The Current - Canada Post strike hitting small business hard

Episode Date: November 21, 2024

Meghan Fahey has shut down her online store selling greeting cards — at her busiest time of year — because the Canada Post strike means she can’t deliver to her customers. We look at the strike���s impact on small businesses; the sticking points between the two sides; and why some observers say it’s time for Canada Post to change its mandate.

In 2017, it felt like drugs were everywhere in the news, so I started a podcast called On Drugs. We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with Season 3 of On Drugs. And this time, it's going to get personal. I don't know who Sober Jeff is. I don't even know if I like that guy.

On Drugs is available now wherever you get your podcasts. This is a CBC Podcast. Hello, I'm Matt Galloway, and this is The Current Podcast. This is normally a very busy time of year for Michelle Nutilla's small business selling crafts in Kelowna, British Columbia. But as the Canada post-st strike continues, she's stressed. Right now I have things that are in limbo. They're in the Canada Post system, but they're not moving and we don't know when that's going to end, so we don't know when we're going to get it. I just had things that were stuck up in the ocean because of the port

strike and now it's in port and can't go anywhere from there either. 55,000 Canada Post workers walked off the job last Friday. Among other things, they are asking for higher pay. This is a job I'm out here making $21.80. And when you start talking about rent and Whitehorse, you know, I don't think we're asking for unreasonable cost of living increases. We do not keep it up. 2%, 2%, 2% does not come up to 25%. We are falling behind. There's a housing crisis. It affects us.

Canada Post, on the other hand, says a new delivery model is necessary, and that includes more affordable weekend delivery. Here is Canada Post spokesperson John Hamilton. We've lost $3 billion in the last five years. Mail volumes have declined by almost 70% over the last 20 years, and we're losing in the parcel business because we're not competitive. So we've got to put forward a plan and a proposal that we can afford and will allow us to grow and then invest more and more. But right now, we're not in that position. The federal government appointed a mediator on Monday. The two sides reportedly remain far apart. We'll get to the sticking points and what that could mean for the future of Canada Post in just a moment. But first, as you've heard, the longer the strike goes on, the harder the hit for many small business owners. Megan Fahey is the owner of

Driven to Ink. It's a small greeting card business in St. John's, Newfoundland. Megan, good morning. Good morning, Matt. You sell handcrafted greeting cards. How much of your business relies on shipping those cards out through Canada Post? For my online sales, I rely on Canada Post for all of my shipping needs. So right now, about 20% of my income is affected by the strike. How stressed out are you? the strike. How stressed out are you? I'm pretty stressed about it, to be honest. I'm just trying to explore other avenues right now for making up that lost income. So what happens? I mean, when you rely on for online orders, they all go through Canada Post. I mean, are orders coming in and they're just piling up and you can't get them out the door? That happened over the weekend.

I had to shut down my store. I was quite busy over the weekend. I should have done it on Friday as soon as the strike was announced. But I had to shut down my Etsy store on Sunday evening and refund all the orders that had come in over the weekend because I just don't know when the strike is going to end. It's too stressful to have those orders in limbo waiting to go out and not know when they can be given to the customer. People are waiting for

them, and not just to give on Christmas Day. They're wanting to ship them to somebody once they receive them as well. That's a big deep breath that you took in when you're talking about sending all that money back. Yeah, it was a hard pill to swallow. We're in late November. It's the 21st of November. This is, I mean, you're getting close to Christmas. How much of your income, if you don't mind me asking, how much of your income comes from this time of the year? I was looking it up right before we joined the call and it's about 20% of my income for the year in these last few weeks. Are there alternatives? You said you're trying to figure out what they might be. Are there alternatives to Canada Post? For me in Newfoundland, there really isn't anything.

UPS, FedEx, et cetera, private couriers, they all cost an arm and a leg. And most of my orders are single greeting cards. They're small weight items. So having a $20 order and then adding $30 in shipping to it is not feasible for me or for the customer. Is that what it would be if you had to send one or two, a couple of greeting cards off the island to somebody else somewhere else in the country and you had to do it through courier? That's what it would cost? Yes. Yeah. It's quite costly.

