The Truck Driver Shortage Is Fake News

Since 2005 the American Trucking Associations (ATA) has been releasing reports on the driver shortage. The ATA is the largest national trade association for U.S. truck carriers. Most recently the ATA estimated that the trucking industry ended 2018 with a shortage of more than 60,000 truck drivers.

If you do a Google search, you will continue to see news stories reporting on the driver shortage. That is despite a report from the Bureau of Labor Statistics in May saying this is not the case. Their report – Is the U.S. labor market for truck drivers broken? – concludes “as a whole, the market for truck drivers appears to work as well as any other blue-collar labor market… There is thus no reason to think that, given sufficient time, driver supply should fail to respond to price signals in the standard way.”

I went through the report and I’ve pulled out some of the key points made while omitting some of the esoteric economic analysis.

An important source of employment – There were approximately 1.75 million heavy and tractor-trailer truck drivers in the United States in 2017, along with 877,670 light truck or delivery services drivers. The occupation is characterized by modest levels of education. There are low returns to additional education.

Legislation does not protect drivers – Drivers who are engaged in any aspect of interstate transportation are not subject to the Fair Labor Standards Act’s overtime provisions, which govern the majority of other private and public sector occupations. The hours of these workers are governed by the Federal Hours of Service regulations, which limit drivers to approximately 60 hours of work over a 7-day period and do not require a time-and-a-half pay premium for weekly hours over 40. Most tractor-trailer drivers work far in excess of 40 hours per week.

The market for truck drivers has been tight – The demand for drivers has remained strong while the demand for workers with low levels of education has declined substantially in other sectors. The earnings of heavy truck drivers exceed those of other blue-collar workers throughout the period… earnings are increasing in nominal terms and strong relative to those in other occupations with similar educational requirements. This picture is consistent with a labor market in which overall supply is responding to growing overall demand.

The long-distance truckload (TL) segment does have high levels of competition – carriers in this segment have high levels of competition, similar average costs, and a very limited ability to differentiate prices in the market. Many individuals entering the occupation in this specific part of the trucking industry find the working conditions and earnings to be unattractive.

These characteristics result in labor market conditions in which carriers are forced to accept high turnover. The bureau cites an annual ATA survey of carriers, which shows that, between 1995 and 2017, the annual turnover rate at large TL carriers averaged 94 percent and that at small TL carriers averaged 79 percent. In contrast, the rate at firms in a different segment, less-than-truckload, averaged only 12 percent.

This segment of trucking also does not respond well to demand spikes because much TL freight moves under contract and thus freight rates do not adjust upward quickly. However, economists would not regard high turnover rates in this segment as a long-term shortage. Nor would they call these conditions a “broken market,” since the high turnover that marks such a segment is an indicator that the jobs in it are unattractive to many potential employees.

In short, the Bureau accepts that there is high turnover in the long-haul segment but is not willing to label this a driver shortage. ATA looks at the turnover and has concluded there is a driver shortage that goes across the entire trucking industry. The ATA has used this “shortage” as an argument to relax regulations such as the ELD mandate and hours of service which they argue makes the driver shortage even worse.

An economist might argue, but the Bureau did not, that the answer is not less regulation, but more. Make trucking subject to the Fair Labor Standards Act’s overtime provisions, pay time-and-a-half for weekly hours over 40, and the job becomes more financially rewarding. This in turn would attract more people into the profession.

Freight Waves had some interesting commentary on this: “The term ‘driver shortage’ gets thrown out by the powers in the industry to explain nearly every major problem or issue that our industry faces – spot-rate volatility, cost inflation, companies missing their earnings due to unseated trucks, etc. Driver shortage has become the ‘go-to’ explanation to explain every problem.’”

My conclusion is that we as an industry have been too willing to accept the research of a self-interested body as credible. We should have known better. The opioid epidemic is a result of the medical industry and the public accepting self-serving “research” funded by drug firms who produced dangerous drugs. Fortunately, the impact of shoddy research in logistics are not nearly as high.

Original story from forbes