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Supply Chain News: No Silver Bullet for Solving the Driver Shortage Issue, Experts Say

 

If Pay Had Kept Up with Inflation Since 1980, Wages Would be $111,000 Per Year, Double Current Rates

March 7, 2016
SCDigest Editorial Staff

Despite incessant hand wring – and rising wages – the issue of US truck driver turnover continues on.

In the third quarter of 2015, the most recent period for which there Is data, the American Trucking Associations found driver turnover among large carriers ( $30 million or more in revenue) was at 100%, the highest level in three years.

Supply Chain Digest Says...

Is it any wonder we have a truck driver shortage in the US when pay simply doesn’t even keep up with inflation?

What do you say?

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WThat 100% turnover rate does not mean carriers are replacing their entire team of drivers every year. Rather, it largely reflects the fact that many new drivers leave the profession very early on, so that three, four or more new recruits may be needed to develop one long-term driver.

That is not to say retaining longer term drivers isn’t an issue as well – a reason virtually every major trucking company has been increasing wage rates in the past few years.

But despite those pay hikes, the driver shortage isn’t going to be solved any time soon. That was the major takeaway from a recent teleconference on the subject, hosted by John Larkin, a Wall Street analyst following the transportation sector for investment firm Stifel, and which featured Gordon Klemp and Leah Shaver of The National Transportation Institute (NTI).

Here are some of the key insights from Klemp and Shaver during the discussion:

Carriers implemented numerous driver pay hikes during the 19 months, bracketed by July of 2014 and January of 2016. This is the shortest driver pay increase cycle since the NTI began collecting records nearly 22 years ago.

During this period, average driver pay increased approximately 14%. The average driver pay increase cycle has lasted roughly 33 months during the past 22 years. Conversely, during the Great Recession driver pay dropped about 25%, on average.

The combination of electronic logging devices, speed limiters, and hair follicle drug testing could combine to reduce effective industry capacity by upwards of 15%, exacerbating the driver shortage.

Private fleets pay drivers between 20% and 50% more than over-the-road for-hire truckload drivers are paid. That, plus a more predictable work schedule and more regular home time, helps private fleets hold driver turnover to just 14% or so annually.

When adjusted for inflation, an average driver pay of $38,618 in 1980 per year would equate to $111,455 per year today. With driver pay averaging just $54,000 per year in 2015, purchasing power is less than half of what it was at the time of deregulation.


US Truck Driver Pay has Nowhere Near Kept Up with Inflation


 

Source: The National Transportation Institute

On average drivers spend about $1,000 per month on food, showers, laundry, etc., while they are driving, which they generally pay out of their own pockets.

 

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Only 6% of drivers are women today. NTI views women as a largely untapped source of drivers, however carriers will have to change some of their recruiting practices and will have to make certain accommodations in order to realize the full potential of this mostly untapped source of potentially high quality, safe drivers.

Dispatcher/fleet manager assignment is critical. Many carriers assign their best dispatchers to their best drivers. This may not be optimal as inexperienced dispatchers are cutting their teeth on inexperienced and often temperamental drivers. In addition, personality tests can be used to better match drivers with dispatchers.

Driver needs don’t change much over time. They are looking for a consistent paycheck, a sufficiency of miles to reach total pay targets, the desired quantity and frequency of home time, and empathetic respect. Carriers that can provide all four of these requirements generally operate with significantly lower turnover.

Our Take: Is it any wonder we have a truck driver shortage in the US when pay simply doesn’t even keep up with inflation? This is some eye opening data.

Are you surprised at how little driver pay has kept up with inflation? Would that solve the problem? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

Steve Hogg

VP, Logistics & Customs, Fraser Direct Distribution
Posted on: Mar, 14 2016
I am not at all surprised because I have lived the experience. I tell people all the time about starting as a truck driver back in the mid 80s for $17/hr. (About $44,000 at 50 hours per week). That was a pretty respectable wage back then. You could afford to buy a house and a car and raise a family. I had a college education which was not unusual for drivers at the time. The bar was much higher then.

Fast forward thirty years and the situation has changed dramatically. As noted, drivers make half of what they used to in real terms and it would be a stretch to call it a profession anymore. Add to that the regulatory restrictions, traffic congestion and high stress from unrealistic delivery expectations and it’s no wonder there is a shortage. It’s a terrible job. The recession squeezed 25% of the capacity out of the industry and there was nothing to entice drivers back when the economy picked up again. At the same time, there is an age cohort where the few professionals left in the industry are retiring.  

Every part of our economy is affected by over the road transportation. “If you bought it a truck brought it”. With that in mind, the situation is dire. Not only aren’t there enough drivers to keep goods moving, but most people would be appalled by the low qualifications of many drivers currently on the road.

In order to fix the problem we need to assess what caused it. In our ever present quest for “cheaper stuff” shippers (and consumers to a lessor extent) have driven the industry into the ground. You get what you pay for and shortsightedness has gotten us where we are today. Rather than implement better processes to create sustainable improvement, it’s easier for shippers to insist on cheaper transportation. And with the low barrier to entry in trucking, there is always a carrier willing to do it for less.

Until we approach the issue in a more mature manner, there is little hope of change. Being a professional driver is a tough job and should command a commensurate wage. On top of that, carriers need to offer the best equipment and programs to attract them. And shippers need to accept that cost. Transportation is the backbone of our economy. It’s not a commodity. We are willing to pay more for fair trade coffee or chickens that weren’t raised in a cage but we won’t pay a fair wage to have any of it delivered safely and on time.

































 

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