Wow. And I send letter mail, so I do it the most affordable way possible, which is, you know, to the cost of a poster stamp most of the time. So I know that some places in bigger cities have the option of sending things across the border through private couriers like Chit Chats, so they can send it over the border and then ship out from there so some people can keep continue shipping to the u.s and international just by sending it across the border but uh for sending it within canada i'm not sure what what they would be doing in that scenario if the strike were to continue for an extended

period of time i mean i said that there's a mediator, but apparently the two sides are pretty far apart right now. Mm-hmm. What are you thinking about? I mean, are there options that you're kind of running through? Well, I've had to pivot. I've reached out to some companies locally, stores who wanted to carry my cards, and I didn't have the capacity to fulfill those orders. So I've reached out to them. It's a little late in the season.

So some of them are going to reach out in the new year and place orders. So hopefully I'll make up that income eventually. I fully support the strike. I know that it was necessary. Canada Post had the opportunity to settle this prior to the strike. So I, I empathize with the workers a lot. It, it's a tough spot for everyone to be in. How are you threading that needle? You have, cause you, you empathize, as you said, with the workers, but you're, you're also squeezed here, right? And you can't raise your prices more because everything's

expensive and people as great as your cards are, they're not going to spend 30 bucks to have something sent because it's just too much. So how are you threading all of that? I'm relying on the local customers to come out and support. And they've been doing it. I mean, during the pandemic, we saw a huge surge in sales online and locally. And right now, hopefully, it'll be the same kind of thing. People are going to, they know that we're feeling the crunch and they're going to come out to those local markets and see us or find us in the retailers. I hope it bounces back for you and that you do okay.

This is for small businesses across this country. This is the busiest time for many of them. And you're right in that mix. Megan, good luck. And thanks for talking to us. Thank you so much for having me. Megan Fahey is the owner of Driven to Ink. It's a small greeting card business based in St. John's, Newfoundland. In 2017, it felt like drugs were everywhere in the news. So I started a podcast called On Drugs. We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with season three of On Drugs. And this time, it's going to get personal.

I don't know who Sober Jeff is. I don't even know if I like that guy. On Drugs is available now wherever you get your podcasts. Van Mala Subramanian covers labor issues for The Globe and Mail. Good morning to you. Good morning, Matt. I mean, we just heard from a small business owner who this is prime time for her. What do you make of the decision to strike now during the holiday rush? This is prime time for her.

What do you make of the decision to strike now during the holiday rush? I mean, yeah, I listened to that conversation. That's tough. You know, she's in a really difficult situation. But I will say that the two sides are pretty far apart from what I can tell, even as of yesterday, still on a couple of issues. on a couple of issues. And the decision to strike, I mean, this is almost an existential issue for both sides. For Canada Post, they have a business model that's simply not working right now. For the union, they're seeing Canada Post slowly sort of push towards more casual employment, sort of push towards more casual employment, more part-time employment. And, you know, the union's entire mandate is to protect jobs and to make sure that the jobs that are added have equal benefits, equal rights as, you know, jobs that have already been there for a while.

So I think both sides are very dug in on these issues. And it's a very tough situation because it's not just a regular business in regular economic conditions. This is a business that is struggling. It's a crown corporation because of bigger macro changes and wants to push to have a different business model, but is unionized. So you're going to get a very tough set of negotiations and it was bound to happen. Let's talk a little bit about what's at stake here. As you mentioned, Canada Post is in a really tough financial spot. It's losing something like $750 million. Last year, the losses increase every year since 2018. What is the new model that it is proposing? Yeah, so let me just kind of break that down for your listeners a little bit. So the one thing to understand is that Canada Post wants to move into the parcel delivery business in a way that they can be competitive.

