have tightened considerably. To
help minimize the potential impact a closure could have on EAS
employees, the Service has said it will make available the services of
a private job search firm.
One hundred thirty four of the 167 San Mateo respondents who indicated
they would likely stay in the Bay Area provided reasons for not
relocating. Of the respondents who provided reasons, 79 (59 percent)
identified concerns with spouses‘ careers as a primary motivator in
their decision not to relocate. The Service has indicated that it will
work with trailing spouses who are postal employees to find postal
employment at the new location, but it does not anticipate providing
assistance to trailing spouses who are not postal employees. Because
the Service is not providing assistance to all trailing spouses, the
Service may not have as many employees relocating as it anticipates. In
preparing the DAR, the IT Department estimated that 33 percent of San
Mateo IT employees would relocate to other postal IT centers. However,
only 17 percent of survey respondents indicated they would likely
relocate. Relocation experts have noted that employees who must make a
relocation choice often base their decisions on whether their trailing
spouses can find suitable employment at the new location. Given this
dilemma, relocation experts report more companies are providing
employment assistance to trailing spouses, such as assisting with
finding employment. By providing trailing spouses assistance-such as
resume preparation and review services--the Service may encourage more
employees to relocate.
The employment outlook for San Mateo IT employees has diminished since
2000. Postal positions are no longer expected to be available in the
Bay Area, and nonpostal IT positions are significantly more limited
than 2 years ago. To help employees through such difficult times, we
have previously reported that employers and employees both benefit when
the employer proactively works with employees to minimize the impacts
of relocation or job loss. Employers frequently provide relocation
assistance, employee and family counseling, and job placement
assistance. To its credit, the Service plans to provide some assistance
in these areas. However, the Service does not anticipate offering job
placement assistance to bargaining unit employees who decide not to
relocate, although bargaining unit employees will have the opportunity
to relocate with their jobs to other postal IT centers because of the
no-layoff provision in the collective bargaining agreement with APWU.
Without the benefit of job placement assistance, bargaining unit
employees who do not relocate might encounter difficulty in finding
employment in the Bay Area. Should the Service decide to close the San
Mateo IT Center, it could offer job placement assistance during closure
discussions with the APWU. These discussions have historically resulted
in additional provisions for affected bargaining unit employees.
We are recommending that before the Service makes its decision about
closing the San Mateo IT Center, it should review and update, if
appropriate, its economic analyses and assumptions. Should the Service
decide to close the San Mateo IT Center, we are also recommending that
it consider (1) offering to help bargaining unit employees find jobs if
they decide to stay in the Bay Area and (2) providing some assistance-
-such as resume preparation and review services--to working spouses of
employees who decide to relocate. In commenting on a draft of this
report, the Service did not comment on our findings. However, the
Service did indicate agreement with our recommendations. The Service
said that before reaching a decision regarding the closure of the San
Mateo IT Center, it would update the information that will be used in
making its decision. The Service also indicated that it would adhere to
the provisions of its bargaining unit agreements and will attempt to
mitigate the negative impacts that relocations might have on employees
and their families.
Background:
During the 1970s, the Postal Service invested in data centers and
mainframe computers to support administrative functions, such as
personnel, accounting, and payroll processing. During the 1980s, the
Service expanded its IT technology network to cover essentially all
facets of postal operations. However, as networking technology
improved, the Service realized that it no longer needed to colocate
some of its IT functions with the hardware processors. This presented
the Service with the opportunity to reduce costs and improve
efficiencies by consolidating some of its IT functions. The practice of
consolidating IT functions is consistent with industry trends, as
companies strive to utilize new technologies to improve operations at
less cost.
Before 1993, the Service had six computer centers, each with a
mainframe computer, located in New York City, New York; St. Louis,
Missouri; Raleigh, North Carolina; Wilkes-Barre, Pennsylvania; San
Mateo, California; and Minneapolis, Minneapolis.[Footnote 5] In 1993,
the Service closed its IT center located in New York and transferred
all functions performed at the center to its postal IT centers located
in San Mateo and Eagan. Some employees affected by the New York IT
Center closure relocated to San Mateo and now face the prospects of
being affected by yet another postal IT center closure. Additionally,
since 1993, the Service has transferred mainframe computer operations
performed in St. Louis, Raleigh, and Wilkes-Barre to the San Mateo and
Eagan IT Centers. Other IT functions continue to be performed at the
Service‘s IT centers located in St. Louis, Raleigh, and Wilkes-Barre.
The Service‘s current IT structure includes two Information Service
Centers located in Eagan and San Mateo. Each of these Information
Service Centers houses a Computer Operations Service Center, a
Management Support Center, an Accounting Service Center, and an
Integrated Business Systems Solutions Center.[Footnote 6] The Computer
Operations Service Centers operate the Service‘s mainframe computers
supporting various postal activities. The Integrated Business Systems
Solutions Centers maintain and enhance software applications for postal
business systems. The Management Support Service Centers provide
facility support to the other centers. The Accounting Service Centers
are operated by the Service‘s Finance Department and provide national
accounting services. The Accounting Service Centers are not included as
part of the IT Department‘s proposed consolidation of the San Mateo IT
Center.
Figure 1 shows the San Mateo IT Center, which is located at 2700 Campus
Drive, San Mateo, CA, in the Bay Area. The building is a three-story
structure plus a basement, contains approximately 160,000 square feet
of space, and is located on 12.4 acres. The building was constructed in
1976 and was purchased by the Service in 1983 for about $13 million.
After purchasing the building, the Service spent an additional $14
million on renovations, and during the last 10 years has spent an
additional $3.7 million on major upgrades.
Figure 1: The San Mateo IT Center:
[See PDF for image]
[End of figure]
The consolidation plan currently under consideration provides that San
Mateo‘s computer operations, management support functions, and some of
its software functions would be transferred to Eagan, along with some
employees. The plan further provides that San Mateo‘s remaining
software support functions would be transferred to postal IT centers
located in St. Louis and Wilkes-Barre, along with some employees. As
previously stated, the consolidation plan currently under consideration
does not include transferring the accounting functions currently
performed at San Mateo. Instead, the accounting functions, along with
their complement of 102 employees, are to be relocated into leased
space in the Bay Area.
In October 2000, San Mateo‘s IT functions had an authorized complement
of 282, comprising 80 EAS positions, 200 bargaining-unit positions, and
2 Postal Career Executive Service (PCES) positions. [Footnote 7]
Seventy-two EAS and 172 bargaining-unit positions were filled as of
March 2002. Six of the IT bargaining unit employees are to be
transferred to the Accounting Service Center and would not be
immediately affected if the Service decides to close the San Mateo IT
Center. The remaining 166 bargaining unit employees and all EAS
employees would be directly affected by the closure. Under the proposed
consolidation, all 166 bargaining unit employees would be offered
relocation to another postal IT center, in keeping with the no-layoff
clause in their collective bargaining agreement. About half of the EAS
employees will be offered jobs at another postal IT center.
For the employees who relocate, the Service will cover basic relocation
costs. However, covered costs differ for bargaining-unit and EAS
employees. Relocation benefits for bargaining-unit employees are
specified in the negotiated collective bargaining agreement between the
Service and the APWU. Examples of covered expenses include the cost of
one advance house-hunting trip, the movement and storage of household
goods, and 30 days of temporary quarters. For EAS employees the Service
covers the cost of 3 house-hunting trips, the movement and storage of
household goods, and 60 days of temporary quarters. Additionally, the
Service provides EAS employees a more generous expense allowance and
assistance in selling and purchasing their homes.
Employees, who do not have the option of relocating or choose not to do
so, may choose to retire, provided they meet the minimum age and
service requirements for retirement.[Footnote 8] Additionally, postal
officials have indicated that if the decision is made to close the San
Mateo IT Center, the Service will seek early retirement authority from
the Office of Personnel Management. If this authority is granted, the
Service plans to make the option of voluntary early retirement
available to all eligible employees.[Footnote 9] Employees who do not
relocate, retire, or find other employment on their own will likely be
involuntarily separated from the Service. Employees who are
involuntarily separated from the Service will be eligible for severance
pay.
The Service has experienced financial problems in recent years that
have been exacerbated by the recent economic slowdown and the use of
mail to transmit anthrax. In April 2001, we placed the Service‘s
transformation efforts and long-term outlook on our high-risk list. We
included the Service on our high-risk list to focus attention on the
dilemmas facing the Service before the situation escalates into a
crisis in which the options for action may be more limited and costly.
While the Service recently developed a transformation plan to address
its financial difficulties and has been able to cut costs, it has a
significant amount of fixed costs due to its vast infrastructure that
are difficult to cut in the short term. Rationalizing the Service‘s
infrastructure will be key as it strives to ameliorate its fiscal
situation. This means that the Service may have to close or consolidate
certain retail, mail processing, and administrative facilities if
necessary to cut costs and improve performance. These closures and
consolidations will undoubtedly lead to public concerns about the
economic effects such actions will have on communities and employees.
The Service is weighing these difficult issues as it considers whether
to close the San Mateo IT Center.
Scope and Methodology:
To describe the process that the Service is following to decide whether
to close the San Mateo IT Center and consolidate its functions into
other postal IT centers, we interviewed postal managers and reviewed
available supporting reports and documents. We reviewed the Service‘s
investment policies and procedures manual, which provides guidance for
preparing, reviewing, and approving a DAR. We also reviewed the
Service‘s DAR, prepared by the IT Department, which included economic
analyses and justification of the proposal to close the San Mateo IT
Center, as well as an alternative proposal that the IT Department
considered and subsequently rejected. Further, we reviewed the OIG‘s
November 2000 audit report on the IT Department‘s proposal and economic
analysis. For contrast, we reviewed (1) the DAR the IT Department
prepared in support of the decision to build a new IT facility in Eagan
that would allow the Service to consolidate IT functions performed at
various sites in the Minneapolis area and provide for future
incorporation of IT functions and (2) documentation the Service used to
support its decision to close the New York IT Center in 1993. We
discussed the steps the Postal Service followed in preparing its
proposal to close the San Mateo IT Center with the Service‘s vice
president, IT; discussed the Service‘s management process for reviewing
the proposal with the Service‘s manager, Capital and Program
Evaluation, and manager, Facilities, Headquarters; and met with
representatives from the OIG to discuss the audit they did of the
Service‘s proposal and economic analyses. We also reviewed sections of
the Postal Service‘s Transformation Plan that discuss procedures the
Service follows in closing postal facilities, and we explored those
procedures in greater detail with postal officials.
To determine experts‘ views on the social and economic impacts that
corporate downsizing and reorganizations can have on employees and
their families, we identified and interviewed eight relocation experts
from our literature review and discussions with authors of articles on
the impacts of closures and relocations on employees. These relocation
experts provide a wide variety of relocation services to several
hundred companies throughout the United States. We also interviewed two
university researchers knowledgable of worksite closures and employee
displacements, and we gathered available data from the Bureau of Labor
Statistics (BLS) on nationwide and regional worksite closures and
employee separations for calendar years 2001 and 2002. To further
broaden our perspective on how closures and relocations typically
affect employees and their families, we conducted Internet research to
identify reports, studies, and other sources of information that
examined the impacts of closing facilities similar to the San Mateo IT
Center. We also conducted literature searches and gathered information
on the social and economic impacts of facility closures and
relocations.
To determine the social and economic impacts encountered by postal
employees and their families who were affected by the Service‘s closure
of its New York IT Center in 1993, we interviewed postal officials as
well as displaced New York IT Center employees who relocated to the San
Mateo IT Center. We also obtained and analyzed salary data, for the
period 1992 to 2001, on displaced New York IT Center employees who are
still employed by the Service. We designed, pretested, and administered
survey questionnaires to displaced New York IT Center employees (1) who
relocated to other postal IT centers and (2) who continued employment
with the Service in the New York City area. For those employees who
relocated, we received responses from 49 of 66, for a 74 percent
response rate. For those who stayed with the Service in the New York
City area, we received responses from 46 of 79 for a 58 percent
response rate. We analyzed the survey responses, including open-ended
comments, and conducted a number of follow-up interviews. We did not
gather data on displaced New York IT Center employees who left the
Service following the center‘s closure in 1993 because the Service was
unable to provide recent mailing addresses for these employees.
To determine the social and economic impacts that the San Mateo IT
Center postal employees and their families would likely encounter if
the Service closes that center, we obtained and reviewed relevant
Postal Service documents regarding personnel policies and consolidation
plans. We also interviewed cognizant postal and APWU officials and
various San Mateo employees regarding these policies and plans and
their potential impacts on employees. We obtained and analyzed San
Mateo employee personnel data; and, on the basis of information from
closure/relocation studies and experts and our interviews with postal
officials and employees, we designed, pretested and administered a
survey questionnaire to obtain information about how closing the San
Mateo IT Center would likely affect employees and their families. We
received survey responses from 213 of 243 employees, for an 88 percent
response rate. We analyzed the survey responses, including open-ended
comments, and conducted follow-up interviews.
