Driver shortage goes beyond basic economics

( Photo: Shuttertstock )

(Photo: Shuttertstock)

Stifel’s John Larkin expands on issues affecting carriers' pursuit of drivers

Last week, FreightWaves published a commentary on how the often-cited driver shortage is not a lack of drivers, but more accurately reflected as an economics issue.

“The reality is, there is no driver shortage. It’s [an] economic shortage. That's right- it’s Economics 101. Basic supply and demand. Where there is a scarcity of a good or service, prices will rise. Where there is surplus, prices will go down. There is certainly scarcity in the driver population and it all comes down to economics. Raise the amount someone can earn and our driver issue will self-correct,” the article noted.

We received many comments on the article, some praising us for pointing out what many view as a reality that others refuse to acknowledge, and some suggesting we don’t know what we are talking about.

That’s the great thing about commentaries – they stir emotions and you don’t have to agree with them, but they play an important role in opening up discussion. One of the responses we got came from John Larkin, managing director of Transportation and Logistics for Stifel Equity Research. Larkin noted that he agreed with much of the article, however he struggled to understand how the shortage could be solved simply raising pay.

“If Economics 101 was in play, high paying [Heartland Express] would have a line of prospective drivers out its door and lower paying [Convenant Tranportation Group] would not have a single truck seated,” he wrote us. “In fact, the LTL and private fleets are now also struggling with the driver issue. Drayage drivers are scarce. Historically, OTR TL drivers simply moved into these more desirable sectors.  Something has changed in recent years.  My thought is that this is a much more complex issue than higher compensation can solve.”

Larkin, who studies the industry and whose views are as well-respected as any, went on to list some of the reasons he believes contribute to the problem.

Work-life balance. Larkin argues that younger workers have been influenced by their upbringing, which has involved more solo play with video games and tablets and more managed time. Also, the push for everyone to go to college has hurt the industry, and in general, “is not the key to a successful career and may do more harm than good.”

Blue collar jobs are for Uncle Joe. Kids today see themselves creating the next-great app, or building their own business, not working in a blue-collar job. “Blue collar jobs are for others,” Larkin said. He also noted that the underground cash economy is growing, allowing people to work cash – and tax-free – jobs such as lawn maintenance and snow plowing.

Autonomous trucks. The massive hype that has accompanied autonomous trucks is scaring away potential drivers. “Why go to the trouble of getting a CDL when my job will be automated in a few years?,” he wrote. “And the only thing more boring than driving might be sitting in a truck that drives itself.  What does one do, monitor the gauges, sleep, play x-box, handle the trucking company’s paperwork (soon to be automated, by the way, thanks to blockchain technology), or call prospective customers (who went or will soon go to automatic bids and load tendering)?”

Minimum driving age. Those teens that don’t attend college are banned by law from interstate driving until they turn 21. “And most insurance companies prefer a minimum age of something more like 23, 24, or 25,” Larkin said. “While the ATA is endeavoring to get an apprenticeship program approved in Washington, to alleviate this issue, I, for one, believe the insurance industry will nix this idea.” Larkin notes the likely views of the insurance industry on teens driving trucks. “Many of us were teenagers once ourselves,” he said. “Still others have watched their children move through this awkward stage in life where decisions are entered into lightly and consequences are seldom considered. Do we really want 18-year-olds piloting an 80,000-pound rubber tired missile down the highway?”

Lack of a career path. Larkin argued that the lack of a career path for advancement hurts recruiting efforts. “What am I supposed to do, master my profession by the time I turn 19, and then continue on in the same manner for another 40 or 50 years?” he said. “Most Americans aren’t focused enough to even contemplate this type if potentially mind-numbing career. Of course, a company driver could move on to become an owner-operator, a fleet operator, and the owner of a small trucking company. But that is harder to accomplish than it used to be given today’s hyper-efficient big fleets and the never-ending stream of tax and regulatory hurdles erected by multiple layers of management.”

Larkin concluded that basic economics and pay scale are a factor, but it is not the only factor.

“Econ 101 is a factor here, but when one carrier moves to increase driver pay or to enhance bonuses and incentives, others typically match as a defense mechanism to help keep their drivers from jumping to the carrier that just increased compensation,” he said. “Until the industry can figure out how to bring new, competent folks into the mix here, our beloved industry will be haunted by the challenges associated with driver recruiting, training, and retention, I am afraid. Unless, of course, fully autonomous operations are closer than we think.  But, my view is that just about all other supply chain functions will be automated first.”

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