Friday Focus: Driver Wages and The Driver Shortage
In this Friday's editorial focus, we talk driver wages and driver shortage, and the importance of balance.
"You're probably going to see number of carriers bumping wages two, four, six cents a mile just to protect their driver base," said Richard Mikes, managing partner with Transport Carriers Association (TCP) in a recent interview with Today's Trucking for a story about driver wages.
It was interesting timing as the day before Maverick Transportation announced a wage increase for all current and new hirers.
And yesterday, Baylor Trucking, a 300-truck dry van fleet located in Milan, Indiana, announced a pay increase, bumping their drivers up to $.44 per mile, effective February 1, 2012.
The cherry on top for Baylor drivers, however, is the minimum weekly pay of $1,000 so that their over-the-road drivers have financial assurance.
During my conversation with Mikes on driver wages, he related a discussion he had had with a carrier. She sat back and looked at her drivers, Mikes said, at how many runs they made in a week and what they were getting paid. She asked herself, "Would I do that job for $50,000?
"No, I wouldn't," she told Mikes.
"Sixty-thousand is not an unreasonable rate to expect to be paying these drivers," she continued. "But will I go out and raise my wages tomorrow? Of course not. But the whole industry is going to have to gravitate towards that in the next few years," she said, "or we're really going to be in a mess."
The conversation stemmed from TCP's 2011 fourth quarter Business Expectations Survey that found that sixty-five percent of carriers believe that wages must be more than $60,000 — up from 49 percent in May 2011. During the same time period, the American Trucking Association's (ATA) data in driver turnover rates jumped from a range of 40 to 50 percent up to nearly 90 percent.
"Here we are now with two-thirds of the carriers versus half saying that we have to have wages above $60,000 to attract and retain people in this industry," Mikes says.
Here's Some Money, Now Go Away Driver Shortage
There's the long-term problem and the short-term problem. Long-term, yes, there is the issue of an entire generation retiring — a generation that decided to stick around when the economy took a dive. "We dodged a bullet there," Mikes says.
And here in Canada, a recent report by the Canadian Chamber of Commerce noted that the trucking industry is going to be short 37,000 drivers.
But, Mikes explains, recent reports have shown a big pop in freight rates increasing — well before the spring shipping season. "It's happening now, so we've got a lot of pressure to just retain drivers, not only increase the pool of drivers."
Yet in that same TCP survey, carriers reported that current ROI isn't keeping pace with costs. Imagine, Mikes explains of the current dilemma, that you are running your old trucks, replacing as necessary. You aren't going to buy any new trucks to meet demand. So you increase your supply of trucks because you aren't getting adequate return — you've got 10 percent unseated, anyway — and the only way that you can get drivers to drive your trucks is to bump wages up 20 percent.
"How are you going to balance that 20 percent increase when you are going to immediately give a nickel to stop the churning of drivers between carriers, and you're getting two bucks a mile so there's a two percent increase you're going to shippers with just on pay?"
For TCP, that's the message they are trying to get out to carriers for 2012: balance. Balancing available trucks with rising freight volumes and balancing driver wages with existing rates.
While drivers clearly do deserve a wage increase, throwing money at the problem blindly is not going to solve the long-term driver shortage, nor will it solve the short-term driver rentention problem. The solution must be strategic and incorporate additional programs (we explore this more in the upcoming March Issue).
While I haven't had a chance to speak with anyone from Baylor on more details about the wage increase, on the surface it looks good.
The minimum $1,000 a week gives their drivers some stability in what is often a very unstable profession from day-to-day. They thought about the need for money, but they also thought about financial security. Good for them.
The biggest hurdle to the driver shortage may not be an absence of warm bodies — we have enough people on this continent to fill the seats. The real problem is convincing people, the Gen Y'ers, that trucking is a cool, important job (that pays well, too!).
A fellow trucking journalist — much more seasoned than I am — sent me a survey on the 200 most popular jobs in America. Trucking was #171. "I don't put a lot of faith in these things," he wrote "but to the person on the outside looking in, this doesn't paint a very appealing picture of the job."
It's time to paint a more attractive picture, and increasing wages is just the start.
So, a weekend challenge: tell us why young men and women, and those looking for work, should consider being a professional driver.