Payday

Both publicly and privately, large truckload carriers are saying that the only way they can continue to profit from tight freight capacity is to find more drivers, and the quickest way to do that is to dangle a bigger carrot. The public statements have been vague, no doubt to keep the competition guessing for as long as possible. Privately, though, some have been telling the investment community that

Both publicly and privately, large truckload carriers are saying that the only way they can continue to profit from tight freight capacity is to find more drivers, and the quickest way to do that is to dangle a bigger carrot.

The public statements have been vague, no doubt to keep the competition guessing for as long as possible. Privately, though, some have been telling the investment community that they will raise driver pay rates by 10% within the first few months of the year. Rates for owner-operators will also rise substantially.

In all likelihood, everyone competing in the truckload market will respond with similar increases within the first quarter, and every driver's boat will float a little higher in the rising tide. It remains to be seen whether 10% pushes pay over the threshold that brings fleets all the drivers they need or simply represents just one more step toward that magic number.

Like it or not, the trucking industry is finally going to have to face the issue of paying drivers competitive wages. Ever since deregulation, truckload carriers have dodged the issue, using a variety of strategies that included training schools to lure a steady stream of new entrants through a revolving door, fancier trucks to lure the other guy's drivers, creative bonus and benefit packages that made it difficult to compare the competition's pay offerings and, as a last resort, some escalation in basic pay rates.

While other segments have enjoyed a clear pay advantage over truckload, in truth they've also benefited from the low pay in that segment since it helped them continue attracting qualified drivers without incurring significant increases in labor costs.

But we've just undergone a fundamental shift in the for-hire freight business. After decades of easy entry into the truckload business and the resulting endemic overcapacity that kept shippers in control of rates, we've entered a prolonged era of actual capacity shortage. Record carrier bankruptcies during the last economic downturn have played a role in this shift. Just as the economy began recovering, changes in hours-of-service meant a decrease in driver productivity, and new financial requirements from insurers raised high barriers for potential new entrants.

The result is not just the current freight capacity shortage, but a reasonable projection that capacity will remain tight for the next three to five years.

The only thing that stands in the way of seizing this golden opportunity to grow both revenues and, more importantly, profits is a lack of drivers. In fact, some carriers say they could increase business 20% immediately if they just had the people to operate their trucks. And as they face this current shortfall, they also acknowledge the aging of their current driver pool and increased competition from higher paying industries like construction for a dwindling potential pool of new workers.

There's only one possible outcome. Success in this new environment will require more drivers, so the most aggressive truckload carriers are about to start paying drivers more to succeed. And once they do, every other business that needs drivers to stay in business will follow. We've finally reached payday for truck drivers.




E-mail: [email protected]
Web site: fleetowner.com

TAGS: News
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