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.
Mr.Fixit
There’s not a shortage it’s turnover companies will tell you anything to get you to pickup a load they do not care about you. You are not treated as even being human just a body you get home whenever and will try to get you back out as soon as you get there one day off for every six days living in a truck they get two days off for five and are home every night
Lloyd massa
They is a drivers pay shortage, I’m making the same money now I was making 20 year ago.
Filippos
I would like to work with you