The industry driver shortage narrative is helping to destroy the truckload market’s economics by attracting more drivers and fleets to our industry. It plays well in truck driving schools and recruiting ads, but it creates more danger than good. By attracting more drivers and fleets into our industry, we are creating more capacity at a time when the market needs less of it.
Trucking companies can have unseated trucks (i.e. not enough drivers to drive the trucks that the carrier owns), which is a driver shortage. But that is the carrier’s problem, not the market’s. There are plenty of carriers that have unseated trucks and it can bankrupt them if it becomes perpetual.
A market can have a capacity shortage, in which the market doesn’t have enough trucks available for dispatch at a moment in time. That is a market problem.
Capacity shortages are good for carriers and drivers alike. Rates go up when there is a shortage of capacity. Carriers, in turn, gain more volume, which encourages them to add trucks. Once the available pool of drivers is dried up for the new trucks, carriers increase wages and incentives to attract drivers to drive for their fleet.
A capacity shortage is what happened in 2018. Driver wages and incentives shot up, as carriers fought aggressively for new drivers. As wages increased, new drivers joined the industry and a number of new fleets also began operations. They were told the shortage is perpetual and they should join the industry. Some new entrants decided to bypass joining a fleet altogether and joined the industry as an owner-operator. The thinking was that if there is a perpetual driver shortage, then carriers will always have pricing power.
Fast forward a year later and the situation is quite different. There is a glut of capacity on the road. Carriers have lost their pricing power. The market is oversupplied. The primary reason – there are too many drivers sitting in trucks available for dispatch. Further, the fact that there are many carriers supportive of efforts to reduce standards for new drivers is counter-intuitive from a supply/demand perspective. It may not be popular to say, but stronger regulations and standards can ultimately result in increased margins and driver pay for incumbent carriers.
The only way to correct the capacity situation is either more freight volume or fewer drivers. Volumes are a function of economic demand, which is largely out of the industry’s control. The only thing the industry can control is the amount of capacity it adds or subtracts, and since drivers are truly the capacity constraint, the industry needs fewer drivers right now.
Certainly, the recent bankruptcies may lower the number of fleets, but it doesn’t mean that drivers end up leaving the industry. They very well may start their own trucking company with a truck bought at their former employer’s bankruptcy auction, or they may go join another fleet that is still in operation.
Total count of tractors from fleets authorized for hire (SONAR:TCFH.USA)
Registered FreightWaves SONAR users can play with this interactive chart by clicking here.
According to the new for-hire tractor count ticker inside of FreightWaves SONAR (TCFH.USA), the for-hire trucking industry has added 26,500 more trucks available for dispatch since November 2018. This works out to a growth of 1.8 percent.
The industry would be better served with fewer drivers. And who could make this happen?
The Federal government.
Safety regulations like hair testing and the drug and alcohol clearinghouse might clean out a large percent of the driver population, which would create a massive capacity shortage. According to the Trucking Alliance, as many as 300,000 of all truck drivers on the road would currently fail a hair test.
Truck drivers that would fail these tests are hired by fleets that don’t have stringent background and underwriting requirements. In an effort to prevent a driver shortage in their fleet, the owners put these drivers behind the wheel, without regard to anyone’s safety, reputation, or risk of criminal negligence if the owner had knowledge that an addict was behind the wheel.
With opioid addiction on the rise around the country, the opportunity to purge it from our industry – while gaining pricing power – is something anyone who operates cleanly should support.
For fleets that have a history of hiring drivers with a drug addiction or alcohol incidents while on duty, a driver shortage would be the least of their concerns.
For everyone else, when carriers, drivers, safety advocates and the general public are aligned, there shouldn’t be a shortage of support.
LaToya Thomas
I concur 100%! This article is straight to the point, easy to understand, easy to digest and leaves no room for second guessing about what is really going on within the trucking industry. Finally, someone writes the real truth! Well said!
Anonymous
It’s great to see an organization focused on reporting unbiased information. For too many years the American Trucking Association has been spreading this as gospel because their members can’t hire drivers. Maybe just maybe good drivers don’t want to work for their member companies. Maybe they will always have a shortage of drivers wanting to run their routes, haul their freight, or accept their pay.
It’s a shortage of drivers that want to work for you. Not a shortage of drivers.
Shawn
Why not a urine test instead? A hair test would not be an appropriate policy for our Sikh truckers.
Riteload.com
WOW, Finally someone makes the “correct” point. KUDOS to you Craig for this article. It’s about time those in the industry received the real perspective on this absolute false narrative of a driver shortage. It’s not a driver shortage…..IT’S A MONEY SHORTAGE!
Brian Kegerreis
There are a lot of new drivers who aren’t fluent in English and went to unethical schools. Most of them are dangerous and should have thier CDL’s revoked.
art
Amen.
Way too many idiot drivers both CDL and non out there these days.
Increase the fuel tax as well… reduce senseless driving and fix the roads.
Jason Miller
Great article Craig! You are 100% correct; there is no way an industry can add as much capacity as it did in 2018 and have a chronic worker shortage. Growth in employment in trucking, broadly defined by the Bureau of Labor Statistics [BLS] as employment in 3-digit NAICS code 484, far out-paced job growth in private industry. The BLS reports that seasonally adjusted employment in NAICS 484 increased from 1.4720 million total workers in January, 2018 to 1.5116 million workers in December, 2018 (39,600 workers), or ~2.69 percent. Seasonally adjusted private industry employment increased by ~1.91 percent in that same period. There is also some recent research by Burks and Monaco at BLS which suggest that the market for truck drivers behaves like a standard labor market.
Jim
Spot on!
Noble1
Now THIS is a great article and SPOT ON !
Hear, HEAR !
In my humble opinion ………………
LaToya Thomas
I concur 100%! This article is straight to the point, easy to understand, easy to digest and leaves no room for second guessing about what is really going on within the trucking industry. Finally, someone writes the real truth! Well said!