Kristen Monaco, an associate commissioner at the Bureau of Labor Standards, the author of the widely-discussed report on driver shortages published earlier this year, brought her message to the attendees of the annual FTR conference: It’s all just cyclical.
“As an economist, I am careful about claiming something is a shortage,” she said while speaking to the conference Wednesday in Indianapolis. When there is a true shortage, Monaco said, “what this really involves is that the market is broken somehow” and the “quantity of labor demanded is constantly exceeding labor supply.”
Monaco said she does not see that in the truckload markets. When a market does not have a “perennial shortage,” it eventually will return to the “equilibrium.” Her conclusion on truck driver “shortages” is clear: “We do not see this market as broken in the aggregate.”
At the core of her findings is something Monaco repeated at her session. “If you want to attract drivers into the market, they will react to wage increases,” she said. The supply of labor is “upward sloping,” with supply rising with wages.
That does not mean there is not a turnover problem, Monaco added. But a “turnover problem and a shortage mean two different things economically.”
The turnover problem she described is actually normal for jobs that have the relatively same skills levels. It results in constant turnover of such a degree that even when unemployment in the U.S. was up near double-digits in the second quarter of 2010, turnover was 39%. That is well below current levels of up to near 90-100% for truckload carriers, but it was still not the sort of level that would be expected in the teeth of a recession.
The problem with just raising wages to attract drivers, Monaco said, is that they are “sticky” and can’t easily be reduced during times when freight markets soften. “So you start with recruiting intensely which causes churn and turnover,” she said. “Companies are using turnover as a way of filing trucks. Once one carrier starts recruiting, you’re going to get this turnover because others do it as well.”
Part of that recruiting will usually include bonuses. “In aggregate, you have enough drivers. But they are always switching companies,” she said. The issue is the “aggregate.” Wage increases are better for the industry “in the aggregate,” but it is “faster and easier to poach other drivers using a signing bonus.”
Several questions from the audience tried to draw Monaco into a discussion of the differences between her outlook and that of the American Trucking Association, which regularly posts dire warnings about the dearth of truck drivers and long-term shortages in their ranks. Monaco said that she and the ATA “basically agree that there are segments of the market that don’t work particularly well.” But as she dryly added, “We disagree on the size.”
One area of disagreement, according to Monaco, is the “perception” that long-haul truck driving was “ever an occupation for a young person.” Efforts to bring 18- to 20-year-olds into the market and regular expressions of concern that driving is not an attractive career path for young people are all part of the idea that young people at one point served as a good source of new drivers.
Monaco disagrees. She said she conducted surveys more than 20 years ago of drivers regarding their career paths and did another round of surveys just recently. “The demographics looks remarkably similar,” she noted. Yes, she said, truck drivers are skewing older – but so is the entire male workforce population.
Trucking companies are “constantly bringing in new drivers and they tend not to come into it as their first occupation,” Monaco said. This finding is no different than the results of her earlier surveys.
Monaco conceded that her years of research do have a hole in it: the financial performance of independent owner-operators. “It’s really hard to figure out where these drivers are and what their economics are,” she said. “It’s a gap industry-wide.”
The challenges of qualifying to be a driver have also gotten more difficult, Monaco said. The duties are more like those one would expect for a job that requires a vocational school background, whereas about half the driver openings are for those with anywhere from one to four years’ experience. Many are looking for clean driving records as well. “Put that together and it makes it much harder to pull people in,” Monaco said, adding that as a result, about half of companies are “just looking for a CDL.”