If Wages Are So High, Why Are Spirits So Low?

Updated: July 7, 2014
Empty Wallet

I recently read a “Motley Fool” article by Rich Smith claiming, “It’s a great time to be a trucker.” Last week, someone sent me an AP article that lists trucking as one of the “key industries” for pay raises. It seems that the tens of thousands of truck drivers on the road today, hauling America’s goods from coast to coast, ought to be sitting pretty in the cab, unless they’ve got a back ache from the bulk of their over-stuffed wallets. The stories I’m hearing, however, don’t measure up.

As the CEO of an emerging technology in the world of freight management, I hear every day from the front lines of transportation: the company drivers and the owner-operators, the big guys and the one-truck operations. No one seems to know that they’re working in a gold-plated industry. So what gives?

The problem lies in the numbers. The financial experts are looking at isolated data without the context of the trucking industry as a whole. For example, Smith points out the 4.3 percent driver shortage, approximately 235,600 open trucking jobs. He errantly concludes that increased demand will lead companies to pay better wages. Smith fails to ask, where are these wages going to come from?

I recently asked drivers and carriers on LinkedIn whether higher freight rates should translate to higher pay for drivers. Their answers reveal how the industry really operates. Fleet managers, OOs and drivers all pointed out the increasing cost of doing business in today’s freight environment. They cited equipment prices that “have gone through the roof,” increased fuel prices and increased fuel taxes, and the climbing cost of employee benefits.

Liability insurance costs are increasing, and the price of driver turnover often eats the income new drivers should be receiving. On top of all of that, what on the face appears to be a positive jump in rates is actually a recovery to pre-recession levels.

“Since 2008, rates have fallen year over year,” says one carrier. “We did not lower any driver’s pay because I know all of our 50 drivers and their families. We were hurting as a company until this year. Things are getting better with rates, [but] rates are not back to 2007 levels, so I don’t see where the pay raises are going to come from.”

As carriers big and small struggle to balance the business metrics to keep their companies out of the red, they face the burden of new regulations. Just this year, the Federal Motor Carrier Safety Administration published a proposed rule to require all commercial trucks to be equipped with electronic logging devices, known as ELDs or e-logs. E-logs record the number of hours that a driver operates to ensure he or she is in compliance with the hours of service regulations.

Similar to tablets, e-logs are small computers that are mounted in the truck and offer an interface for inputting and displaying data about driving hours, on-duty non-driving time and off-duty hours. Carriers will have two years to equip their fleets with e-logs once the final rule is published but at a significant cost. Small to mid-sized carriers, those with more than a few trucks but thin margins are likely to be hurt the worst.

The HOS rules, which the e-logs are meant to enforce, are already impacting both drivers and carriers. The newest requirements force drivers to take a 34-hour break each week, and that break must include two 1-5 a.m. periods. The lack of flexibility often means that drivers have to take a break that is actually longer than 34 hours, which prevents them from getting the miles they need to earn a living. It also prevents carriers from delivering freight as efficiently as possible to their customers. An overall loss in productivity hurts the entire supply chain.

Now, FMCSA wants to increase the minimum insurance requirement for all commercial carriers. The current requirement is $750,000. Regulators have not indicated what they want to new minimum to be, but amounts have been floated from $1 million all the way up to $4 million. If the initiative proves successful, carriers will have to shell out for even higher premiums, when their current policies are already costing them more.

The AP article I mentioned above cites a 4.4 percent wage increase for transportation and warehouse workers over the past three months. Ignoring the fact that the figure includes warehouse personnel, who work within a completely different, if related, environment, the number is still deceptive. AP makes no effort to determine which specific jobs are seeing raises or which sectors are benefitting the most. Regional haul and drayage are not the same animals as over-the-road trucking. Owner-operators with a couple of trucks and two or three drivers do not reflect the same factors as mega-carriers and third-party logistics providers. Are pay decreases in certain sectors bringing down a larger increase in others?

“You might not believe this, but [it’s] true,” says one driver in our LinkedIn discussion. “Thirty years ago, I was making more than now.”

Some truck drivers may be seeing increased wages, but the trucking industry overall is hurting, and if the business community cannot address the problems and regulators continue to add to them, it won’t just be drivers who come out the losers. The cost of logistics rose 2.3 percent last year, according to the “State of Logistics Report” from the Council of Supply Chain Management Professionals. It won’t be long before consumers start seeing that increase on store shelves. And when the purchasing power of the dollar tightens, the market restricts, and we will once again find ourselves on the downward swing of the economic pendulum.

Dawn Strobel is a LinkedIn Influencer. Click here to follow her on LinkedIn.

Photo credits: OverdriveOnline.com, IStockPhoto.com & truckerslife.weebly.com