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America’s Shortage of Drivers in the Trucking Industry

The video, by J.B. Hunt,  provides emotional and informative insight into the life of America’s drivers. Without a doubt, on average, most people do not imagine how their food gets from one place in the United States to the other, often traveling across from one coast to the other coast in the backseat of a 16-wheeler. The cost and time of this is only seen by truck drivers and trucking companies.

In 2014, Swift Transportation had 20,000 workers and 14,000 trucks, but oddly in July 2014, its stock dropped by 18%. It was not due to the fact there was little business but too much business that the company did not have enough resources or workers to move the freight waiting to be delivered.1 In reports conducted by the American Trucking Association (ATA) the trucking industry lacks about 35,000 drivers and that number will shortfall to about 240,000 by the year 2020.2

The question is: how did this ever become an issue? Since when did a demand for truck drivers become such a pressing issue? Well due to a much awaited expansion and growth in the economy, there has been more pressure from companies to provide for consumers who are ready to buy, but the issue sets in with the lacking drivers to move those goods across states. Moreover this burst in the economy has drivers abandoning their trucking jobs to do work in construction or factories, incentivized by the stationary aspect of the job.

Moreover regulatory changes caused operational and logistic issues for trucking companies. In 2013, hours became limited to 8,000 miles per month, down from 11,000 in 2007.1 In 2010, the government began to deterred drivers with safety violations. Demographic changes in the industry, with an average driver age of 55 and quickly retiring, are leading to the shortage and posing as a structural change.2

As the shortage continues, the rate per mile on freight shipments is increasing according to DAT Solutions, who stated that in August 2014 long-term contracts were up by 8% or $1.80 per mile and in the spot market, short notice freight went up 14% to $1.92 per mile.2

Most economists report that the solution is obvious. In basic economics, when supply doesn’t meet demand, it means the price (truckers’ wages) is too low. In the past decade, trucker pay has significantly decreased when adjusted for inflation from about $43,500 in 2003 to $40,900 in 2013.1

While trucking companies have made efforts by offering generous signing bonuses, ranging often from  $500 to $12,000, depending on location, and covering the cost of truck licensing, valued roughly around $7,000, it is still not luring in the number of drivers as expected. Higher wages may be the answer. ACT Research’s Kenny Vieth, stated that in 1980 truck drivers earned almost 4 times more than fast food workers compared to now where they earn only 1.8% more.2 Evidently, trucking companies may have to incentivize the old fashion way, with a pay raise for their truckers.

 

 

Sources:

  1. http://www.nytimes.com/2014/08/10/upshot/the-trucking-industry-needs-more-drivers-it-should-try-paying-more.html?_r=0
  2. http://www.reuters.com/article/2014/10/02/usa-trucks-driver-shortage-idUSL2N0RO18P20141002
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