What Price Truck Driver Shortages?

Posted on August 20, 2015 • 0 Comments

Truck driving is a skilled occupation yet one that is is often undervalued

A shortage of truck drivers has bedeviled the logistics industry for so long, that it’s difficult to imagine a time when filling driver vacancies was not a problem. What is also difficult to fathom is why simply paying these workers more is not a solution.

Based on the economics of supply and demand – when the former falls below the latter, prices tend to rise – if drivers are a scarce commodity, the market should adjust by increasing the price companies pay for this resource, thereby attracting more workers until the imbalance is corrected. Yet the American Trucking Associations estimate that the industry is short of 35,000 to 40,000 drivers.

Moreover, even though the economy appears to be ticking along, there are people who still need gainful employment. According to the US Department of Labor’s Employment Situation analysis for July 2015, the number of long-term unemployed people (those jobless for 27 weeks or more) stands at about 2.2 million , which represents 26.9% of the total unemployed. The jobs picture has generally improved as the economy has picked up steam, but the threat of job losses – especially among semi-skilled workers – owing to automation is still very real. Furthermore, the labor market participation rate has declined from 66.4% in January 2007 to 62.6% last month. Almost 4% of US workers have dropped from the labor force in that time.

Why then, can’t the freight industry attract more drivers by offering higher financial incentives?

The first reason, of course, is that shippers, while complaining about driver shortages, are still not willing to pay more for high quality truck transportation. In other words, the situation is not “bad enough” despite the publicity. On a day-to-day basis the issue is not sufficiently visible to prompt drastic action. Driver shortages crimp the supply of truck capacity, forcing supply chain managers to mitigate the problem by, for example, increasing safety stock levels, using more intermodal solutions, or resorting to the spot market for truck capacity, where the quality of the drivers may be somewhat lower. Measures like these add cost to supply chains – but perhaps not enough cost to prompt an increase in compensation that attracts more drivers in numbers.

There are other possible reasons. Truck drivers spend long periods away from their families and friends. Driving a truck has become more stressful owing to tighter delivery deadlines, deteriorating road conditions and increased traffic congestion. Owner drivers also face the vagaries of fluctuations in both demand and prices.

Also, this is not a job that commands a high level of respect, even though it is critical to almost every industry and requires a specific set of skills. Drivers are often kept waiting for loads and amenities for these workers can be quite basic. The Wall Street Journal reported recently that the manufacturer Kimberly-Clark is addressing this latter issue by upgrading the restrooms and rest areas in more than 20 distribution centers.  The WSJ reports that the company wants to “ensure it gets its pick of drivers” by making its facilities attractive to carriers.[i]

Demographic trends could aggravate the driver shortage problem. There are not enough young recruits to replace retiring baby boomer drivers at a time when the US population is ageing.

Looking ahead, another solution could save the day: driverless trucks. As I’ve argued in a previous post, it will be a long time before fully automated trucks are a common sight on our highways. Automated vehicles with human drivers are a more likely option in the medium to long term. Shifting much of the driver’s role to automated systems might alleviate much of the stress that drivers now endure.

However, other problems will emerge, such as underutilized drivers becoming inattentive or even sleeping on the job. And whether highly automated vehicles will make truck driving a more respected occupation is open to question.

I’m reminded of the joke about the highly automated factory of the future that only has two employees: a man and a dog. The man is there to feed the dog, and the dog is there to stop the man from touching the equipment!