As driver shortage worsens, driver pay begins to rise

The driver shortage has worsened or improved with changes in the economy and freight demand, but if existing trends remain unchanged, the shortage could reach 174,000 drivers by 2026.

By the end of 2017, the truck driver shortage is expected to rise to “the highest level on record as freight volumes recover and the industry transitions to the use of electronic logging devices to record driver hours of service,” according the American Trucking Associations’ Truck Driver Shortage Analysis 2017. The organization previously released a report on the shortage in 2015.

When the truck driver shortage was first documented in 2005, it was 20,000. During the Great Recession, the shortage was eliminated as freight demand fell and fewer drivers were needed. The shortage returned in 2011 as demand increased, reaching 45,000 by 2015, and it continued through 2016 but fell slightly after freight demand decreased. While the shortage has worsened, driver pay has begun to rise, but increasing pay might not be the only solution to the shortage because the number of job opportunities has risen as the economy has improved.

The high average age of the existing workforce is one of the leading factors for the shortage, according to the ATA analysis. The average driver age is 49 in the for-hire, over-the-road truckload industry, and over the next 10 years, 49% of the 898,000 new drivers the industry will need to hire will replace retiring drivers. The second largest factor related to the shortage is industry growth, accounting for 28% of new hires.

Less-than-truckload carriers and private fleets have a higher average age, but the shortage isn’t as significant in those sectors as the over-the-road truckload sector.

Kathy Fieweger, spokeswoman for Fort Smith-based ArcBest, parent company of less-than-truckload carrier ABF Freight, said the driver turnover issue is more challenging for truckload carriers than for LTL carriers “because of how we move freight in our network. At ABF, we pay the highest wages and benefits in the industry, so that helps us find and retain drivers.” The Teamsters military assistance program and the ABF Freight driver development program also helps to find and retain drivers. The carriers’ turnover rate is between 3% and 5%, excluding normal retirements.

Over-the-road LTL turnover fell one point to 9% in the second quarter of 2017, while the rate for local LTL rose two points to 14%. For large truckload carriers, the turnover rate rose 16 points to 90%, and for small carriers, it was up 19 points to 85%.

According to ATA’s analysis, it did not include the driver turnover rate in its calculations for the shortage. The turnover rate reflects driver demand, and the higher the rate, the higher the demand. The majority of turnover is caused by drivers leaving one company for another, and as demand rises, companies attract drivers by offering “sign-on bonuses, higher pay, newer trucks and better routes.”

RISING DRIVER PAY
Some of the solutions to the shortage include attracting workers from other sectors, such as warehouse and retail workers, said Steve Brantley, director of talent acquisition at Van Buren-based carrier USA Truck. Pay for workers in those sectors hits a peak of $25,000 to $35,000 annually, while an experienced over-the-road truck driver can earn between $45,000 and $60,000 each year.

Driver pay is an important factor in the shortage, but it’s not the only factor that plays into it. The shortage is “as much or more driven by lifestyle issues and availability of employment alternatives within the ‘gig economy’ or local opportunities with Uber, Lyft, etc.,” Brantley said.

Gordon Klemp, founder and CEO of the National Transportation Institute, said ride-sharing companies Uber and Lyft offer full-time workers the potential to earn between $50,000 and $55,000 annually.

“You dictate how you work, when you work and you’re home every night.” Klemp and

Leah Shaver, chief operating officer for the institute, spoke about driver pay in a conference call hosted by transportation analyst Stifel. Shaver said the organization tracks pay at the regional and local levels and has a database of more than 330 cities that’s updated quarterly.

In the second quarter of 2017, carriers were offering sign-on bonuses as high as $10,000, with 40% paid out in four months, Shaver said. In the third quarter of the year, 1-cent to 2-cent per mile increases were going into effect, and some increases ranged between 4 cents and 7 cents per mile. Driver pay is expected to continue to rise in the fourth quarter and into 2018, Klemp said.

Between 2006 and 2017, for-hire driver pay has risen 6.3%, Klemp said. Over the same period, pay for drivers in private fleets has risen 16.6%, close to the inflation rate of 18.5%. The pay gap between for-hire and private fleet drivers is about $20,000, Shaver said. Turnover in private fleets is “due almost exclusively to retirement.”

Adjusted for inflation, driver pay is about half of what it was in 1979 before deregulation, according to John Larkin, trucking/transportation analyst for Stifel.

