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Demographics, government scrutiny hamper fleets to keep trucks seated

By John D. Schulz, Contributing Editor
June 22, 2011

Truck driver shortages, a persistent dilemma for shippers seeking adequate capacity, are back.
 
Current driver demand and supply are out of whack and shortages of qualified, safe, experienced drivers could worse as the economy improves because of demographics, increased government regulation and other factors, a top expert in driver compensation says.
 
Gordon Klemp, founder and president of the National Transportation Institute (NTI), Kansas City, Mo., studies truck driver availability, compensation, turnover and fleets’ ability to attract suitable drivers. He says driver supply has diminished during the past several years and shippers should be prepared to pay higher freight rates to reflect fleets’ higher compensation levels to retain adequate driver supply.
 
“I see it as inevitable,” Klemp told LM. “This is a market that is short of drivers right now. Drivers don’t seem to be available in any (region) in good numbers. We have lost a significant amount of drivers to retirement. We had an old driver work force in 2000. Roughly a-third of that driver fleet has reached retirement age.”
 
Klemp isn’t the only one forecasting this. Economist Noel Perry, a much-respected analyst and managing director and senior consultant for FTR Associates, is predicting shortages of as many as 400,000 drivers by 2012 if current trends hold.
 
Here are the factors behind the shortages:
-Roughly 25 percent of the driver workforce has been eliminated from the industry during the past 10 years as a result of demographic and health issues;
-the industry has been unable to successfully market itself to minorities and women as a long-term career;
-the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) program will likely reduce the size of the existing driver pool by about 2 percent, or 60,000 of the approximately 3 million long-haul drivers;
-any hours-of-service reduction later this year could cut productivity by another 15 percent, causing fleets to scramble for more qualified drivers; and
-more sophisticated drug testing procedures (using hair follicle testing instead of urinalysis) could eliminate another 10 to 15 percent (300,000 to 450,000 drivers) from the driver pool;
 
Whatever the causes, fleets already are taking steps to keep their trucks “seated” with CSA compliant, drug free drivers. Carrier executives report the driver shortage currently seems worse in the Northeast and Midwest. But driver pay, which peaked during the boom period that ended in 2006 and fell slightly during the 2008-09 recession, is rising again, according to Klemp.
         
The increased compensation comes in various forms. They include signing and retention
bonuses, increases tied to higher freight rates and annual pay raises. Klemp’s analysis shows company pay for new hire drivers with three years of experience is now averaging 35.5 cents a mile, just off its peak of 36 cents in 2006 but well up from the 31.2 cents a mile average in 2005. Flatbed drivers average 36 cents a mile now, up from 32.6 in 2005. Reefer drivers are at 34.5 now, up from 30 cents a mile in 2005.
         
Still, that only translates into starting pay of about $36,000 annually for a person driving 100,000 miles a year, about average. “It’s not a high-paying job,” Klemp says. “That is good and bad. It has held costs down. But we’ve reached a point where the driver pool is dwindling quickly.
     
The “most logical way” to combat this is to “change the lifestyle and change the pay” of the drivers,” Klemp said.
     
Fleets already have started doing the former but reducing the amount of time away from home, increasing the number of short-haul and dedicated routes and other amenities.

“Fleets have made significant strides in improving lifestyle improvements, providing home time options that as near as five years ago were unheard,” Klemp said. “Drivers are home every other week. It’s more dedicated and less irregular.”
     
Since the recession, driver turnover has improved from more than 100 percent in some truckload fleets to about 53 percent now, according to Klemp’s figures. “Historically, turnover is not good. If you compare turnover to any other industry, you’d say it’s horrible. But 53 percent is actually a lot better than it was. Still, it’s terribly expensive to recruit a driver, somewhere north of $5,000 to recruit and train a driver.”
       
Private fleets, which have much better retention rates and average 15 percent annual turnover, report their median driver pay was year was $67,411. Private fleets often lure experienced drivers from the for-hire sector, putting additional pressure on driver pay in that sector.
       
Klemp is forecasting for-hire driver pay increases averaging between 3 and 5 cents a mile in the next 12 months, with owner-operators getting between 4 and 6 cents increases.

Additionally, there will be more instances of signing bonuses, use of raises tied to productivity, team drivers will get even greater boosts and perhaps higher pay in certain regions of the country particularly afflicted by shortages.

    Klemp says right now in most regions the supply of adequate drivers is “marginal at best,” and is forecasting ongoing shortages of drivers that will only worsen as the economy improves. Trucking often competes with the construction industry for drivers. As the U.S. housing industry recovers, that will only put greater pressure on the ability of trucking to keep its trucks seated.

Then, there’s the lifestyle. “All you have to do is go to a truck stop and look around and see drivers are not physically fit,” Klemp says. “If you have a 10- or 11-hour workday behind the wheel, your exercise level is low. Established eating patterns lead drivers to less healthy choices. Overall it’s not a fit population. That’s going to eliminate some people from driving.”
     
Because of demographics—the largest group of drivers are aged 35 to 54 – these trends will only worse. The only sector of the industry immune from shortages is the unionized LTL sector. The average age of a Teamster in the freight industry is 61. But unionized drivers account for barely 100,000 jobs in freight, barely 3 percent of all the drivers on the road.
     
“We went into the recession with a driver shortage and capacity restraints, and we’re going to come out with an exacerbated driver shortage and a more severe capacity crunch,” predicts Rosalyn Wilson, author of the State of Logistics report.
     
Her advice for shippers? “This would be a good time to be building or mending relationship with your trucking firms,” Wilson says. “It is going to be all about relationships and carriers having the luxury of choosing whom they do business with.”

About the Author

image
John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.


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