To provide information on how selected organizations, during
downsizing, have assisted affected employees, we identified and
reviewed our prior reports on restructuring and downsizing. We
incorporated information on those organizations where appropriate.
Because our three surveys did not make use of probability sampling,
there are no sampling errors. However, the practical difficulties of
conducting any survey may introduce other types of errors, commonly
referred to as nonsampling errors. For example, differences in how a
particular question is interpreted, the sources of information
available to respondents, or the types of people who do not respond can
introduce unwanted variability into the survey results. We included
steps in both the data collection and data analysis stages for the
purpose of minimizing such nonsampling errors. For example, our data
collection instruments were designed by survey specialists in
combination with subject matter specialists and pretested to ensure
that questions were clear and were understood by respondents. To
increase our response rate, a follow-up mailing was made to those who
did not respond in a reasonable time period.
We conducted our review at Postal Service Headquarters in Washington,
D.C., and at the Service‘s IT center located in San Mateo, CA, from
August 2001 through October 2002, in accordance with generally accepted
government auditing standards.
We requested comments on a draft of this report from the Postmaster
General. The Service‘s comments are discussed at the end of this letter
and are reprinted in appendix II.
The Service Is Following Its Investment Review and Approval Process:
The Service is following its Investment Review and Approval Process in
deciding whether or not to close the San Mateo IT Center, because it
will require an investment of $8 million to support the closure. Events
leading to the IT Department‘s proposal to close the San Mateo IT
Center began in 1996. At that time, the IT Department started making
long-range plans to consolidate the San Mateo IT Center‘s mainframe
computer operations into a new IT center the Service was building in
Eagan. Other IT functions performed at the San Mateo IT Center were to
be unaffected by the consolidation plans under development at that
time. However, in 2000, the PMG called on postal managers to find
savings by eliminating work, working more efficiently, and
consolidating functions. In response to that call, the IT Department
proposed closing the San Mateo IT Center and transferring its IT
functions to Eagan and other postal IT centers. That proposal has yet
to be approved by the Service, and the PMG has said that such a
decision will not be made until after we have issued our report.
As required by the Service‘s Investment Review and Approval Process,
the IT Department prepared a DAR in 2000 to support the $8 million
investment needed for the proposed closure of the San Mateo IT Center.
The Service‘s Investment Review and Approval Process establishes the
review/approval process, procedures, and responsibilities for capital
investments made by the Service. Major capital investments, generally
defined as $5 million or more, require a DAR, which is justification to
recommend an investment for approval.
In 2000, OIG reviewed the San Mateo DAR and concurred with the IT
Department‘s analysis that money could be saved and efficiencies gained
by closing the San Mateo IT Center and transferring its IT functions to
the Eagan IT Center and other postal IT centers. However, since the DAR
was prepared in 2000, some of the economic assumptions, which were
based on the economic conditions at that time, have changed.
Additionally, the Service recently announced plans to consolidate its
accounting functions in 85 postal districts into the Service‘s 3
Accounting Service Centers located in Eagan, St. Louis, and San Mateo.
Given this, before the Service makes its decision about closing the San
Mateo IT Center, the IT Department‘s DAR may need to be reviewed and
updated, if appropriate, to better reflect current economic conditions
and recent plans to consolidate accounting functions.
The IT Department‘s Proposal to Close the San Mateo IT Center
Originated in 1996:
Events leading to the IT Department‘s proposal to close the San Mateo
IT Center began in 1996 when the IT Department initiated development of
a long-range plan to consolidate the San Mateo IT Center‘s mainframe
computer operations into a new IT center that the Service was building
in Eagan. The IT Department‘s proposal called for consolidating San
Mateo‘s mainframe computer operations into a new 352,000-square-foot
postal IT center, located on 28 acres in Eagan. The new Eagan IT Center
was to serve as the Service‘s primary financial center, meet the
Service‘s long-term computer operational requirements, and have the
flexibility to adjust to IT changes and provide room for growth. The
Eagan IT Center was designed to absorb the San Mateo IT Center‘s
mainframe computer operations. At the time the IT Department was
preparing its original consolidation proposal, it projected that the
San Mateo IT Center‘s mainframe computer operations could be
consolidated into the new Eagan IT Center sometime around 2000.
However, before that consolidation occurred, the PMG called on postal
managers in 2000 to review their operations and find savings by
eliminating work, working more efficiently, and consolidating
functions. The PMG did this in response to the Service‘s declining
financial condition: shrinking net income, operating expense growth
outpacing operating revenue growth, the threat of declining mail
volumes, and stagnating productivity.
Heeding the PMG‘s call to find savings, the IT Department decided to
expand its plans for the San Mateo IT Center. Instead of just
consolidating the San Mateo IT Center‘s mainframe computer operations
into the Eagan IT Center, the IT Department decided to propose closing
and selling the San Mateo IT Center and consolidating all of its IT
functions into other postal IT centers located in Eagan, St. Louis and
Wilkes-Barre.
The Primary Document Supporting the Closure Proposal Is the DAR:
According to IT Department officials, once a decision was made in early
2000 to propose closing the San Mateo IT Center, the proposal‘s
sponsoring unit (the IT Department), per the Service‘s Investment
Review and Approval Process, prepared a DAR in support of the closure
proposal. The DAR details the economic analyses and assumptions,
including costs and benefits, of the proposed investment and
alternatives being considered so that approving authorities will have
the information necessary to make informed decisions. The Service
requires that a DAR be prepared, validated, and approved for planned
capital and expense investments of $5 million or more. The IT
Department provided us with copies of (1) documentation and an internal
paper prepared in support of the proposal to consolidate the San Mateo
IT Center‘s mainframe computer operations into Eagan and (2) the DAR
supporting the closure proposal. However, the IT Department was unable
to provide us documentation explaining the basis for expanding the
mainframe consolidation proposal into a proposal to close the San Mateo
IT Center entirely and transfer all of its IT functions to other postal
IT centers. Additionally, according to postal officials, the two
individuals most familiar with the closure proposal, the vice
president, Information Technology; and the manager, Information Systems
Support, are no longer with the Service.
According to postal officials, there are no detailed policies or
rigorous procedures that must be followed when a department proposes
closing a postal facility other than a post office or mail processing
facility. They said that references, in the Service‘s Transformation
Plan, to detailed procedures for closing facilities apply only to post
offices and mail processing facilities, not to administrative offices
such as the San Mateo IT Center. They said the DAR is the primary
document being used to support the IT Department‘s proposal to close
the San Mateo IT Center.
The San Mateo DAR prepared by the IT Department included (1) the
objectives, justification, and details of the proposed closure/
consolidation; (2) economic analyses and financial justification for
the proposed closure; and (3) information on an alternative to the
closure that was considered, analyzed, and eliminated. According to the
DAR, closing the San Mateo IT Center and consolidating all of its IT
functions at other postal IT centers would be justified because (1)
consolidating IT and support operations would provide the Service
savings, over a 10-year period, of approximately $25 million in
staffing, utilities, maintenance, and contractor systems software
support and (2) consolidating IT functions would allow the Service to
sell the San Mateo facility for approximately $49 million. The DAR also
noted that the San Mateo area had become one of the highest cost-of-
living areas in the nation, and the San Mateo IT Center was finding it
increasingly difficult to retain its executives and the top technical
staff needed to operate the center. The DAR further noted that the cost
of contractors in the San Mateo area was higher than in other areas
where postal IT centers were located.
Before finalizing the DAR to close the San Mateo IT Center, the IT
Department considered one alternative proposal which, consisted of the
Service selling the San Mateo facility and leasing it back from the new
owner, with all of the postal functions remaining in the leased
facility. The Service rejected that alternative for two reasons. The IT
Department determined that (1) the annual lease cost would exceed the
current depreciation cost of the San Mateo facility and (2) the Service
would not realize the savings and operational efficiencies that would
accrue from consolidating San Mateo IT functions at other postal IT
centers.
According to postal officials, the IT Department--following the
Service‘s Investment Review and Approval Process--prepared the San
Mateo DAR and forwarded it to the Service‘s Finance Department for
validation and to the Facilities Department for review and concurrence.
By early November 2000, the Finance Department had completed its
validation of the accuracy and integrity of the San Mateo DAR‘s
assumptions and economic analyses; the Facilities Department had
concurred with the DAR; and the sponsoring vice president, IT, had
signed the DAR. Next, the senior vice president/chief technology
officer and the chief financial officer/executive vice president
reviewed and approved the DAR. In late November 2000, the chief
financial officer/executive vice president prepared and signed a
validation memorandum and executive summary, which was forwarded to the
PMG, stating that the DAR proposing to close the San Mateo IT Center
had been reviewed and validated. According to postal officials, before
the San Mateo IT Center can be closed, approval must be obtained from
the Headquarters (HQ) Capital Investment Committee and the
PMG.[Footnote 10] The OIG has also reviewed the DAR. (See fig. 2 for an
overview of the Service‘s Investment Review and Approval Process.):
Figure 2: Overview of Postal Service‘s Investment Review and Approval
Process:
[See PDF for image]
[End of figure]
OIG Reviewed the IT Department‘s Proposal and Concurred that Closing
the San Mateo IT Center Would Save Money:
Prior to our review, postal management asked the OIG to evaluate the
potential benefits, costs, and operational issues surrounding the IT
Department‘s proposal to close the San Mateo IT Center and transfer its
IT functions to other postal IT centers. The OIG did this evaluation
between May and late November 2000. The OIG agreed with the IT
Department that consolidating the San Mateo IT Center‘s IT functions
into the Eagan and other postal IT centers would produce savings in
staffing, utilities, maintenance, and contractor systems software
support. However, among other things, the OIG noted that the IT
Department‘s projected savings in the San Mateo DAR might be overstated
by $4 to $8 million because the cost of leasing space for the
Accounting Service Center in the Bay Area may have been underestimated.
Also, the OIG questioned the Service‘s support for $6.3 million in
capital expenditures for hardware and software upgrades associated with
the consolidation. The Service subsequently provided justification for
the capital expenditures, which the OIG found to be generally
responsive to its concerns.
According to the OIG‘s November 24, 2000, report, postal management
revised its lease cost estimates for the Accounting Service Center.
This revision reduced estimated savings from $78 million to the current
estimate of $74 million. The OIG concluded that this and other actions
the Postal Service was planning were responsive to the OIG‘s concerns
and concurred with the IT Department‘s analyses that consolidating the
San Mateo IT Center‘s IT functions into other postal IT centers would
result in savings.
Economic and Other Conditions Have Changed Since the DAR Was Prepared
in 2000:
In 2000, when the Service‘s IT Department prepared the DAR to support
its proposal to close the San Mateo IT Center, general economic
conditions were noticeably better than they are currently; and the
Service had not yet made plans to automate and reengineer its field
accounting activity, which involves closing its 85 district accounting
offices and consolidating residual activity into its 3 Accounting
Service Centers. The IT Department‘s proposal to close the San Mateo IT
Center was based on several major economic assumptions that have since
changed. First, when the IT Department prepared the San Mateo DAR, it
noted that the job market in the Bay Area was very good and that
employees with IT skills were in great demand, thereby making it
difficult to recruit and retain IT employees at the San Mateo IT
Center. Since then, however, the general job market has declined
significantly. For example, in the Bay Area, from 2000 to 2002, the
unemployment rate increased from 2.2 percent to 5.4 percent. Even more
dramatic was the reversal in employment growth. From 1999 to 2000, the
number of Bay Area employees grew by 3.8 percent.[Footnote 11] In
contrast, the number of these employees contracted by 5.9 percent from
2000 to 2002. Given the increase in unemployment and the shrinking
employment growth in the Bay Area, current IT labor costs may not be as
high as they were in 2000, thereby creating a more favorable recruiting
environment for the Service.
Second, the IT Department received an appraisal in 2000, indicating
that it could reasonably expect to sell its San Mateo facility within 6
months for a minimum price of $49 million. However, according to real
estate experts, office-building values in the San Mateo area are
currently depressed. From the 4th quarter of 2000 to the 2nd quarter of
2002, average asking rents fell by about 60 percent, and office vacancy
rates increased nearly sixfold, from less than 4 percent to 22 percent.
As a result of this depressed real estate market, the time and value
estimates that the IT Department received in 2000 for the San Mateo
facility may be out of date.
