However, allocating costs is a cost accounting exercise that depends partly on how you treat fixed costs. If you assume that most of the costs associated with first class mail are going to happen anyway, then everything you get from standard mail is pure gravy. Of course, there are some costs associated with actually delivering junk mail (and periodicals) but it probably doesn't have a huge effect on how many post offices you have, existing pension benefits, and so forth. In fact, according to the prior link: "Labor costs, which are approximately 80% of total costs, create a fixed cost
structure which is not readily scalable in response to changes in volume and revenue."
Yes, I understand all this which is why I was hoping there was a good study or something done on the matter. Junk mail accounts for 48% of all mail volume, but only 26% of revenue. What would be the effect of increasing the cost of junk mail until its volume decreased by half? You'd see a 24% decrease in mail volume, but less than a 13% decrease in revenue. Would this decrease in volume facilitate cutting "fixed costs" like labor? Or are the costs truly fixed? If so, is that for business reasons or due to congressional mandates or what?
Most USPS revenue does come from First Class mail (though it's declining). Furthermore, "standard" mail seems to have a smaller contribution to profits than it does to revenue. http://about.usps.com/news/national-releases/2012/pr12_0217p...
However, allocating costs is a cost accounting exercise that depends partly on how you treat fixed costs. If you assume that most of the costs associated with first class mail are going to happen anyway, then everything you get from standard mail is pure gravy. Of course, there are some costs associated with actually delivering junk mail (and periodicals) but it probably doesn't have a huge effect on how many post offices you have, existing pension benefits, and so forth. In fact, according to the prior link: "Labor costs, which are approximately 80% of total costs, create a fixed cost structure which is not readily scalable in response to changes in volume and revenue."