Overdrive Magazine | Trucking Business News & Owner Operator Info
Issue link: http://read.dmtmag.com/i/634029
30 | Overdrive | February 2016 PAY AND THE DRIVER SHORTAGE Even so, would higher pay bring in enough qualified drivers to keep carriers happy? That's a moot issue as long as freight rates won't support it, says Gordon Klemp, principal of the National Transportation Institute, longtime pub- lisher of the National Survey of Driver Wages. Klemp routinely hears from many of the largest fleets about their recruitment challenges and has mea- sured their pay packages for decades. Driver demand and rising freight rates contributed to a round of strong pay raises in 2014-15, but demand has now softened. "Rates are not supportive of additional increases," he says. Many in the driving community, like Clark, see the hiring problem in simpler terms. Given that carriers are recruiting constantly, for-hire truckload driver pay becomes a function of "what you can be replaced for," and not what the work is or should be worth, says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association. "Carriers can make money off a truck even if its driver doesn't make enough to survive," Spencer adds. And if there were truly a shortage of drivers, freight rates would certainly reflect that and move up substantially, say many Overdrive readers. Contract linehaul rates have been fairly flat overall this past year, but spot market rates have been on a downswing. "Rates are down so low because of demand that it feels like there are too many truck drivers," says owner-operator LeAnn McKee. Adjusted up to 2014 dollars and despite recent gains, most average annual driver compensation and owner- operator income levels in recent years have been well below highs experienced for company drivers and independent contractors more than a decade ago. Inflation-adjusted company driver pay rose sharply between 2003 and 2004, hovering at just above $59,000 annually in 2005 before dropping before and during the 2008-09 recession. Owner-operator income was steadily about $61,000 between 2003-06 before also dropping. Those earlier periods were times of relatively high demand during which income levels rose in tandem with the inflation rate, showing little year-to-year variation when adjusted. Factors affecting the fall in income following those years include a marked reduction in annual miles per truck dur- ing the recession, ATA says, softening the effect of any pay rate increases. For owner-operator clients of ATBS, annual miles dropped from almost 140,000 in 2003 to 108,000 in 2014. Warnings of current and future driver shortages, after abating slightly during the last recession, returned quickly fol- lowing it. But inflation-adjusted income continued flat for a few more years before finally rising in 2014 and, based on estimates, in 2015. The most high-profile recent quanti- fication of a driver shortage was ATA's 2015 "Truck Driver Shortage Report." Its projection: "If the current trend holds, the shortage may balloon to almost 175,000 [drivers] by 2024." ATA's 2012 estimate had predicted a bigger gap, 130 125 120 115 110 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The ability to command better rates is a primary component of fleets' ability to raise driver pay. Truckload linehaul rates, adjusted for inflation, show patterns similar to those in driver pay and owner- operator income over the period most associated with a driver shortage. Rates, by this estimation having returned to their pre-recession highs, bode well for driver pay. These numbers are derived from Cass Information Systems' Truckload Linehaul Index, which tracks fluctuations in rates and separates out fuel's volatile effect. Index averages over these years are adjusted for inflation by 2015 dollars. Year 2015 excludes December data, unavailable at press time. Rates to cover the pay 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: American Trucking Associations ATA's 2012 analysis predicted the driver shortage "could balloon to as much as 239,000 by 2022," but the 2015 analysis (pictured here) dialed back that estimate considerably. Dire forecasts of shortage