In view of what might be significant changes in some of the economic
assumptions used in the San Mateo DAR, we asked the Service about
updating (1) the estimate of the fair-market value of the San Mateo
building and property and (2) the estimate of rental rates for office
space in the Bay Area. The Service said that it was too costly to have
a commercial real estate broker update this information before the
Service was ready to make a decision about closing the San Mateo IT
Center. However, the Service acknowledged that the commercial office
market in the Bay Area has changed since the DAR was prepared in 2000.
Postal officials said that the key assumptions used in preparing the
DAR would be updated before the Service makes a decision about closing
the San Mateo IT Center. Until these data are updated, it is uncertain
how much the Service would save by closing the San Mateo IT Center.
Another significant change indicating the need to update the San Mateo
DAR is the Service‘s plans to revamp its accounting functions. In 2001,
the Service announced plans to automate and reengineer its field
accounting activity. These changes will result in the Service closing
its 85 district accounting offices; eliminating 1,063 field accounting
technicians in these offices; and consolidating the residual activities
into its 3 Accounting Service Centers located in Eagan, St. Louis, and
San Mateo. Postal officials stated that this would result in about 350
more accounting technician and finance positions at these 3 centers. As
noted earlier, the San Mateo DAR includes a plan to move the accounting
functions and its 102 employees into leased space in the Bay Area. The
DAR included $2.1 million as the 3-year estimated cost for this leased
space. As a result of the planned consolidation of district accounting
functions, the Service‘s estimated cost of leased space may no longer
be accurate for its accounting functions in the Bay Area and could
affect projected savings associated with closing the San Mateo IT
Center. Given this possibility, before the Service makes its decision
about closing the San Mateo IT Center, the DAR may also need to be
reviewed and updated, if appropriate, to reflect the cost associated
with obtaining the leased space necessary to accommodate about 40
additional accounting technician and finance positions.
Relocation Experts Report that Negative Economic and Social Impacts
Generally Accompany Plant and Facility Closures:
Relocation experts we interviewed reported that plant and facility
closings generally have negative economic and social impacts on
displaced employees and their families. Typically, some employees
experience negative economic impacts, others experience negative social
impacts, and some experience both when the plant or facility where they
work closes. The experts told us that employees who do not relocate
with their jobs typically experience economic impacts, such as lost
income, loss of retirement benefits, and lower paying jobs upon
reemployment. Experts also noted that employees who relocate with their
jobs are likely to encounter social impacts, such as marital stress,
separations from family members, and the loss of social ties. In
addition to the negative social impacts, the experts noted that dual-
income families who relocate may face negative economic impacts when
the trailing spouse has to give up employment in order to relocate.
Experts‘ opinion and research done on plant and facility closures
indicate that such events have a greater negative impact on older
employees than on younger employees. Older employees are less likely
than younger employees to be reemployed and are more likely to
experience social difficulties when relocating. Research also indicates
that an increasing percentage of employees are declining relocation
offers because they want to avoid the social and economic impacts
associated with moving to a new geographic location, particularly the
disruptions to family ties that often ensue. Research further shows
that elder care is playing an increasingly important role in employee
relocation decisions.
Notwithstanding the negative impacts closures can have on employees and
their families, closures occur across the nation and are done for a
variety of business reasons and purposes. Research also indicates that
in the final analysis, all affected employees may not view plant and
facility closures negatively. Some employees may actually come to view
their experience with a plant or facility closure as positive because
it affords them the opportunity to redirect their careers, develop new
competencies, or leave unsatisfying jobs.
Displaced Employees Typically Face Economic Impacts:
According to the relocation experts we interviewed, studies have shown
that the economic impacts on employees displaced by a plant or facility
closure include the loss of earnings due to periods of unemployment,
loss of retirement benefits, and lower wages upon reemployment. For
example, a 1999 study on job displacement stated that about 20 percent
of displaced employees who found employment did so at greatly reduced
wages, earning one-half or less than they did previously.[Footnote 12]
The study also found that between one-fourth and one-third of displaced
employees remained unemployed a year or more after displacement.
Similarly, another study of displaced employees found that about 30
percent remained unemployed for a year or more.[Footnote 13] Studies
also indicated that the longer displaced employees remained unemployed,
the greater the drop in their wages when reemployed, with some
displaced employees becoming so discouraged that they stop looking for
work altogether.
Similar findings were echoed in a survey of employees displaced by a
New York plant closure in 1998.[Footnote 14] Survey respondents
reported several impacts they experienced as a result of the worksite
closure, including earnings losses, declines in job quality, and
financial difficulties. The survey disclosed that most displaced plant
employees had held two or more jobs since the closure, with some
holding as many as eight jobs in 3 years. The survey results, published
in a 2001 report, indicated that as a result of the closure, employees
experienced a 17 percent decline in median income and a 33 percent
increase in commuting distances. The researcher also found precipitous
declines in job quality, in terms of regular raises, sufficient income,
promotions, and skill development. In addition, the report stated that
many of the displaced employees experienced financial difficulties,
such as having to sell their homes.
Relocated Employees Typically Face Social and Economic Impacts:
Relocation experts we interviewed told us that families commonly
experience social difficulties when relocating, including disruptions
of their children‘s education and social well-being, increased marital
stress, and a sense of loss caused by separations from family members.
Relocation experts and available studies also point out that in
addition to social adjustments, trailing spouses in dual-income
households may face economic impacts due to the loss of employment and
income. Research indicates that in over 50 percent of married
households, both spouses are employed. This prevalence of dual-income
households in the workforce is prompting companies to provide
employment assistance to trailing spouses in order to reduce family
stress during relocation transitions, according to studies and experts.
For example, employers assist trailing spouses in a variety of ways,
including paying a job-finders fee, assisting with finding employment
either within or outside the company, and reimbursing the spouse for
lost income while seeking employment at the new location. Examples of
other types of assistance provided trailing spouses include resume
preparation and review, development of job search strategies, and
career counseling. According to the experts we interviewed, until and
unless a trailing spouse finds comparable employment at the new
location, a dual-income household might lose 30 percent to 50 percent
of its income when it relocates.
The impacts of relocation on trailing spouses have also been known to
include emotional and cultural adjustments. For example, relocation
experts noted that trailing spouses might be natives of the originating
city and could experience a sense of loss at the new location.
According to experts, trailing spouses may experience difficulties in
adjusting to less culturally diverse regions of the country where there
may be fewer opportunities associated with their culture, religion, or
language. Trailing spouses may also find it difficult to transition
from large urban areas where they have access to ethnic activities,
with which they have an affinity, to small rural areas where they may
feel isolated. Experts also stated that career development for trailing
spouses who worked may be negatively affected, and they might have
difficulty finding comparable employment. In addition, according to a
1998 study, relocation can lead to loss of continuity of training and
skill development, as the new location may not have the same career
opportunities.[Footnote 15] For these reasons, trailing spouses may be
dissatisfied with their new jobs, according to experts. Experts also
told us that the difficulty associated with finding comparable
employment is compounded when people move from large urban areas, such
as the Bay Area, to smaller communities that traditionally have fewer
employment and career prospects.
Older Employees Often Face Greater Economic and Social Impacts than
Younger Employees:
Research and relocation experts report that when a plant or facility
closes, older employees tend to encounter greater economic and social
difficulties than younger employees. While there is no consensus among
studies and experts regarding the age at which individuals encounter
greater difficulties due to job loss, there is general agreement that
as workers age, the impacts of job displacement become increasingly
severe. In particular, research and industry experts state that workers
in their mid-40s begin to face economic impacts attributable to age
because they face more obstacles than younger employees in obtaining
new employment. Experts also noted that these older employees
potentially experience greater economic losses as they are typically
vested in their retirement systems and could potentially lose their
retirement benefits due to job displacement. Additionally, according to
relocation experts, workers in their mid-40s and older who relocate
generally face greater social impacts than younger employees.
In November 2001, we reported that although employees age 55 and older
are not more likely to lose their jobs than younger workers, a job loss
for these older employees potentially has more severe
consequences.[Footnote 16] For example, we noted that employees age 55
and older may experience larger losses in earnings upon reemployment,
compared with younger employees. We also reported that such employees
were significantly less likely than younger employees to be reemployed.
In addition, we stated that the potential loss of health care benefits
following a job loss could be more problematic for employees who are
age 55 and older because they tend to have more health problems than
younger employees. Other studies on job loss reported similar findings
regarding older workers.
Similar to the greater economic impacts older employees may experience
due to job displacement, relocation experts we interviewed also told us
that employees in their mid-40s and older are more likely to face
greater social difficulties in relocating than younger individuals. For
example, according to experts, employees in their mid 40s and older are
more likely to have elderly parents, grandchildren, or existing health
conditions. Experts also told us that these employees are more likely
to have high school or college-aged children who are often reluctant to
relocate. Moreover, employees who are in their mid-40s and older are
typically less inclined to move than younger individuals. For example,
one relocation expert we contacted noted that older employees feel that
relocating to a new community requires that they sacrifice social
networks, long-time friendships, and family relationships that took
years to establish. In addition, experts pointed out that trailing
spouses of older employees might also experience more difficulties in
finding new jobs because of age discrimination.
Employees Decline Relocation Offers for Various Reasons:
Given the wide range of potential impacts from relocation, in
particular the impacts on families, studies indicate that a growing
number of employees are declining to relocate. According to survey
results published by Atlas Van Lines in 2001, the number of companies
reporting that employees rejected relocation offers increased from 39
percent in 1999 to 50 percent in 2001.[Footnote 17] The most frequently
cited reason for declining to relocate was ’family ties“ (81 percent).
Other reasons cited included ’personal reasons“ (73 percent), ’no
desire to move“ (67 percent), and ’spouse employment“ (48 percent).
The Employee Relocation Council (ERC) reported in 2001 that family-
related considerations, such as elder care, child care, and schools
played a crucial role in employees‘ relocation decisions.[Footnote 18]
Elder care was specifically identified as an area of increasing
importance in employees‘ relocation decisions. The report estimates
that 80 percent of elderly persons have lived alone or with a family
member, rather than in nursing homes. As a result, according to ERC,
more employees and their families will be increasingly responsible for
helping elderly relatives who need assistance with the activities of
daily living, including shopping, transportation, personal care, paying
bills, preparing meals, walking, and house cleaning. The ERC report
also noted that employers offer various types of elder care assistance,
such as paying to move elderly relatives, providing lists of elder care
facilities and programs, and providing written materials on elder care
needs. ERC further reported that similar services are provided for
relocating families needing child care services or help in finding
schools for their children.
Business Closures Occur and Sometimes Create Opportunities for
Employees to Make Life and Career Changes:
Plant and facility closures are the result of business decisions made
for a variety of reasons and purposes. Notwithstanding their potential
impact on employees and their families, business closures occur and
affect thousands of employees annually. Research indicates that in the
final analysis, not all affected employees view plant and facility
closures negatively.
According to experts, closures, accompanied by employee displacements
are largely fueled by corporate downsizing. For example, the BLS
reported that there were 1,253 worksite closures that resulted in
nearly 380,000 employee layoffs throughout the United States in
calendar year 2001.[Footnote 19] BLS data also show that in the Bay
Area, where the San Mateo IT Center is located, there were 22 worksite
closures that resulted in over 5,800 employee layoffs in calendar year
2001. According to studies and relocation experts, businesses make
decisions to downsize, restructure, or close facilities for a wide
variety of reasons, primarily driven by business needs. According to
unemployment research, for example, plant relocations are
organizational changes that are commonly taken to pursue company
development or to solve financial and operational problems. Experts
told us that companies often implement different reorganization
strategies to increase profits and competitiveness and to respond to
various business factors, such as the economy, the stock market,
business competition, the availability of skilled workers, and the cost
of labor. For example, according to one expert we contacted, companies
typically move facilities to reduce costs, often relocating to regions
of the country where labor costs are lower.
Recent Bay Area worksite closures have resulted in employee layoffs.
While specific data on the number of employee layoffs by Bay Area
companies are not available, media reports indicate that several
thousand employees have lost their jobs over the past year. For
example, in May 2002, it was reported that a San Francisco based
financial services company implemented its first large-scale employee
layoff since 1987, reducing its workforce by approximately 4,500
employees in order to keep the company‘s total complement under 20,000.
