Eli5 How does a stamp cover the cost of sending a letter?


It confuses me on how one stamp can cover the cost of sending something basically anywhere in the states, and international isn’t much more.

Wouldn’t the gas alone cost more?

In: Other

One letter, yes, it would be too expensive. However the usps delivers millions of letters. Take the price of a stamp and multiply that by millions. Yeah, they got gas money

That’s because it isn’t one parcel getting shipped. There are thousands of pieces of mail that get shipped with your letter.

Think of an air plane one $500 ticket isn’t going to cover gas, but 130 passengers paying $500 each will.

The USPS doesn’t make a “profit,” like a typical corporation. It strives to price things so that it basically breaks even–enough to pay salaries, pay for buildings, pay for gas, etc. The USPS makes money in a lot of different ways. Some are basic stamps on letters. Some is packages and bulk mailings (like those flyers from your local stores). Some is special services like overnight mail, certified mail, and registered mail. It even makes money selling greeting cards and packaging supplies in post offices. The USPS then estimates how much money will be spent, how much needs to be made, and prices things accordingly. So, it may technically “lose” some money, sending a letter across the country, but the USPS makes it up in other ways. This is not unlike a typical business that makes more money on some products and less on other products. For example, Ford sold millions of Ford Escorts but made no real profit on them. Ford made its profit on bigger, gas-guzzling vehicles, but it had to sell enough fuel-efficient cars to meet certain federal standards.

Yes it would cost more in gas if they just individually ran letters one by one from here to there. The postal system is an example of an economy of scale and doing things smarter not harder.

For example let’s say it takes $100 in diesel to get an empty semi from City A to City B. That’s just an empty truck with nothing but a driver. Now let’s start adding mail into it. A letter is pretty light and there’s rules where if it weighs so much you have to add more postage. Each piece of mail adds $0.0001 cents to the diesel bill, so every 100 letters costs another penny. 100 letters is going to be $58.00 in postage starting next Monday, so with *just* 100 letters we’re already over halfway covering the diesel.

But it’s a semi it has room for a whole lot more than 100 letters, let’s load 20,000 letters on it (still way under what it can haul, as each letter is pretty small and has a weight limit of 1 oz). Now you’re hauling $11k worth of postage for $102 worth of diesel. Plenty of room in there now for paying the driver and postal workers and maintaining the machines.

Of course that’s just the semis running from the hubs, not the little Grumman truck putting it in your mailbox. But even those are handling hundreds or thousands of letters in a day between delivering and picking up. And again they aren’t doing it one by one, they follow a route and do all delivery and pickups while following that route so doing all those transactions for the cost of one trip through the route.

For most things they’re not just transporting your letter, they’re transporting dozens of letters and packages and other cargo.
But there are plenty places you can mail to that will result in them just having some guy drive out with just your letter.
This is a huge part of why many Post Offices don’t make a profit and are dependent on government funding.

>How does a stamp cover the cost of sending a letter?

It doesn’t. The United States Post Office is losing money hand-over-fist. They do okay on most packages, and okay on letters that are sent to somebody who’s in the same city as the sender, but if you mail a letter from like Florida to Alaska, your stamp doesn’t even come close to paying the cost.

Since they’re a government agency, not a corporation, their goal is to provide the service, not to maximize profits. So they accept your letter even though it will lose them money.