Letter mail has dwindled. People don't send letters anymore. That we understand. But what happened in the pandemic is that they were making headway in market share in parcel delivery, but there was a rise of all these new delivery careers, third-party delivery careers, that used very cheap labor and cut into Canada Post business. So just a stat that's interesting is, you know, in between 2020 and say 2023, their parcel delivery market share eroded by more than half in this country, from 62% to 29%. So they're saying in order for us to compete, we need to also have lower labour costs. And in order to do that, we need to have what they're proposing, part-time flex employees, which means that these are part-time employees who are permanent with Canada Post, but kind of work around the clock on weekends, on demand, similar to how third-party deliver careers operate.

And this idea of weekend part-time flex, part-time flex, and these are two new employee classifications that Canada Post has proposed, this is the crux of the issue. This is what the union is really unhappy about because they want to preserve more full-time jobs and they want to preserve, more importantly, benefits, a defined benefit pension for any employee of Canada Post. Does Canada Post really think it can compete with those third-party delivery services?

In many cities, you will see, and it's not just that Amazon-branded vans that are driving around dropping off people's packages, but personal cars, private cars, stuffed to the gills with packages because somebody has taken on a bit of gig work to deliver those packages. Does Canada Post think that it can actually compete with it? That's a really good question, Matt, because I combed through their 2023 and 2022 annual reports.

And yes, they do believe they can compete. And their argument is that they were competing before the pandemic. their argument is that they were competing before the pandemic and the pandemic was what kind of ruined them in a way because of the rise of these third-party delivery careers but the reality of this situation is their market share has already been eaten into and what the union is proposing which really hasn't been talked about a lot is is for Canada Post to completely innovate its business, to not just focus on parcel delivery, to do things like postal banking. This is something where you provide basic banking services, especially in rural and northern communities, for people who are unable to get easy access to a bank or who don't bank online.

And, you know, in countries like Japan, in Switzerland, in parts of Singapore, they do, postal banking is a thing. It is a concept that can be introduced to sort of negate the dwindling letter mail problem that postal services face. face. What does this say, do you think, about the future of work and labor disputes in the public sector in particular? We live now in this 24-7, seven-day-a-week kind of order anything and it'll be delivered in a couple of days sort of society right now. When that, and the pandemic supercharged that in many ways, when that exists, what does this say about the future of work, do you think? many ways. When that exists, what does this say about the future of work, do you think? Yeah, I mean, you know, the model of labor is, of work and labor is really changing. And you can see that with gig workers, right? So they're effectively independent contractors, like people who work for these third-party delivery careers or even Uber drivers and things like that. And that's what the union said, they don't want the gigification of the post office.

Exactly. They don't want that. But the fact of the matter is that's happening because that labor regulations, employment codes across the country cannot keep up with how quickly these tech companies have moved in to change the nature of work. And that's what the union is seeing happening at Canada Post and is trying to protect against. But we as consumers have a role to play in that too, right? Yeah, we do. We do. Because we're getting really used to same day delivery and we want things instantly and we're doing things from our phones. So that's why I use the word existential because for both sides, it's really sort of a, they're dug in because there aren't any easy solutions to this.

We know that, I mean, whether it's small businesses are being hit, we know that people are waiting for passports and driver's licenses as well. If this continues, should people, you say that the two sides as of yesterday are still pretty far apart. Should they make alternate plans for, for example, sending, people do still send Christmas cards. I like to get them in the mail. I like to send them in the mail. Should people make alternate plans for those kind of things? Well, I personally would.

So I think what Canada Post has said is that the only mail that they will deliver is socioeconomic checks, said is that the only mail that they will deliver is socioeconomic checks, which means your checks for old age security, counter pension plan, childcare benefits checks, everything else will not go. And given how, you know, I'm not saying I can't predict when the strike will end, but I can say that this round of bargaining, the issues are not just as simple as wages and reaching a middle ground on wages. They're just bigger, broader issues that sort of affect the entirety of the workforce of Canada Post. So, you know, frankly, I would look for alternatives in delivering my meal. Can I ask you a really important question, which is for kids who are writing a letter to Santa that will be delivered, you put it in the post box and it goes to the North Pole and Santa gets that letter.