In addition, another report indicated that as a result of a Bay Area
based corporate merger in the technology sector, an estimated 15,000
positions would be eliminated worldwide over the next 2 years,
including many in the Bay Area. Another event that may affect the Bay
Area economy was reported in June 2002, when a major air carrier
announced that as a result of the September 11, 2001, terrorist
attacks, it had applied for federal assistance to aid its recovery from
these events. The air carrier also plans to increase its viability by
reducing costs, such as through salary cuts from pilots, managers, and
administrative employees. However, if these efforts are unsuccessful,
the jobs of approximately 18,000 Bay Area employees may be affected.
Experts also told us that companies make decisions to displace or
relocate employees according to, among other things, business needs,
economic conditions, competition, company size, acquisitions and
mergers, and the number of employees on the payroll. For example, a
relocation expert we interviewed told us her company, which employs
approximately 2,800 employees, recently downsized by closing two of its
office locations. While some employees were retained and relocated,
others lost their jobs and their employee benefits.
Despite the negative social and economic impacts that closures have on
employees, unemployment researchers have suggested that a job loss
sometimes creates opportunities for individuals to change careers and
life directions. Additional research also indicates that after a period
of time, some employees may actually come to view their experiences
with a plant or facility closure as positive because it gave them the
opportunity to redirect their careers, develop new competencies, or
leave unsatisfying jobs. Research and relocation literature also
indicates that families differ in their abilities to adapt to change.
Moreover, relocation experts stated that in many cases, families adapt
well and make very successful transitions.
New York IT Center Employees Reported Economic and Social Impacts as a
Result of the Closure:
Ninety-five displaced New York IT Center employees responded to our
survey and reported economic impacts, such as diminished earnings; and
social impacts, such as broken family ties. Of these 95 respondents, 46
remained with the Service in the New York City area and reported facing
more economic impacts than social impacts. The remaining 49 employees
relocated to postal IT centers in other geographic areas and reported
more social impacts than economic impacts.
Several options were available to displaced New York IT Center
employees, including working for the Postal Service in the New York
City area--though most likely not in an IT job; relocating to another
postal IT center; retiring with a buyout; or leaving the Service.
Employees most concerned about social issues, such as maintaining close
family ties, tended to remain in the New York City area and deal with
the resulting economic impacts, such as diminished earnings. Our survey
results indicate that employees most concerned about economic issues,
such as maintaining their level of earnings and career potential,
relocated to other postal IT centers and dealt with the ensuing social
impacts, such as diminished ties with family and friends left behind in
the New York City area. Still other employees opted to retire or leave
Postal Service employment altogether. Retiring or leaving the Service
at the time of the New York IT Center closure may have been
particularly appealing to some employees because as part of a
nationwide restructuring occurring at that time, the Service was
offering a monetary incentive of 6 months‘ pay to all eligible
employees who opted to retire or take an early out. In total, 104 of
the 283 displaced New York IT Center employees chose to remain with the
Service in the New York City area; 82 relocated to postal IT centers in
other geographic areas. The remaining 97 displaced employees retired,
separated from the Service, or found other jobs with the Service
outside the New York City area.
Postal Employees Had Several Options When the New York IT Center
Closed:
From August to November of 1992, the PMG restructured the Service. To
minimize the impact on employees, an early-out option was offered to
permit most employees to retire at age 50 with 20 years of service or
any age with 25 years of service. A monetary incentive was offered to
encourage eligible employees to retire. This incentive was a lump-sum
payment equal to 6 months‘ pay. According to postal officials, when the
Service closed its New York IT Center in 1993, the restructuring had
resulted in numerous retirements and an abundance of non-IT jobs in the
New York City area to offer displaced IT center employees. Postal
officials said the Service was therefore in the position to offer
displaced IT center employees--both EAS and bargaining unit--various
options that included (1) taking an available Service job in the New
York City area that had become vacant as a result of the restructuring,
(2) relocating to another postal IT center in a different geographic
area, or (3) retiring with a buyout--if eligible. Some employees chose
none of these options and decided to independently find other Service
employment outside the New York City area. Still others opted to leave
Service employment altogether.
EAS employees who opted to relocate to other postal IT centers were
able to continue working in the IT field at their same grade and pay.
EAS employees who decided to stay in the New York City area were
initially offered saved-pay for 2 years, but the Service later made
saved-pay permanent for these employees.[Footnote 20] According to some
EAS survey respondents, the Service made its offer of permanent saved-
pay for EAS employees after some EAS employees had already relocated to
other postal IT centers. Some EAS survey respondents reported that they
based their decisions to relocate on their belief that if they stayed
in the New York City area in a lesser graded position, they would
receive saved-pay for only 2 years. Some EAS survey respondents said
that if they had known the Service would make saved-pay protection
permanent, they would have taken a non-IT job and stayed in the New
York City area. Bargaining unit employees who took lower paying Service
jobs in the New York City area were to receive saved-pay protection for
1 year. [Footnote 21] In many instances, however, the actual reduction
in pay did not occur until about 2 years after the closure because the
time that employees spent in a trial employment status did not count
against the 1-year limit. Also, the Service experienced some delay in
making the pay changes in its computerized payroll system. Figure 3
shows the number and percent of displaced New York IT Center employees
who chose each option.
Figure 3: Options Selected by Displaced New York IT Center Employees in
1993:
[See PDF for image]
[End of figure]
Postal Employees Who Took Available Jobs with the Postal Service in the
New York City Area Faced More Economic Impacts than Social Impacts:
For many displaced New York IT Center employees, the decision to accept
other postal employment in the New York City area meant that they fared
worse economically in the long run than those who chose to relocate to
postal IT centers in other geographic areas. According to a postal
official, when the Service closed the New York IT Center, the Service
had numerous vacancies in the New York City area because it had
recently gone through a major restructuring that saw many employees
leave the Service through retirement or separation. As a result of the
numerous vacancies in the New York City area, the Service was able to
offer jobs to displaced New York IT Center employees who did not wish
to relocate to postal IT centers in other geographic areas. However,
the vacant postal jobs in the New York City area were frequently lower
paying, non-IT positions.
Using salary data on the 147 displaced New York IT Center employees
still employed by the Service at other postal IT centers or postal
facilities in the New York City area, we determined that the 68
employees who relocated (44 bargaining unit and 24 EAS employees)
generally fared better economically than those who remained in the New
York City area. Nine years after the closure, salary data provided by
the Service showed that the average salary of employees who relocated
had increased about 11 percent (in constant 2001 dollars); in
comparison, the average salary of employees who remained with the
Service in the New York City area had decreased about 1 percent (in
constant 2001 dollars). The impact on salary between displaced
employees who relocated and those who remained in the New York City
area was greater for bargaining unit employees than for EAS employees.
Our analysis of the Service‘s salary data shows that the 44 displaced
bargaining unit employees who relocated to other postal IT centers
were, 9 years later, earning salaries that averaged about 14 percent
more (in constant 2001 dollars) than they had been earning when the New
York IT Center closed. In contrast, the 43 displaced bargaining unit
employees who remained in the New York City area were earning salaries
that averaged about 6 percent less (in constant 2001 dollars) than the
salaries they were earning at the time of closure. Almost all of the 43
displaced bargaining unit employees who remained in the New York City
area after the closure took lower paying mail clerk positions.
No EAS employees took pay cuts (in actual dollars) as a result of the
closure.[Footnote 22] Nine years after the New York IT Center closed,
the 36 displaced EAS employees working in the New York City area were
earning an average of about 2 percent more (in constant 2001 dollars)
than they had been at the time the center closed. In contrast, the
salaries of the 24 displaced EAS employees who relocated to other
postal IT centers saw their salaries increase an average of about 8
percent (in constant 2001 dollars). Displaced EAS employees who
relocated, however, fared worse, on average, than displaced bargaining
unit employees who relocated.
Generally, survey respondents who took postal jobs in the New York City
area indicated they did so because they were concerned about the social
impacts they believed they would face if they left the New York City
area. For example, 34 of the 46 survey respondents who remained in the
New York City area believed it was very important to remain in the area
in order to maintain family ties with parents and other relatives--ties
that would otherwise be strained by relocating to a new geographic
area. One respondent who took a postal job in the New York City area
commented that he could not relocate because he was the only person
able to provide care for his aged parents. Another respondent commented
that she was unable to relocate to another postal IT center because her
parents‘ health was such that they would not be able to accompany her.
A third respondent who took a postal job in the New York City area
commented that she was unable to relocate for several reasons, one
being that she could not relocate her mother, who lived close by and
was about to undergo surgery. Respondents remaining in the New York
City area were also concerned that relocating to another geographic
area could alienate relationships with their children and
grandchildren. Twenty-five of the 46 respondents remaining in the New
York City area stated that it was very important that they remain in
close proximity to their children and grandchildren.
Respondents who remained with the Service in the New York City area
indicated that concerns related to their spouses weighed heavily in
their decisions not to relocate. For example, 24 of the 46 respondents
remaining in the New York City area said that a very important concern
they had was that relocating would strain the relationship they had
with their spouse. One EAS employee decided against relocating because
his wife was pregnant at the time and did not want to sever the close
relationship she had with her physician. Another EAS employee stated
that he did not relocate primarily for family reasons--his spouse was
working, and it would have been very hard to ask her to give up her job
and pension and move across the country to a new location. Twenty-three
of the 46 respondents remaining with the Service in the New York City
area also indicated that in reaching their decisions not to relocate,
it was very important to them not to lose social, community, and
cultural ties to the New York City area.
Given that so many of the 46 survey respondents who remained with the
Service in the New York City area did so to minimize the social impacts
they believed relocating would involve, it is not surprising that most
had strong family and cultural ties to the area. Forty-one of the 46
respondents had parents, grandchildren, or relatives living in the New
York City area. Thirty-six of the 46 respondents had a spouse/partner
living with them, and 34 had children. Most of the respondents who
remained in the New York City area also tended to be more senior
employees with many years of postal service. Forty of the 46
respondents were 40 years old or older, and 30 of the 46 respondents
had over 15 years of postal service at the time the New York IT Center
closed.
Several survey respondents who accepted postal jobs in the New York
City area, rather than relocate, furnished written comments describing
the economic impacts they experienced following the closure of the New
York IT Center. In general, they believe that they suffered financially
by staying with the Service in the New York City area. As indicated
earlier, our analysis of the Service‘s salary data confirmed that
employees who relocated generally fared better economically than those
who did not. Some said that their salaries would have been
progressively higher; and their chances for advancement would have been
better, if they had relocated to another postal IT center.
Postal Employees Relocating to Postal IT Centers in Other Geographic
Areas Faced More Social Impacts than Economic Impacts:
For many displaced New York IT Center employees, the decision to move
to another postal IT center in another geographic area was accompanied
by more social impacts than economic impacts. When the Service closed
the New York IT Center in 1993, it offered displaced employees the
opportunity to relocate to other postal IT centers, such as Eagan and
San Mateo. By relocating to other postal IT centers, employees were
able to continue working in the IT field with no pay cut. Eighty-two of
the 283 displaced New York IT Center employees chose to relocate to a
postal IT center in another geographic area.
Survey respondents who relocated to postal IT centers in other
geographic areas often reported encountering very significant social
impacts as a result of their moves. For example, 23 of the 49 relocated
postal employees who responded to our survey reported that they had
found it very difficult to adjust to the new geographic area, work
environment, and local culture. The same number of respondents also
reported finding it very difficult to maintain or establish social,
community, and cultural ties or find supporting communities where they
could get involved. One respondent who relocated to the Eagan IT Center
reported that her family, coming from New York City, found it difficult
to assimilate into the midwestern culture. Another respondent found it
difficult being away from family and friends and missing out on
important family events. She noted that relocating had strained her
marriage and forced her to give up a private business she had been
running in New York City.
Many survey respondents who relocated reported that they had been
greatly affected by concerns related to their spouse/partner. For
example, 18 of the 49 respondents reported that since relocating, their
spouse/partner had found it very difficult to maintain or secure a job/
career, benefits, and retirement security. Nineteen respondents also
indicated that the relocation had been very difficult because of the
strains it had placed on relationships with spouses/partners. One
respondent who relocated commented that it had been emotionally
difficult for his wife to relocate and leave her family behind.
Twenty-two of the 49 relocated respondents reported that relocating
from the New York City area to another geographic area had put strains
on family relationships; and 20 respondents reported that as a result
of the relocation, it had been very difficult to keep their families
together. One respondent noted that it had been difficult for him and
his wife to leave the New York City area because they had children
working and going to school there, and they were also leaving elderly
parents behind.
Twenty-three of the 49 respondents who relocated stated that as a
result of their relocation, they had a very difficult time maintaining
social ties with parents and other relatives. One respondent commented
that the relocation meant not being there for his mother when she
passed away and not being able to be with his relatives. Twenty-two
respondents stated that as a result of relocating to another geographic
area, they had a very difficult time assisting with the physical care
of their parents or other relatives. One employee commented that
relocating had placed tremendous stress on him as well as his wife,
children, parents, and other relatives.
