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Can higher pay alone solve the driver shortage?

Aug. 29, 2014

As a range of carriers continue to announce driver pay increases, some within the industry are questioning whether higher pay alone will be enough to reduce the ongoing truck driver shortage, estimated by the American Trucking Associations (ATA) to be between 30,000 and 35,000 positions.

A now-completed truck driver survey conducted by National Retail Systems (NRS) – the parent company of Keystone Freight Corp., National Retail Transportation, and other retail-focused trucking firms – found that 79% of the thousand or so drivers it polled agreed that salary remains the most important factor when choosing a job, with home-time ranked second. By contrast, sign-on bonuses and training ranked the lowest.

David Bullins, east coast recruitment officer for NRS, noted that changes to hours of service (HOS) rules are now making local freight hauling the most attractive to driver candidates.

“It used to be that regional and long-haul drivers were making better money, but now with the new HOS [rules] they are required to have more downtime,” he explained in the survey. “That downtime ultimately means less money, so drivers are now making the push to become local drivers instead. Since drivers cannot run like they used to, home-time has now become a higher priority.”

With drivers indicating pay is the most important factor in job selection, Joe Brady, VP at NRS, said that now poses a new question for the industry: how much are trucking companies able to increase driver pay?

“Market conditions will not allow transportation companies to increase pay beyond a certain level. With driver pay increases it is challenging for asset-based transportation companies to make money,” he noted. “Customers are reluctant to raise pricing even though ever increasing variables such as new equipment, maintenance, and employee benefits continue to rise with inflation. These expenses add up, and transportation companies many times are forced to incur the cost-differential.”

John Larkin, a managing director and head of transportation research at Wall Street firm Stifel, Nicolaus & Co., noted in a recent presentation that based on his firm’s analysis of truck driver wages, pay alone may not be enough.

“When I think about it, I think about how maybe the lowest paying carriers are paying $40,000 and the highest paying carriers are paying $80,000. In the oil field, it’s probably $100,000 to $120,000. Yet the people paying $80,000 per year to their drivers are still struggling,” Larkin explained. “It doesn’t seem like there’s a market-clearing price within the reasonable range of what carriers can afford to pay drivers.”

Thus, in his opinion, it must be “other things” leading to this dearth of truck drivers. “Perhaps it’s the quality of the truck, how the dispatcher treats them, getting home on a frequent basis, doing load swapping, creating regional opportunities, or something of that nature,” Larkin said. “And the driver problem has gotten so severe lately that it’s not just the TL industry that’s suffering: LTL, private fleet, dedicated fleet, and even the drayage industry are really struggling to find enough drivers.”

As a result of those challenges, some carriers are trying to offer different pay and benefit package “mixes” to appeal to potential driver recruits. Boyd Bros. Transportation, for example, not only raised its base pay to an average of 54 cents per mile, but added a “seasonal bonus” of 2 cents per mile for company drivers and 4 cents per mile for lease-purchase drivers, along with increased vacation pay, tarp pay at $20 to $26, a higher sign-on bonus for experienced flatbed drivers, and a higher referral bonus.

Boyd also recently rolled out what it calls its “Five Star” MPG bonus program, which provides monetary rewards to drivers based on achieving certain fuel economy targets, along with the opportunity to have 24-hours of home time every weekend in 80% of its hiring areas.

“We also plan to introduce new trucks to our fleet,” added Betty Nix, Boyd’s director of recruiting, in a statement. “Between now and the end of the year, we will replace over one third of our fleet with new trucks.”

Transport America is another carrier planning to implement a pay increase for all of its positions – solo, team, regional, and owner operators – effective September 1.

Some key highlights of Transport America’s pay changes include: Owner operators receiving a 2 cent per mile increase; most team drivers seeing a one-cent per mile boost per driver, with an increase in HazMat pay as well to an additional 4 cents per mile; a “top scale” solo driver pay boost of 1 cent per mile, with drivers with 4 years or more experience to start at 43 cents per mile; and a “relaxation” of HazMat requirements in performance pay rules for regional drivers, meaning more accelerated pay increases can occur, with new hires starting as high as 40 cents per mile.

"Not only have we increased entry level pay, but we also enhanced the earnings experienced drivers can achieve within our organization," noted Scott Arves, CEO of Transport America, in a statement.

Performance-based pay is a tactic being deployed by more carriers of late, with Interstate Distributor Co. the most recent example. It is offering a new “Pay for Performance” bonus package for its team drivers to allow them to earn up to an additional 6 cents per mile – even for drivers with as little as 6 months experience.

Interstate added that for its teams, that bonus starts at just 18,000 miles and is maximized at 23,000 on the month – noting that 65% of its eligible drivers hit the new bonus requirements in July this year.

Longer term, though, some believe fundamental changes need to be made in the age eligibility rules for commercial truck drivers so carriers can more effectively recruit younger workers into the industry.

“In many cases high school graduates do not have the option of choosing the career path as a truck driver due to the state minimum age of 21,” Chris Saville, marketing director for NRS. “By the time any graduates with aspirations of becoming a truck driver have reached the state minimum, they have most likely chosen a different career. Becoming a driver is almost like everyone’s plan ‘B’ because there is no career path directly out of high school.”

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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