What happens? Is Canada Post going to deliver those letters? What should happen there? They haven't said that they will. That might change as we get closer to the Christmas season. But as of now, they are only delivering pension checks pension checks and, you know, old age security and what they call socioeconomic checks. So I'm not sure if Santa letters are going to actually get delivered this time around. Van Mala, thank you very much for this.

Thank you, Matt. Van Mala's Subramaniam covers the future of work and labor issues for the Globe and Mail. Ian Lee is an associate professor in the Sprott School of Business at Carleton University. He studies Canada Post. Ian, good morning to you. Good morning, Matt. I'd said the statistic earlier, Canada Post losing $750 million last year. The losses have increased every year since 2018. Why is Canada Post seeing declining revenue as you understand it? The core problem, and I documented this in my MLI study in 2015, is the check still in the mail. I documented it, brought it right up to date in my most recent study, Canada Post is at the tipping

point. And I do want to point something out because I get emails all the time telling me it's my opinion. Every statistic and trend and graph in my reports are sourced exclusively from the audited annual reports of Canada Post tabled in the Parliament of Canada. All the data comes from there. To your question, letter mail is collapsing. It is the core product of the post office for 250 years since the British set up the Canadian post office as a subset of the Royal Mail in 1761. And this letter mail, which has a profit margin of 50%, according to the Deloitte study done in 2016 for the Blue Ribbon Panel, is falling like a stone, 70%.

And I'm sorry if I sound like John Hamilton, but I do want to make a point because people are saying, you're the spokesperson for Canada Post. I don't consult the Canada Post. I do not talk to them. And in fact, they are using the lines from my report that I've been stating for 10 years. Letter mail's collapsing. It is not coming back. Canadians do not write letters anymore. How important is parcel delivery to Canada Post in 2024 then? Well, that's the only thing that's going to save them. And as the Globe and Mail future work reporter did note correctly,

the Canada Post is not competitive in parcels. That's the only thing that's going to save them. They should have pivoted 10 years ago, but they didn't. And they squandered 10 years of opportunity. Let me put some numbers on the table so people understand why they're not competitive in parcels and why they have such an existential crisis. Yes, because there's only two things, letter mail, which is collapsing, and parcels.

It is correct that this trend occurred in the pandemic, but I really don't blame it on the pandemic. It was a shift in the market. The gigs came along. Up until then, Canada Post was doing fairly well in parcels in market share a little over 50% of the market in market and the share of parcel post but what happened is the gigs came in and radically undercut them today the average cost per truck those postal trucks you see flying driving around Canada the

average cost for the truck and the driver and the fuel is about sixty to sixty five dollars an hour the private for-profit courier companies are around forty five dollars an hour for the truck and the driver and the fuel the gigs are about twenty five dollars an hour they own their own car. They're like Uber drivers. And they are radically undercutting both Canada Post and the private for profit couriers. And as a consequence, the commerce companies are shifting en masse from Canada Post and abandoning Canada Post to go to the gig drivers for the delivery of e-commerce parcel posts. And so facing an existential crisis, what do you see as the role of Canada Post in 2024?

It's on the tipping point. I believe after the next election, it's not going to be handled by, this is a lame duck parliament, we all know that. But after the next election, no matter who is elected, my joke is even if we elected Karl Marx, we will be facing massive downsizing in the post office after the next election. The CEO and the CFO this past summer on the record at the annual general meeting stated they stated many things, but there are two things that are really important. Canada Post is going to run out of money in early 2025, which will necessitate a bailout from the government of Canada. The second really important point was the CEO said, and he's