Finally, survey respondents who relocated typically reported that they
had experienced significant social impacts associated with the
relocation itself. Twenty of the 49 relocated respondents reported that
they had experienced a very difficult time dealing with the cost, time,
and energy involved in relocating from the New York City area to their
new homes in another geographic area. Fourteen respondents also noted
that they had a very difficult time selling their homes in the New York
City area or buying homes in their new geographic area. One respondent
who was a bargaining unit employee stated that the Service did not help
him sell his house in the New York City area or assist with the costs
associated with the sale. Another survey respondent stated that he lost
money relocating because he had just refinanced his home in the New
York City area when the Service announced the closure of the New York
IT Center. He believed it would have been better if postal officials
had given employees more lead time to plan their affairs before the
Service closed the New York IT Center. Another respondent believed that
relocating workers needed more time than the Service provided to
research housing options, schools, and medical facilities. He believed
that because employees had insufficient time to research these things,
it created a social hardship on them and their families that could have
been avoided. According to postal officials, the Service provides
bargaining unit employees about 7 months‘ notice of planned closures.
Most survey respondents who relocated to other postal IT centers
indicated that they did so because they were concerned about the
economic impacts they believed they would face if they remained in the
New York City area. Forty-four of the 49 respondents who relocated
reported that keeping their jobs for economic/financial well-being had
been very important to them when deciding whether or not to relocate to
another postal IT center. Forty of the 49 respondents said that
concerns about maintaining their pension plan and retirement security
had been a very important factor in deciding to relocate. One
respondent indicated that he and his colleagues who relocated to Eagan
felt that they had no real choice but to relocate if they wanted to
maintain their financial well-being. He stated that the only option the
Service offered him besides relocating to another postal IT center was
to remain in the New York City area as a mail clerk or letter carrier
with temporary saved-pay. Another respondent who relocated also stated
that she didn‘t believe she had any other viable choice besides
relocating. She stated that she was too old to look for a nonpostal job
and didn‘t believe she could afford to remain with the Service in the
New York City area in a non-IT position and take a reduction in pay
when her saved pay expired. As previously noted, our analysis of the
Service‘s salary data for displaced New York IT Center employees
confirmed that employees who relocated generally fared better
economically than those who remained in the New York City area.
Twenty-two of the 49 relocated survey respondents also reported that in
deciding to relocate, they had considered it very important that they
keep their IT jobs for career advancement purposes. Twenty respondents
also reported that they had been very concerned that as older workers,
they would have found it very difficult to find satisfactory jobs if
they had not relocated to other postal IT centers and kept their IT
jobs. A respondent who relocated to another postal IT center stated
that he had no other choice but to relocate if he wanted to continue
working with the Service in an IT position.
Most of the 49 survey respondents who relocated to postal IT centers in
other geographic areas tended to have fewer years of service than the
46 respondents who remained in the New York City area. Only 16 of the
49 respondents who relocated to another postal IT center had 15 years
or more service, whereas 30 of the 46 respondents who stayed with the
Service in the New York City area had 15 years of service or more.
Otherwise, the demographics of those who relocated to a postal IT
center in another geographic area were similar to those of the
respondents who stayed in the New York City area. Thirty-eight of the
49 relocated survey respondents were 40 years of age or older at the
time the New York IT Center closed; 42 had parents, grandchildren, or
relatives living in the New York City area; and 39 had a spouse/partner
living with them. In contrast, 40 of the 46 respondents who remained
with the Service in the New York City area were 40 years of age or
older at the time the New York IT Center closed; 41 had parents,
grandchildren, or relatives living in the New York City area; and 36
had a spouse/partner living with them.
San Mateo IT Center Employees Anticipate Mostly Economic Impacts if
they Opt to Stay in the Bay Area and Social Impacts if they Opt to
Relocate to Another Postal IT Center:
San Mateo IT Center employees responding to our survey anticipate more
economic impacts than social impacts if they choose to remain in the
Bay Area and more social impacts if they relocate with the Service to
another postal IT center. If the Service closes the San Mateo IT
Center, the options available to San Mateo IT employees to minimize
their economic and social impacts vary, depending on individual
circumstances and job status. Some affected employees will likely seek
other employment in the Bay Area, some will likely retire, and others
will likely relocate to another postal IT center in order to keep their
IT jobs.
On the basis of the best information they had available at the time,
167 (78 percent) of the 213 San Mateo IT employees responding to our
survey indicated that they would likely stay in the Bay Area if the
Postal Service closes the San Mateo IT Center. Under such
circumstances, they said they would expect to face more economic
impacts than social impacts. Many anticipate that their decision to
stay in the Bay Area could result in them losing their Postal Service
jobs. According to postal officials, affected San Mateo IT employees
will be able to apply for vacant postal positions, provided they meet
the minimum qualifications; however, the Service does not anticipate
holding open vacant positions in the Bay Area for these employees.
Furthermore, the Service no longer anticipates that it will have many
job vacancies in the Bay Area.
Thirty-six (17 percent) of the employees responding to our survey
indicated that if the San Mateo IT Center closes, they would probably
relocate to another postal IT center. Moreover, they anticipate facing
more social impacts than economic impacts from their decisions. Survey
respondents indicating they would likely relocate reported that they
were doing so primarily for their financial well-being and retirement
security. Many provided narrative comments in their survey responses
describing how relocations would probably lead to family separations
for at least a few years. Some of the married respondents indicated
they would probably experience some economic impacts from their
relocation decision because they would have trailing spouses who would
be leaving their jobs in the Bay Area. The remaining 10 survey
respondents (5 percent) indicated they were unsure what they would do
if the Service closed the San Mateo IT Center.
Options Available to San Mateo IT Center Employees:
All San Mateo IT Center employees meeting the minimum age and service
requirements have the option of retiring. According to postal
officials, the Service anticipates offering early retirements to all
eligible employees provided that the Office of Personnel Management
approves the Service‘s request, but the Service does not anticipate
offering buy-outs. Other options available to San Mateo IT Center
employees depend, in part, on whether they are bargaining unit or EAS
employees. Bargaining unit employees are covered by a collective
bargaining agreement with a no-layoff provision and are therefore
guaranteed a job at another postal IT center. EAS employees are not
guaranteed a job at another postal IT center. According to postal
officials, about half of the EAS employees will be offered jobs at
other postal IT centers. Bargaining unit and EAS employees who do not
retire, relocate to another postal IT center, or find another postal
job on their own will likely be separated from the Service.
Two years ago, when the IT Department first announced its proposal to
close the San Mateo IT Center, postal officials indicated that the
Service could likely find postal jobs for bargaining unit employees who
wanted to stay in the Bay Area rather than relocate to another postal
IT center. For most bargaining unit employees, this would have involved
a downgrade to a mail clerk position. However, according to postal
officials, most affected employees would have retained their IT pay for
up to 2 years, after which their pay would have been reduced to the pay
of their new positions. However, in July 2002, postal officials told us
that conditions had changed and that the Service was no longer in a
position to accommodate bargaining unit employees who want to stay in
the Bay Area. San Mateo IT Center employees can still apply for any
postal job vacancies, provided they meet the minimum qualifications;
however, few vacancies are anticipated for the Bay Area. Postal
officials said that because of recent drops in mail volumes and
advances in automated mail processing, the Service now has an excess of
mail clerks in the Bay Area. Nevertheless, postal officials indicated
that in keeping with the Service‘s collective bargaining agreement with
APWU, all bargaining unit employees would be offered jobs in one of its
other postal IT centers--although most of the job offers would probably
be for positions in its Eagan IT Center.
The Service has indicated that it also plans to make available to all
EAS employees the services of a private job search firm to help them
find employment outside the Service. However, according to postal
officials, the Service has no plans at this time to extend these
services to its bargaining unit employees because of their no-layoff
clause, which EAS employees do not have. Postal officials said that the
benefits provided San Mateo bargaining unit employees are specifically
governed by its collective bargaining agreement with the APWU. In
appendix I, we present (1) demographic data for San Mateo IT Center
employees and displaced New York IT Center employees who responded to
our survey and (2) the likely options/opportunities for San Mateo
employees and options/opportunities that were available for displaced
New York employees.
San Mateo IT Center Employees Planning to Stay in the Bay Area
Anticipate More Economic than Social Impacts:
Essentially all of the 167 San Mateo survey respondents who indicated
that they would likely stay in the Bay Area reported that they
anticipate their decisions will result in more economic impacts than
social impacts. According to postal officials, those staying in the Bay
Area will likely lose their postal IT jobs and will not likely find
other jobs with the Postal Service because of its efforts to downsize.
Further, the respondents were concerned that because of the tight job
market in the technology sector, they might be unable to find nonpostal
IT jobs in the Bay Area. Of the 167 respondents, 140 (84 percent)
anticipated difficulty finding jobs to adequately support their
families. Finally, respondents said they were concerned that if they
could not find satisfactory jobs with the Postal Service or the federal
government, they would lose their ties to the federal retirement and
health care systems. Respondents planning to stay in the Bay Area
generally anticipate a range of outcomes that include retiring earlier
than planned to adjusting to a reduced standard of living.
San Mateo respondents who indicated that they planned to stay in the
Bay Area cited a number of reasons for their decisions, including age,
longevity in the Bay Area, extensive family and social ties in the
area, and working spouses with substantial time invested in their
careers. Three-fourths of the respondents planning to stay are over 45
years old; have lived in the Bay Area for more than 20 years; and
indicated that they have extensive family ties, social ties, and other
responsibilities in the area. These older respondents also typically
have working spouses who are reluctant to leave their jobs and lose
their pension benefits. For example, 79 of the 134 respondents (59
percent) who provided reasons for not relocating identified concerns
with spouses‘ careers as a primary motivator in their decision not to
relocate. This is not surprising since 49 of the 79 respondents (62
percent) reported that their spouses contributed at least 50 percent to
the household income.
San Mateo respondents who indicated they would not likely relocate also
reported having high school and college age children reluctant or
unwilling to relocate and aging parents in need of assistance who would
be left behind. Of the 60 respondents with high school and college age
students, 58 (97 percent) said keeping their family together was a very
important factor in deciding not to relocate. In addition, 78 percent
of those deciding not to relocate cited maintaining social and
community ties as an important factor in their decision. Over 70
percent also cited health issues and a reluctance to sell their homes
as factors in deciding not to relocate. A similar percentage were also
concerned that maintaining their health care coverage might become
difficult should they lose their postal IT jobs-a particular concern if
family members have serious health conditions and continuity of care
and coverage for preexisting conditions becomes critical.
Under the Service‘s collective bargaining agreement with APWU, San
Mateo IT Center bargaining unit employees are guaranteed jobs at other
postal IT centers. Thus, these employees have the option of relocating
with their jobs to other postal IT centers and continuing employment
with the Service. Conversely, EAS employees are not guaranteed jobs,
and some San Mateo EAS employees will likely not have the option of
relocating and continuing employment with the Service. According to the
Service, the option to relocate will likely be extended to about half
of the EAS employees. One respondent who was an EAS employee, age 49
with 15 years of service, commented that not having the assurance of
being able to relocate to another postal IT center has increased his
anxiety about the potential closure. He reported that he is not
eligible for retirement and doubts that he will be offered other
employment with the Service. He indicated that he essentially has no
option but to find a nonpostal job because he is the primary
breadwinner and has many years to go on his mortgage payments. He
indicated that the Service will pay him severance pay equal to 4 or 5
months‘ salary, but he anticipates much difficulty finding another IT
job in the Bay Area because of the tight labor market for technology
positions.
The majority of the 167 San Mateo respondents who anticipate staying in
the Bay Area reported that they will likely seek whatever postal
employment that may be available in the Bay Area, although many
indicated in their narrative responses that such job prospects do not
look good. The remaining respondents who anticipate staying in the Bay
Area reported that they would likely retire or seek nonpostal
employment in the Bay Area. (See fig. 4 for details.):
Figure 4: Options San Mateo Employees Expect to Pursue if Staying in
the Bay Area:
[See PDF for image]
Note: San Mateo IT Center employees who responded to GAO survey.
[End of figure]
San Mateo respondents indicating that they would likely seek other
employment in the Bay Area were skeptical about finding such
employment. According to postal officials, finding other postal
employment is unlikely because of Servicewide downsizing. Some
respondents thought they might qualify for other postal management or
administrative positions, but they were not optimistic about the
availability of such positions. Both EAS and bargaining unit
respondents seeking nonpostal employment anticipated difficulties
because of the current slump in IT employment and the added difficulty
faced by older workers in finding new employment. Additionally, those
anticipating seeking new employment were concerned that their earnings
would likely be less and that they would lose current health and
retirement benefits.