The trucking industry was one of the few industries hiring people several years ago, but as the job market has improved, more job opportunities are available, according to the ATA analysis. Over the past five years, more than 1.3 million people have been hired in the construction industry, according to the Department of Labor. Construction jobs don’t require as much travel as truck driving, and might require less responsibility and regulations to follow.

CARRIER RESPONSE
USA Truck has responded to the shortage by increasing “marketing and outreach” to attract drivers into the industry and introduce prospective drivers to a truck driving career. USA Truck has partnerships with a university and a truck driving school.

“We are doing a lot of work in the retention space with our current drivers, and we will continue to develop other options to grow our workforce through CDL training and other career outreach efforts,” Brantley said. “We have a strong program for transitioning military and veterans as well.”

FedEx Freight has worked to ease the shortage through its internal driver development course.

“In this program, eligible FedEx Freight team members complete a professional truck driving curriculum while maintaining their current employment within the company,” according to a company statement. “Apprentices who successfully complete the DDC are promoted to a driving position determined by their individual curriculum.”

In the past fiscal year, more than 840 drivers graduated, and the program has an average of 700 graduates annually.

“Diversity and inclusion also plays a critical role in our effort to fill the need for drivers,” according to the FedEx Freight statement. “We are always striving to increase the number of women, for example, and people of all backgrounds in driver and leadership roles at our company.”

Only 6% of truck drivers are women, according to the U.S. Department of Labor. Gender and demographics are listed as other causes for the shortage, according to the ATA analysis. Since 2000, the number of women truck drivers has remained between 4.5% and 6%.

“This is a large, untapped portion of the population,” the ATA noted.

Lifestyle is another cause of the shortage. Drivers often spend a week or two away from home while on routes.

“Therefore, it is not just a career, but a lifestyle that does not fit with everyone’s desires or needs,” according to the analysis. “Eventually, drivers that wish to can move into regional or local driving positions with tenure.”

Fieweger said ABF’s over-the-road drivers are “usually out one, sometimes two, nights at a time.”

Drivers in the Dedicated Contract Services segment of J.B. Hunt Transport Services are assigned “local, familiar routes that get them home more often and in less time,” according to David Keefauver, senior vice president of Dedicated Contract Services Operations for the Lowell-based carrier.

“When drivers are at the heart of a company, every day is driver appreciation day. Access to coffee, washer and dryer units and a marketplace are examples of the many things that our experience team leads to improve their workplace satisfaction.”

So far in 2017, J.B. Hunt has hired more than 9,400 drivers, and it can take more than 100 calls to get one driver hired, according to a Nov. 3 blog by Keefauver. The carrier has more than 360 driver recruiters. In the blog, Keefauver explained many companies don’t have the resources to make attracting and retaining drivers a high priority and choose to outsource fleet management to a logistics provider, such as J.B. Hunt.

“Good pay and benefits are a fundamental way to recruit and retain drivers. J.B. Hunt researches geographic markets and driver activity to determine compensation.”

OTHER SHORTAGE ISSUES
One of the challenges with the shortage is the quality of the driver, according to the ATA’s analysis. In 2015, 88% of fleets had enough applicants but many weren’t qualified.

“There is no reason to believe that this situation has improved since 2015. The cost of lowering hiring standards can be significant in the long run when accounting for increased insurance premiums and accidents.”

However, the analysis on the shortage didn’t account for the quality of applicants.

With the exception of the ELD mandate, other factors not considered in ATA’s analysis are future regulations. New regulations often decrease productivity, leading to a rise in the shortage.

“However, if the federal government were to lower the age requirement for interstate drivers from the current 21 years old, it could help reduce the driver shortage,” according to the analysis.

ATA president and CEO Chris Spear recently announced the organization would take on a new role in the shortage and create a Workforce Development subcommittee chaired by ATA Secretary John Smith, chairman of CRST International. Spear looked to establish apprenticeship training programs and hire 18 to 21 year olds. The driver shortage is the top concern of the trucking industry, according to American Transportation Research Institute, the ATA’s nonprofit research organization.

One of the biggest challenges for Tontitown-based carrier P.A.M. Transportation Services has been the cost to “attract, train and retain enough qualified professional drivers,” said President Daniel Cushman. The challenge intensified in 2017, but as the deadline for the ELD mandate approaches, shippers have started to be more receptive to helping pay for increased driver costs.

“Our customers, for the most part, realize that in order to continue to hire and retain qualified drivers, we need help,” Cushman said in the carrier’s third-quarter financial report. “In order to continue to maintain our industry leading equipment standards, we need help. This help comes in the form of rate assistance.”