correct, I mean, the numbers are self-evident. He said the post office has been structured to deliver five and a half billion pieces of the letters a year, and we're only delivering two billion, he said, and this is unsustainable. There will be downsizing. Well, you've said that Canada Post should end door-to-door delivery. Why should it stop delivering mail to my front door? Well, first off, only 25% of Canadians do receive door-to-door delivery. 75% do not. The second, and by the way, full disclosure, I live in one of those neighborhoods in Ottawa, and I receive door-to-door delivery, albeit I only get mail once every two or three weeks. But the more important reason is that Deloitte, in the study for the Blue Ribbon Panel, found

that the cost just of the 25%, the privilege, these are the most privileged neighborhoods in Canada, the Glebe in Ottawa, Rockcliffe, Rosedale in Toronto, Outremont, Pointe-Gre, the most privileged and wealthy neighborhoods in Canada. This service was costing $500 million a year in 2015. I estimate because of inflation, it's now about $800 million. Canada Post is hemorrhaging cash, and they have to do radical surgery to buy them time to pivot and completely restructure as a parcel post company. Is there an argument to be made that this that this con corporation doesn't need to be profitable

that it needs to provide a service to parts of this country that would otherwise be without delivery? Well that's essentially what I've argued. I've argued in this report I've said that the in the in the urban cities where 80 percent of us live according to stats Canada most people don't use the post office there's all kinds of alternatives there's small regional courier companies national courier companies their shopping malls don't have to do e-commerce etc and so what I argued was the old delivery model of going to 17 million addresses five days a week 52 weeks a year is massively expensive, will become more expensive as the volumes continue to decline. And so there's no need for that. That's why I recommended ending

that as well as franchising all the post offices and ending home delivery to the 25%. Then you create a new or a parcel, a Canada Post, a parcel post company, if you will, that will service small business that absolutely is dependent on the post office and the rural remote communities across Canada, such as the villages and hamlets of rural eastern Ontario, where I grew up as a boy 50-odd years ago. Those places will not get private for-profit couriers coming in because the densities are too small. So there's a role for Canada Post. It is not the role that we envisage of a 65,000-employee organization

marching down the streets of Canada to every last address in the country with no mail because Canadians are no longer sending mail. I call that a Potemkin post office, and it's unsustainable. I think we have to completely and radically re-engineer the post office to be a much, much smaller post office servicing small business and rural and remote communities in Canada. I'm going to let you go, but when you do that radical surgery, a lot of people will lose their jobs.

These are good-paying jobs. They come with benefits. The people who are in them are now out on the streets fighting for the preservation of those jobs. What would you say to those people who would lose their jobs if that surgery that you're calling for takes place? Matt, you're absolutely right. I didn't sugarcoat it in the report. We have 65,000 people in the post office. The model I'm proposing will probably need about 10,000 people. So we're looking at a 50,000, 55,000 downsizing that will rival the downsizing of the Kretchen government in 1995, albeit that was in the public service. There's two specific answers. In the annual report, it states that 25% of the

workers are going into retirement over the next 10 years. So they can, using compensation packages, bridge those people into retirement. That will still leave an awful lot of people. And they will receive, as any company does that downsizes or goes out of business for that matter, they'll receive compensation packages. And because we have massive labor shortages in this country with the boomers exiting the workforce and the decline in fertility, which we all know about, and the cutbacks in immigration, we are already facing job shortages across the country. And those people will be reabsorbed by the labor markets across Canada. But I know that people find this very harsh. The reality is I don't believe that any government, no matter what government is elected,

is going to say, look, we're going to continue paying. Those deficits are going to become larger and larger, Matt. They're not going to be a half a billion. In two years, they'll be two billion. Then they'll go to three billion, four billion, five billion, as the volumes continue to decline in both letters and parcel posts because they're not competitive. And then we'll end up with a Potemkin post office. Ian, we'll leave it there. Thank you very much. Thank you. Ian Lee is an associate professor in the Sprott School of Business at Carleton University.

Your thoughts, how do you use Canada Post? What would the end of mail delivery mean to you, if you get it now? And what does the strike mean to you in your community? Email us, thecurrentatcbc.ca. For more CBC Podcasts, go to cbc.ca slash podcasts.