Some San Mateo respondents indicated they would be willing to take a
non-IT job if it would mean continued employment with the Service in
the Bay Area. For example, one younger respondent said she would be
willing to transfer from her computer programmer/analyst job to other
kinds of postal work in order to stay in the Bay Area because both her
and her husband‘s families live nearby, her mother cares for her baby
while she is at work, and her husband‘s parents are in frail health and
need constant assistance. Other respondents indicated they wanted to
stay in the Bay Area but did not want to take a non-IT job. For
example, one senior systems analyst, making $67,000 per year, said he
would rather take early retirement and try to find a nonpostal job in
his field than take a mail clerk job at $40,000 per year.
According to postal officials, employment opportunities may not be very
good for individuals wishing to stay in the Bay Area. Postal officials
said in July 2002 that the job market for IT positions in the Bay Area
had changed significantly in the last 2 years. They said that 2 years
ago, IT jobs were plentiful in the Bay Area and that the Service had
difficulty attracting and keeping IT personnel. More recently, however,
they reported that those conditions had changed. They said that in the
current economic environment, IT positions in the Bay Area have become
difficult to find. Additionally, postal officials indicated that they
could no longer accommodate San Mateo bargaining unit employees who
might want to stay in the Bay Area as mail clerks because the Service
now has excess employees in the Bay Area.
Fifty-two of the 167 San Mateo respondents who did not anticipate
relocating to another postal IT center reported that that they would
likely exercise their option to retire. Forty-five of those respondents
said their retirement would be earlier than planned, and 39 said they
would face financial difficulties in retirement. Of the respondents
indicating that they would likely retire, 22 said it would be very
difficult to maintain or find adequate housing on their reduced
incomes. For example, one respondent said that her reduced income would
be insufficient to cover her health benefits, mortgage payments, and
other expenses and that finding supplementary employment would be
difficult at her age.
One respondent who was an EAS employee, age 50 with 25 years of
service, said he would likely take early retirement because he does not
think that the Service will offer him another job. He indicated that he
must stay in the Bay Area because his wife will not be eligible to
retire for 5 years, his daughter attends a local college, and his aging
parents need regular assistance. Because retirement would considerably
reduce his income, he said he would have to find other work in order to
meet his mortgage payments and other expenses.
In discussions of the survey results with postal officials, they
expressed surprise that such a large percentage of affected San Mateo
IT Center employees had indicated they would likely stay in the Bay
Area and compete for jobs in a tight labor market, rather than relocate
and continue their employment with the Postal Service. The officials
said they expected that more affected IT employees would eventually
decide to relocate when they encountered difficulty finding other
suitable jobs in the Bay Area. The officials also said that based on
past experience, about one-third of all employees would likely relocate
if the Service closes the San Mateo IT Center. As previously noted, the
Service plans to offer all EAS employees the services of a private job
search firm to help them find nonpostal jobs if they decide to seek
outside employment. However, the Service has no current plans to extend
these services to bargaining unit employees because they are guaranteed
jobs at another postal IT center.
San Mateo IT Center Employees Who Are Likely to Relocate Anticipate
Primarily Social Impacts, and Some with Trailing Spouses Also
Anticipate Economic Impacts:
Nearly all of the 36 San Mateo survey respondents who indicated that
they would likely relocate to another postal IT center anticipate
social impacts if they relocate. As a group, these respondents were
most concerned about the impact that relocating would have on their
spouses and/or other family members.
Twenty-nine of the 36 San Mateo respondents (81 percent) who said they
intend to relocate to other postal IT centers are over age 45, and many
are concerned that the relocation would split up their families.
Twenty-two of the 36 respondents have spouses; and 9 said that if they
relocated, their spouses would probably not relocate with them. The
nine respondents reported several reasons why they did not believe
their spouses would relocate:
* spouse has lived in the Bay Area for 30 or more years,
* spouse has aging parents in the Bay Area who need care,
* spouse has children who would not be relocating, and:
* spouse‘s job pays well (about half the family income).
Twelve of the 18 San Mateo respondents who had children and/or
grandchildren living in their households reported that at least 1
family member would be left behind. One respondent commented that
leaving his 7-year-old son with no father present could have a life-
long negative impact. Another said relocation would separate him from
his wife and three children for 5 to 6 years until he was eligible to
retire. He stated that the economic impacts for him would be (1) the
cost of maintaining two households, (2) travel costs between the Bay
Area and his new job for family visits, and (3) a more expensive
telephone bill. Additionally, 30 of the 36 respondents reported having
aging parents or relatives in the Bay Area, and 25 said relocation
would make current or future care for them difficult. In some cases,
the respondents reported that their parents relied on them to assist
with doctors‘ appointments, aid their limited English language skills,
and be available in case of emergencies.
San Mateo respondents likely to relocate also reported concerns with
losing community and social ties and with adjusting to new communities,
cultures, and work environments. These concerns were particularly
reported among ethnic minority respondents, who accounted for more than
half of those likely to relocate. They expressed concerns about leaving
their important cultural ties in the Asian and Hispanic communities of
the Bay Area. For example, one respondent commented that his wife, of
Asian descent and with limited English language skills, would have a
difficult time leaving the Bay Area.
Three-fourths of San Mateo respondents who anticipated relocating to
another postal IT center reported that the relocation would strain
their family relationships, and one commented that it would likely lead
to divorce. Although respondents anticipated strained family
relationships, several saw the relocation as temporary, until they were
eligible to retire.
Other San Mateo respondents who said they would likely relocate
reported concerns about anticipated economic impacts associated with
trailing spouses. Some reported concerns about the possible loss of
spousal income and benefits if their working spouses were to relocate
and be unable to find employment at the new location. For example,
eight respondents reported having a trailing spouse who would be
looking for employment after relocation, and seven of those thought
employment would be difficult for their spouses to find. One respondent
commented that relocating her spouse would be a major problem because
her husband is a journalist and has already learned that prospects for
such jobs at the new location are poor. Postal officials indicated that
in cases where the trailing spouse is also a postal employee, the
Service would work with the trailing spouse to find suitable postal
employment at the new location. However, officials did not anticipate
that the Postal Service would offer employment services to trailing
spouses who are not postal employees.
Nearly all of the 36 San Mateo respondents who indicated that they
would likely relocate reported that the cost, time, and energy involved
in moving would be difficult for them. Twenty-three respondents
reported being homeowners who will face the prospect of selling and
buying homes. While relocating to a lower housing cost area could
provide them some financial advantage, several respondents commented
that the differential costs and the loss of preferential property tax
status would make it difficult for them to ever move back to the Bay
Area.
Experience Shows that Providing Job-Finding Assistance Is Beneficial to
Employers and Employees:
We have previously reported that when employees lose their jobs it can
be a traumatic experience; therefore, progressive organizations often
work with employees to help them through such difficult times.[Footnote
23] We reported that not only does job loss disrupt employees‘ personal
lives and plans, but it can also cause stressful concerns about finding
another job. Of 25 organizations we surveyed for our 1995 report on job
loss issues, 23 had devised programs to help employees who lost their
jobs. These programs included job placement assistance, employee and
family counseling, relocation assistance, and training. Some of the
organizations surveyed provided self-administered job placement
assistance while others used outside job assistance companies. Also, we
have previously reported that the Department of Defense was very
successful in minimizing the impacts of maintenance depot closures on
employees, primarily through a comprehensive outplacement effort.
[Footnote 24]
Our prior work on job loss issues further showed that, in general,
organizations that offer job placement assistance to displaced
employees also benefit. Providing job placement assistance helped
sponsoring organizations (1) avoid lawsuits by displaced employees, (2)
reduce unemployment costs, and (3) enhance their reputations in the
community by demonstrating that they cared about their employees.
Similar to other organizations that have helped displaced employees,
the Service has indicated that it plans to provide assistance to San
Mateo IT Center employees to minimize the impact, if it decides to
close the center. In addition to providing the relocation and
separation benefits mentioned earlier, the Service has indicated that
it plans to hold a series of meetings with affected San Mateo employees
and their families to provide them with needed information on available
options and opportunities and to address employees‘ questions about the
closure. Additionally, as noted earlier, the Service plans to provide
the services of a job search firm to San Mateo EAS employees, although
bargaining unit employees will not receive similar services because
such services are not provided for by the collective bargaining
agreement that governs IT bargaining unit employees‘ benefits.
According to postal officials, services to be provided by the job
search firm are to include, among other things, seminars on change
management, skills development, resume writing, negotiation skills, how
to network, how to find a job on the Internet, and group counseling and
coaching.
In 2000, when the IT Department proposed closing the San Mateo IT
Center, it estimated that 33 percent of affected employees would likely
relocate to other postal IT centers and possibly need some relocation
assistance. The IT Department acknowledged that because it expected
that only 33 percent of affected employees would relocate, it would
need to rely on contractor support to cover for the loss of
knowledgable employees who would not be relocating from the San Mateo
IT Center to other postal IT centers. Our survey of San Mateo
employees, however, indicates that the IT Department‘s estimate of
relocating employees may be overstated; and its need for contractor
support could, therefore, be greater than planned. According to our
survey results, only 17 percent of San Mateo employees currently
anticipate that they would likely relocate to another postal IT center
if the Service closes the San Mateo IT Center. Fifty-nine percent of
the respondents (who indicated they would likely stay in the Bay Area
and provided reasons for not relocating) identified concerns with their
spouses‘ careers as a primary motivator in their decision not to
relocate. Further, seven of the eight respondents relocating with
trailing spouses who would be looking for jobs at the new location
expressed concern that the spouses would have difficulty finding
suitable employment.
Relocation experts have noted that because of the prevalence of dual-
income households in the workforce, employees who must make a
relocation choice often base their decision on whether or not their
trailing spouses can find suitable employment at the new location.
Given this, relocation experts report more companies are providing
employment assistance to trailing spouses, such as resume preparation
and review, paying job finders-fees, assisting with finding employment,
and reimbursing trailing spouses for lost income while they seek
employment at the new location.
When the IT Department first proposed closing the San Mateo IT Center
in 2000, economic conditions and the employment outlook in the Bay Area
were noticeably better than they are today; so much so that the Service
anticipated that postal positions would be available in the Bay Area
for many displaced employees who did not relocate. However, because of
changed economic conditions, recent drops in mail volumes, and advances
in automated mail processing, the Service no longer expects that it
will have job openings to accommodate employees who do not relocate. As
noted earlier, although the Service has indicated that it plans to make
the services of a private job search firm available to San Mateo EAS
employees, the Service has no plans at this time to extend similar
services to San Mateo IT Center bargaining unit employees because their
benefits are governed by the Service‘s collective bargaining agreement
with the APWU. Consequently, many bargaining unit employees will face a
dilemma if the Service closes the San Mateo IT Center. If bargaining
unit employees do not relocate, they will likely lose their postal
employment and would not have the services of a private job search firm
to help them find other employment. Additionally, bargaining unit and
EAS employees with working spouses who are not postal employees face a
dilemma concerning the impact a relocation would have on their trailing
spouses‘ careers and their families‘ household incomes. That is, if
these employees relocate, will their trailing spouses be able to find
suitable employment at the new location or will household incomes and
spouses‘ careers suffer?
By not addressing employees‘ concerns about trailing spouses, the
Service may be missing an opportunity to entice more of its San Mateo
IT Center employees to relocate to other postal IT centers, thereby
exposing itself to higher than necessary contractor costs. If the
Service decides to close the San Mateo IT Center, it is required under
its agreement with APWU to notify the union of its decision and offer
to meet with national level officials to discuss the closure‘s impact
on affected employees. Historically, discussions preceding previous
closures have resulted in additional provisions for affected bargaining
unit employees, which were specified in Memorandums of Understanding
that modified existing collective bargaining agreements. According to
postal officials, the Service expects that if it decides to close the
San Mateo IT Center, the APWU will request a meeting to discuss, among
other things, additional benefits for affected bargaining unit
employees.
Conclusions:
The Service is following its Investment Review and Approval Process as
it moves toward a decision about closing the San Mateo IT Center.
