With the unemployment rate so high, why is there a shortage of truck drivers?
December 8, 2011
December 8, 2011
Last week we received some unexpected good news in the United States as the unemployment rate fell to 8.6%. In Canada the news wasn’t as good as the unemployment rate increased to 7.4 percent. Without counting those people who have given up looking for work or who are underemployed (e.g. performing a job below their level of expertise and education at a wage inferior to what they should be earning), there are about 14 million people unemployed in North America (e.g. 13.3 million in the United States and 1.3 million in Canada).
FTR Associates estimated that there was a shortage of 200,000 drivers in the United States in the first quarter of 2011. How does one explain the fact that out of a pool of 13.3 million unemployed people (plus millions more if you include those who are underemployed), we cannot find 100,000 to 200,000 individuals to fill these jobs?
Here are some thoughts on this apparent anomaly. There were 3.2 million commercial drivers in the United States in 2008, including 1.8 million heavy haul or tractor-trailer drivers, according to the U.S. Labor Department. By May 2010, the number of big rig drivers had dropped 18.4 percent to about 1.5 million. In other words, there are 300,000 drivers that left the labour force that should be available to fill the available jobs. Why is it so hard to convince them to come back to work?
One of the most frequently mentioned reasons is compensation. In the United States, experienced truck drivers can make $50,000 a year at some truckload carriers. According to a BLS survey, the average wage was $39,450 in 2010 while the median wage was $37,770. The survey indicated that 75% earn less than $47,000 per annum.
The trucking industry has a long term practice of paying its drivers by the mile. While there is certain fairness to this approach since it correlates directly with the amount of miles driven and hours worked, it also injects a level of uncertainty into the driver’s weekly pay package. Inconsistent load availability translates into inconsistent pay.
Pay raises are difficult to implement since they cannot be easily correlated with increases in freight rates. In fact, there has been tremendous downward pressure on freight rates as the recession took hold and shippers sought a means of reducing supply chain costs. According to the American Transportation Research Institute, U.S. driver pay fell by 7.4 % in 2009.
Then there is the lifestyle issue. For long haul drivers, being away from home for days or weeks at a time is another deterrent. While there can be a certain glamour in being on the open road and visiting different regions of North America, spending so much time away from home can lead to a range of potential lifestyle issues (e.g. marital difficulties, unhealthy living etc.).
There are a host of other issues that contribute to the problem. At the heart of it is the fact that being a truck driver is not a recognized profession. The current driver compensation packages make drivers a commodity who can sell their services to the highest bidder.
Hours of Service regulations may or may not improve driver safety but restrict work hours. The new CSA provisions improve the quality of those drivers who meet the standards but make it tough on those who work for trucking companies that do not support them with a high quality fleet management program.
The driver shortage problem is coming to a head. Fleet costs are rising as more demanding emissions standards are imposed by governments. The CSA program will push poor quality drivers out of the business. An increasing number of shippers are challenging carrier rate increases (that are intended to cover these rising costs). A driver shortage problem that will exacerbate the capacity shortage is not a sustainable situation, particularly as we try to pull ourselves out of recession.
So what has to change? It will take a combined effort from shippers, carriers and governments to help avert a capacity shortage situation that will disrupt the Canadian and U.S. economies.
From a shipper perspective, there is a need to have “carrier friendly” freight. This can be achieved by removing inefficient and non-productive processes. This includes making improvements in freight packaging, loading, paperwork, vendor and customer network management. Many shippers need to get their “house in order” to keep their freight costs in line. As unpleasant as this may sound, freight rates have to go up (although the level of increase can be muted by Best in Class transportation practices).
From a carrier perspective, there is a need to run a sound operation, to properly recruit and train drivers and to offer them a job and a career within the organization. It is time to look at other pay options including guaranteed pay and incentive based pay for drivers who achieve certain metrics and CSA scores. There is a need to manage and communicate with drivers effectively including dispatcher training so drivers are treated with respect and dignity. We need to create a class of professional drivers who meet specific metrics on an ongoing basis and are properly recognized and compensated for their excellence.
For governments, they need to think through every law and policy they pass that has an impact on driver safety, performance and lifestyle. In North America we need a team of professional drivers that are intelligent, hard-working, thoughtful and motivated employees that serve as a differentiator as we compete with the other leading world economies.
Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to transportation and logistics organizations to help them improve their profitability. All posts by Dan Goodwill