In 2007, personnel compensation and benefits costs of $54,186 million were $479 million, or 0.9%, less than 2006. The decrease was due to elimination of the employer’s share of the CSRS contribution resulting from the enactment of the new law and reductions in workhours, complement, and workers’ compensation costs.

Although total compensation and benefits were lower in 2007, our labor costs increased by $1,118 million, or 2.8%. COLA increases in 2007 added $871 million to our compensation expenses. These increases were offset somewhat by a decrease of 36 million labor hours. Our 2007 average hourly labor cost increased by 1.6%, compared to an increase of 4.5% in 2006. In 2007, workers’ compensation decreased by $399 million. See Workers’ Compensation later in this section and Note 11, Workers’ compensation, in Notes to the Financial Statements for additional information.

Workhours
In addition to labor and benefits rates, workhours are a major driver of our compensation and benefits expense. In 2008, mail processing, customer service, city delivery, and other workhours decreased by 50 million compared to 2007 offsetting the higher labor rates. The reduction in workhours was in part an outcome of lower mail volumes, which reduced workload. As mail volume fell throughout the year, management initiated a number of efforts to reduce workhours, especially overtime.