However, economic conditions have changed significantly since 2000 when
the IT Department prepared the DAR in support of closing the San Mateo
IT Center. Also, the DAR does not reflect the impact that the Service‘s
announced plans to automate and reengineer its field accounting
activity--which involves closing its 85 district accounting offices and
consolidating the residual activities into its 3 Accounting Service
Centers--could have on projected savings associated with the proposal
to close the San Mateo IT Center. Therefore, the Service may be using
dated information as it goes about making its closure decision
regarding the San Mateo IT Center. Finally, the employment outlook is
not nearly as encouraging now as it was in 2000 when employment
conditions in the Bay Area were better and the Service indicated it
would have postal positions available for bargaining unit employees who
did not want to relocate. Given these changed conditions, bargaining
unit employees who do not relocate might encounter difficulty in
finding employment in the Bay Area. Further, some San Mateo IT
employees may be reluctant to relocate because of concerns that their
trailing spouses might have difficulty finding jobs at the new
location.
Recommendations for Executive Action:
We recommend that before the Service makes its decision regarding
whether to close the San Mateo IT Center, the PMG should direct the IT
Department to review and update the economic assumptions and analyses
used in the San Mateo DAR and make revisions, if appropriate, to better
reflect current economic conditions and recent plans to automate and
reengineer its field accounting activity.
If the Service decides to close the San Mateo IT Center, we recommend
that the PMG consider:
* During discussions with APWU regarding the IT center‘s closure,
offering to help bargaining unit employees find jobs if they decide to
remain in the Bay Area.
* During discussions with APWU regarding the IT center‘s closure,
offering some assistance--such as resume preparation and review
services--to the trailing spouses of bargaining unit employees who
decide to relocate to another postal IT center.
* Providing some assistance-such as resume preparation and review
services--to the trailing spouses of EAS employees who decide to
relocate to another postal IT center.
Agency Comments and Our Evaluation:
The Postal Service provided comments on a draft of this report in a
letter from the chief financial officer and executive vice president
dated December 19, 2002. These comments are summarized below and are
reprinted in appendix II. Postal officials also provided technical and
clarifying comments, which we have incorporated into the report where
appropriate.
Although the Service did not comment on our findings, it did agree with
our recommendations. The Service reiterated that it has not yet made a
decision regarding the proposed closure of the San Mateo IT Center and
will reevaluate the proposed closure as part of its overall strategy to
rationalize its administrative infrastructure and meet its data
processing needs with the appropriate facilities, technologies, and
staff. The Service indicated that it would implement our recommendation
that the DAR be reviewed and updated before a decision is made about
closing the San Mateo IT Center. Specifically, the Service said that
before making any decisions regarding possible disposition of the
building and property, it would update the information in the DAR. The
Service further stated that it was aware that conditions in the
commercial building market in the Bay Area have changed since the San
Mateo DAR was submitted. The Service stated that it might need to
revisit the proposal to sell the building in light of an updated
assessment of the building‘s fair market value, the viability of
potential outlease or leaseback options, and the space needs of the
expanded Accounting Service Center.
In response to our other recommendations that the Service consider
offering to (1) help bargaining unit employees find jobs if they remain
in the Bay Area and (2) provide some assistance to help the trailing
spouses of employees who relocate find jobs, the Service indicated that
it would try to minimize the negative effects of relocation. The
Service said that if it determines that closing the San Mateo IT Center
and relocating its functions to other postal IT centers are still
critical to the Service‘s IT strategy, the Service will adhere to the
provisions of its bargaining unit agreements. The Service further
stated that to the extent possible, consistent with those agreements,
it will attempt to mitigate the negative impacts that relocation may
have on employees and their families.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report for 30 days
after the date of this letter. At that time, we will send copies of
this report to the Chairmen and Ranking Minority Members, Senate
Committee on Governmental Affairs and its Subcommittee on International
Security, Proliferation, and Federal Services; and to the Chairman,
House Committee on Government Reform. We will also send copies of this
report to the Postmaster General and Chief Executive Officer, U.S.
Postal Service, and the President of the American Postal Workers Union.
In addition this report will be available at our Web site at http://
www.gao.gov.
Major contributors to this report included Gerald P. Barnes, Isidro L.
Gomez, Stuart M. Kaufman, Roger L. Lively, Donald J. Porteous, and
Charles F. Wicker. If you have any questions about this letter or the
appendixes, please contact me or Mr. Barnes on (202) 512-2834 or at
ungarb@gao.gov or barnesgp@gao.gov.
Bernard L. Ungar
Director, Physical Infrastructure Issues:
Signed by Bernard L. Ungar
[End of section]
Appendix I: Comparative Demographic Data and Options for San Mateo and
Displaced New York IT Center Employees:
According to the responses to our survey, San Mateo IT employees, on
average, are older and have more years of service than displaced New
York IT Center employees at the time of the center‘s closure. The
demographics of San Mateo IT Center employees indicating they would not
likely relocate and displaced New York IT Center employees who did not
relocate were more similar than the demographics of San Mateo IT Center
employees who indicated they would likely relocate and displaced New
York IT employees who relocated. Table 1 provides comparative
demographic data for San Mateo and displaced New York IT employees.
Data are shown for employees who relocated (or are likely to relocate
in the case of San Mateo employees) and those who did not relocate (or
are likely not to relocate in the case of San Mateo employees). Because
our data for New York IT Center employees do not include all displaced
New York employees, the data may not be totally representative. For
example, during the 9 years since the New York IT Center closed, some
of its displaced employees may have retired and are therefore not
reflected in our data. If data were available for this group, it would
have tended to increase the average age and years of service of
displaced New York IT Center employees at the time of closure.
Additionally, displaced New York IT Center employees had more favorable
options/opportunities to lessen the impact of the closure than San
Mateo IT Center employees are likely to have. For example, all
displaced New York IT Center employees had the option of relocating
with their jobs to another postal IT center or continuing to work for
the Service in the same geographic area (though not necessarily in an
IT position), whereas San Mateo IT Center employees likely will not
have this option. Table 2 displays the range of options/opportunities
likely to be available to San Mateo IT Center employees and options/
opportunities that were available to displaced New York IT Center
employees. Options/opportunities are similar for early retirements,
assistance programs to help EAS employees find employment outside the
Service, and help for trailing spouses who are postal employees and
need to find suitable employment at the new location. Options/
opportunities are not similar with regard to buy-outs, ability to
continue employment with the Service in some capacity, saved-pay
protections, and the availability of local postal and nonpostal jobs.
Table 1: Demographic Data for San Mateo IT Employees Compared with
Displaced New York IT Employees‘ Demographic Data:
Demographic characteristics: Employees indicating they would likely
relocate or did relocate to another postal IT center; San Mateo IT
Center employees: 36; Displaced New York IT Center employees[A]: 49.
Demographic characteristics: Ages 45 to 49; San Mateo IT Center
employees: 8 (22%); Displaced New York IT Center employees[A]: 18
(37%).
Demographic characteristics: Ages 50 to 54; San Mateo IT Center
employees: 10 (28%); Displaced New York IT Center employees[A]: 3 (6%).
Demographic characteristics: Ages 55 or older; San Mateo IT Center
employees: 11 (31%); Displaced New York IT Center employees[A]: 2 (4%).
Demographic characteristics: 15 or more years of service; San Mateo IT
Center employees: 27 (75%); Displaced New York IT Center employees[A]:
16 (33%).
Demographic characteristics: 20 or more years of service; San Mateo IT
Center employees: 16 (44%); Displaced New York IT Center employees[A]:
7 (14%).
Demographic characteristics: Living with spouse/partner; San Mateo IT
Center employees: 22 (61%); Displaced New York IT Center employees[A]:
39 (80%).
Demographic characteristics: Living in dual-income household; San Mateo
IT Center employees: 14 (39%); Displaced New York IT Center
employees[A]: 32 (65%).
Demographic characteristics: School-age[B] children living in
household; San Mateo IT Center employees: 18 (50%); Displaced New York
IT Center employees[A]: 30 (61%).
Demographic characteristics: Providing assistance to elderly parents/
relatives in the area; San Mateo IT Center employees: 22 (61%);
Displaced New York IT Center employees[A]: 27 (55%).
Demographic characteristics: Employees indicating they would likely not
relocate or did not relocate; San Mateo IT Center employees: 167;
Displaced New York IT Center employees[A]: 46.
Demographic characteristics: Ages 45 to 49; San Mateo IT Center
employees: 41 (25%); Displaced New York IT Center employees[A]: 11
(24%).
Demographic characteristics: Ages 50 to 54; San Mateo IT Center
employees: 44 (26%); Displaced New York IT Center employees[A]: 8
(17%).
Demographic characteristics: Age 55 or older; San Mateo IT Center
employees: 44 (26%); Displaced New York IT Center employees[A]: 2 (4%).
Demographic characteristics: 15 or more years of service; San Mateo IT
Center employees: 125 (75%); Displaced New York IT Center employees[A]:
30 (65%).
Demographic characteristics: 20 or more years of service; San Mateo IT
Center employees: 81 (49%); Displaced New York IT Center employees[A]:
10 (22%).
Demographic characteristics: Living with spouse/partner; San Mateo IT
Center employees: 124 (74%); Displaced New York IT Center employees[A]:
36 (78%).
Demographic characteristics: Living in dual-income household; San Mateo
IT Center employees: 99 (59%); Displaced New York IT Center
employees[A]: 29 (63%).
Demographic characteristics: School-age children living in household;
San Mateo IT Center employees: 78 (47%); Displaced New York IT Center
employees[A]: 27 (59%).
Demographic characteristics: Providing assistance to elderly parents/
relatives in the area; San Mateo IT Center employees: 93 (56%);
Displaced New York IT Center employees[A]: 22 (48%).
Source: GAO.
Note: San Mateo IT Center and displaced New York IT Center employees
who responded to GAO survey.
[A] Responses reflect employees‘ recollections of circumstances at the
time the New York IT Center closed.
[B] School age was defined as ages 5 to 22.
[End of table]
Table 2: Likely Options/Opportunities for San Mateo IT Employees
Compared with Options/Opportunities that Were Available for Displaced
New York IT Employees:
Option/opportunity: Take early retirement; Options/opportunities
likely available to San Mateo IT employees: According to postal
officials, if the Service decides to close the San Mateo IT Center it
will offer early retirement to all eligible employees provided the
Office of Personnel Management grants the Service such authority.;
Options/opportunities that were available to New York IT employees: The
Service offered early retirement to all eligible employees..
Option/opportunity: Receive buy-out; Options/opportunities likely
available to San Mateo IT employees: According to postal officials, the
Service does not anticipate offering buy-outs.; Options/opportunities
that were available to New York IT employees: At the time of the New
York IT Center closure, the Service was offering, as part of a
nationwide restructuring, a monetary incentive of 6 months‘ pay to all
eligible employees who opted to retire or take an early-out..
Option/opportunity: Relocate with job; Options/opportunities likely
available to San Mateo IT employees: [Empty]; Options/opportunities
that were available to New York IT employees: [Empty].
Option/opportunity: Bargaining unit employees; Options/opportunities
likely available to San Mateo IT employees: San Mateo bargaining unit
employees are covered by a collective bargaining agreement with a no-
layoff provision and are guaranteed the option of relocating with their
jobs to other postal IT centers.; Options/opportunities that were
available to New York IT employees: New York bargaining unit employees
were covered by a collective bargaining agreement with a no-layoff
provision and were therefore guaranteed jobs at other postal IT
centers. Additionally, a Memorandum of Understanding between the
Service and APWU concerning the closure provided that bargaining unit
employees who wanted to continue employment with the Service in the New
York City area (though not necessarily in IT jobs) could do so..
Option/opportunity: EAS employees; Options/opportunities likely
available to San Mateo IT employees: The Service anticipates offering
only about half of its 72 EAS employees the opportunity to relocate
with their jobs to other postal IT centers.; Options/opportunities that
were available to New York IT employees: All EAS employees had the
option of continuing employment with the Service. EAS employees who did
not want to relocate with their jobs could continue employment with the
Service in the New York City area, although not necessarily in an IT
position..
Option/opportunity: Assistance in helping trailing spouses find
employment at new location; Options/opportunities likely available to
San Mateo IT employees: According to postal officials, the Service will
work with trailing spouses who are postal employees to find suitable
postal employment at the new location. No special assistance is planned
for trailing spouses who are not postal employees.; Options/
opportunities that were available to New York IT employees: According
to postal officials, the Service worked with trailing spouses who were
postal employees to find suitable postal employment at the new
location. No special assistance was provided to trailing spouses who
were not postal employees..
Option/opportunity: Continue employment with the Service in the same
geographic area; Options/opportunities likely available to San Mateo IT
employees: [Empty]; Options/opportunities that were available to New
York IT employees: [Empty].
Option/opportunity: Bargaining unit employees; Options/opportunities
likely available to San Mateo IT employees: Initially, the Service
anticipated that it would be able to accommodate bargaining unit
employees who wanted to remain in the Bay Area in non-IT positions.
More recently, it reported that because of recent drops in mail volumes
and advances in automated mail processing, it now has excess mail
clerks in the Bay Area. Accordingly, the Service does not anticipate
that it will be able to accommodate; bargaining unit employees who want
to remain; Options/opportunities that were available to New York IT
employees: A Memorandum of Understanding between the Service and APWU
concerning the New York closure provided that bargaining unit employees
who wanted to continue employment with the Service in the New York City
area (though not necessarily in IT jobs) could do so..
Options/opportunities likely available to San Mateo IT employees:
Option/opportunityEAS employees: in the Bay Area. Nevertheless, if the
Service decides to close the San Mateo IT Center, this issue will
likely be a part of the discussions between the Service and the APWU on
the impact that the closure would have on employees.; Options/
opportunities that were available to New York IT employees: Option/
opportunityEAS employees: [Empty].
Option/opportunity: EAS employees; Options/opportunities likely
available to San Mateo IT employees: According to postal officials,
very few EAS employees will likely be able to continue employment with
the Service in the Bay Area. Employees can apply for jobs in the Bay
Area provided they meet the minimum qualifications for the job;
however, the Service does not anticipate that it will have many vacancy
announcements in the Bay Area. According to postal officials, the
Service currently has excess employees in the Bay Area.; Options/
opportunities that were available to New York IT employees: All EAS
employees who wanted to continue employment with the Service could do
so. EAS employees not wanting to relocate to other postal IT centers
had the option of continuing employment with the Service in non-IT
positions in the New York City area..
Option/opportunity: Other job opportunities; Options/opportunities
likely available to San Mateo IT employees: [Empty]; Options/
opportunities that were available to New York IT employees: [Empty].
Option/opportunity: Within the Service; Options/opportunities likely
available to San Mateo IT employees: The Service is currently in a
downsizing mode, and job opportunities are limited.; Options/
opportunities that were available to New York IT employees: The
Service, just prior to the closure, had undergone a major
restructuring, resulting in numerous vacant positions and job
opportunities for employees affected by the New York IT Center‘s
closure..
Option/opportunity: Outside the Service; Options/opportunities likely
available to San Mateo IT employees: According to postal officials, job
opportunities for nonpostal IT positions are very limited in the Bay
Area, unlike 2 years ago when IT positions were readily available. San
Mateo IT employees responding to our survey also indicated that,
overall, job opportunities in the Bay Area were tight.; Options/
opportunities that were available to New York IT employees: Data on the
experience of New York ITemployees seeking nonpostal jobs in the New
York City area at the time of closure are unknown..
Option/opportunity: Avoid reductions in pay; Options/opportunities
likely available to San Mateo IT employees: [Empty]; Options/
opportunities that were available to New York IT employees: [Empty].
Option/opportunity: Bargaining unit employees; Options/opportunities
likely available to San Mateo IT employees: According to postal
officials, bargaining unit employees at the San Mateo IT Center will
not likely have the option of continuing employment with the Postal
Service in the Bay Area, even in non-IT positions. However, should
these employees find other postal employment, the Service anticipates
that such employees would likely receive saved-pay protection for up to
2 years.; Options/opportunities that were available to New York IT
employees: Employees who wanted to stay in the New York City area and
voluntarily transferred to lower paid positions received saved-pay
protection for 1 year. This was provided for in the Memorandum of
Understanding agreed to by the Service and the APWU concerning the New
York IT Center‘s closure..
Option/opportunity: EAS employees; Options/opportunities likely
available to San Mateo IT employees: According to postal officials, EAS
employees at the San Mateo IT Center will not likely have the option of
continuing employment with the Postal Service in the Bay Area, even in
non-IT positions. However, should these employees be reassigned to
lower paying positions, they would, in general, receive saved-pay for 2
years.; Options/opportunities that were available to New York IT
employees: Initially, EAS employees who stayed in the New York City
area and took lower paid positions as a result of the closure believed
they would have saved-pay protection for 2 years. However, the Service
later announced that EAS employees taking lower paid positions as a
result of the closure would receive permanent saved-pay protection..
Option/opportunity: Assistance in finding employment outside the
Service; Options/opportunities likely available to San Mateo IT
employees: According to postal officials, should the Service decide to
close the San Mateo IT Center, it will offer EAS employees the services
of a private job search firm to help them find nonpostal employment.
Currently, the Service has no plans for extending these services to its
bargaining unit employees whose terms of employment are specifically
provided for under the Service‘s collective bargaining agreement with
the APWU.; Options/opportunities that were available to New York IT
employees: The Service made available the services of a private job
search firm to any EAS employee who wanted to find nonpostal
employment. Bargaining unit employees were not offered such services,
as they were not provided for under the contract or Memorandum of
Understanding between the Service and APWU concerning the closure..
Option/opportunity: Involuntary separations; Options/opportunities
likely available to San Mateo IT employees: According to postal
officials, EAS and bargaining unit employees who do not to relocate,
retire, or find other postal employment on their own will likely be
separated from the Service.; Options/opportunities that were available
to New York IT employees: According to postal officials, there were no
involuntary separations associated with the New York IT Center
closure..
Source: U.S. Postal Service.
[End of table]
[End of section]
Appendix II: Comments from the U.S. Postal Service:
RICHARD J. STRASSER, JR. CHIEF FINANCIAL OFFICER,
EXECUTIVE VICE PRESIDENT:
UNITED STATES POSTAL SERVICE:
December 19, 2002:
Mr. Bernard L. Ungar:
Director, Physical Infrastructure Issues
United States General
Accounting Office Washington, DC 20548-0001:
Dear Mr. Ungar:
Thank you for providing the Postal Service the opportunity to review
and comment on the GAO draft report, U.S. Postal Service: Employee
Issues Associated With the Potential Closure of the San Mateo IT
Center.
During the approximately two years that the proposal to close San Mateo
has been on hold, pending the report‘s issuance, we have, of necessity,
continued to pursue strategies that will provide cost effective and
efficient information services for our operations and administrative
functions. At this time we have not made a decision concerning San
Mateo. We will reevaluate our proposed closure as part of our overall
strategy to rationalize our administrative infrastructure, meeting the
Postal Service‘s data processing needs with the appropriate facilities,
technologies and staff.
If we determine that continuing to own and maintain the San Mateo
building no longer fits within our Information Technology (IT)
strategy, we will, as a matter of prudent decision making and as the
report recommends, update the information in the Decision Analysis
Report (DAR) before we make any decisions regarding possible
disposition of the building. We also realize that the conditions in the
commercial building market in the San Francisco Bay area have changed
since the DAR was submitted. The proposal to sell the building may need
to be revisited in light of an updated assessment of the building‘s
fair market value, the viability of potential outlease or leaseback
options and the space needs of the expanded Accounting Service Center.
If we determine that closing San Mateo and relocating its functions to
other centers is still critical to our IT strategy, we will adhere to
the provisions of our bargaining unit agreements, and to the extent
possible consistent with those agreements, we will attempt to mitigate
the negative impacts that relocation may have.
If you or your staff would like to discuss any of these comments, I am
available at your convenience.
Sincerely,
Richard J. Strasser, Jr.
Signed by Richard J. Strasser, Jr.
475 -‘ENFANT PLAZA SW WASHINGTON DC 20260-5000 202-268-5272:
FAX: 202-268-4364 www.usps.com:
[End of section]
FOOTNOTES
[1] Generally, at the San Mateo IT Center, bargaining unit employees
are computer operations and programming employees who are represented
by the American Postal Workers Union, which bargains collectively with
postal management over pay and conditions of employment. EAS employees
are nonbargaining employees, which include employees such as
supervisors, mangers, and professional and technical specialists.
[2] Henceforth, for simplicity and readability, we refer to the IT
Department‘s Information Service Centers and its Integrated Business
Systems Solutions Centers as IT centers.
[3] The Bureau of Labor Statistics defines displaced employees as
persons who lost or left jobs because their plant or company closed or
moved, there was insufficient work, or their position or shift was
abolished.
[4] A DAR details the economic analyses, including costs and benefits,
of the proposed investment and alternatives being considered.
[5] In 1998, IT functions performed at various sites in Minneapolis
were consolidated and moved into a new postal IT center in Eagan.
[6] The Service also has three other Integrated Business Systems
Solutions Centers, located in Raleigh, St. Louis, and Wilkes-Barre.
Raleigh also serves as the Service‘s disaster recovery center.
[7] PCES employees are senior-level officers and executives in such
postal positions as area vice presidents and IT center managers. The
PCES is comparable with the Civil Service‘s Senior Executive Service.
EAS employees are paid under the Service‘s Executive and Administrative
Schedule. IT bargaining unit employees‘ pay and benefits are
established by a collective bargaining agreement between the Postal
Service and the APWU.
[8] The minimum age and service requirements for retirement under the
Civil Service Retirement System are age 55 with 30 years of service,
age 60 with 20 years of service, or age 62 with 5 years of service. The
minimum requirements for retirement under the Federal Employees‘
Retirement System are ’minimum retirement age“ with 30 years of
service, age 60 with 20 years of service, age 62 with 5 years of
service, or ’minimum retirement age“ with 10 years of service. An
employee‘s minimum retirement age is based on his/her date of birth and
ranges between 55 and 57 years.
[9] Early retirement allows eligible employees to retire with immediate
annuities before meeting the age and service requirements for regular
retirement. The minimum requirements for early retirement under the
Civil Service Retirement System are age 50 with 20 years of service, or
any age with 25 years of service. The annuity is reduced by 2 percent
for each year that the employee is under age 55. The Federal Employees‘
Retirement System has the same minimum requirements for early
retirement as the Civil Service Retirement System. However, annuities
for employees retiring under the early retirement provisions of the
Federal Employees‘ Retirement System are not reduced.
[10] The Capital Investment Committee voting members include the deputy
postmaster general; chief operating officer and executive vice
president; senior vice president and general counsel; chief marketing
officer and senior vice president; senior vice president, chief
technology officer; senior vice president, Operations; vice president,
Strategic Initiatives; and chief financial officer and senior vice
president (chair). The Committee‘s nonvoting members include the vice
president, Engineering; vice president, Finance; controller; vice
president, Purchasing and Materials; and vice president, Facilities.
[11] BLS data.
[12] Paul Attewell, The Annals of the American Academy of Political and
Social Sciences, The Impact of Family on Job Displacement and Recovery,
(Mar. 1999).
[13] Michael Podgursky and Paul Swaim, Duration of Joblessness
Following Displacement, Industrial Relations 26(3): pp. 213-226 (1987).
[14] Jennifer S. Tiffany, Insights from a Plant Closing: Dislocated
Workers and Economic Development Planning, Planners Network, Hunter
College Dept. of Urban Planning No. 148, (July/August 2001).
[15] Lillian T. Eby and Tammy D. Allen, Perceptions of Relocation
Services in Relocation Decision Making: An Exploratory Field Study,
Group and Organizational Management, Vol. 23 No. 4 (Dec. 1998).
[16] Older Workers: Demographic Trends Pose Challenges for Employers
and Workers, GAO-02-85 (Washington, D.C.: Nov. 16, 2001).
[17] Atlas Van lines, Inc., Corporate Relocation Survey 2001, 34th
Annual Results, (Memphis, TN: Apr. 2001). Atlas Van Lines, Inc., is a
nationwide motor carrier that provides relocation services and
publishes relocation-related publications, including its Survey of
Corporate Relocation Policies document.
[18] Employee Relocation Council, Family Issues Research Report,
(2001). The Employee Relocation Council is a professional membership
association that conducts research on emerging trends in employee
relocation assistance.
[19] BLS defines ’worksite closures“ as the full closure of either
multiunit or single-unit establishments or the partial closure of a
multiunit establishment where entire worksites affected by layoffs are
closed or planned to be closed.
[20] Saved-pay allows an employee reassigned to a lower paying job to
retain the pay of his/her former position.
[21] A Memorandum of Understanding between the Postal Service and the
APWU provided that bargaining unit employees relocating to lower paying
postal jobs in the New York City area would have saved-pay protection
for 1 year.
[22] Typically, displaced EAS employees took non-IT management
positions in such areas as customer service, maintenance, financial
services, purchasing, and human resources. Two displaced EAS employees
took jobs as local postmasters.
[23] Workforce Reductions: Downsizing Strategies Used in Selected
Organizations, GAO/GGD-95-54 (Washington, D.C.: Mar. 13, 1995).
[24] Closing Maintenance Depots: Savings, Workload, and Redistribution
Issues, GAO/NSIAD-96-29 (Washington, D.C.: Mar. 4, 1996).
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