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Is there a driver shortage? Depends how you define shortage

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Conventional wisdom is that there is a driver shortage. That came in for some questioning Tuesday on the final day of the Truckload Carriers Association’s annual meeting near Orlando, where the term “driver shortage” was heard in just about every presentation and in conversation after conversation.

“Maybe it’s semantics, but I’m a bit of a detractor on this,” Steve Hitchcock, the chief operating officer of Duncan & Sons said at a general session. “How do you define driver shortage?”

“If you define it as, here’s an open truck and I could use a driver for it, then yes, there’s a driver shortage,” he said. But a driver shortage is an issue of “rate….whether it’s a shipping rate or a pay rate.  Shortages are market conditions and they can change.”

There is a driver shortage, Brent Nussbaum, the CEO of Nussbaum Transportation Services, said in response. But his view was not so much a repudiation of what Hitchcock said but a qualification. And it wasn’t pleasant.

“I believe we created the driver shortage in the way we paid them and treated drivers as a commodity,” Nussbaum said. “Everyone in the industry, starting with myself, are responsible for what we created as far as the shortage itself. And it is our responsibility to fix it.”

Hitchcock and the third member of the panel, Karen Smerchek, the president of Veriha Trucking, both outlined some of the steps they have taken over the past several years to retain drivers, without detailing the actual pay numbers in their plans.

A minimum guarantee of pay

There has been a lot of talk at the meeting about solutions to the driver squeeze–possibly a more acceptable term to some than shortage–and the structure of pay has been at the heart of the discussions. Not just the outright level of per mile pay, but other aspects of compensation as well.

Nussbaum said his company has had a minimum wage guarantee for 10 years. It isn’t the target of any drivers, who want to earn more than that, “but it does help them to know at the end of the week that if they had a short week, if they were affected by weather, they are going to make at least X,” with X not being defined.

The company has taken other steps. Instead of paying for mileage based on zip code to zip code, payment now is based on a door to door routing. Parking fees are being assumed by the company, Nussbaum said, a particularly welcome benefit in a market where getting to a parking spot and staying within the hours of service rule is becoming more crucial as strict ELD enforcement begins April 1. “If we can take the anxiety out of their day, and tell them if you turn in a parking receipt we are going to pay that, the drivers really respond to that,” Nussbaum said.

Additionally, paid detention is after one hour, a change from the prior policy of two hours.

Smerchek said her company has been doing guaranteed pay for five years. It was problematic in the beginning, because there were instances of it lowering performance levels. “We made some adjustments to it, because we had lost some productivity,” she said. Now, Smerchek said, there are minimums but “we want to be sure that their pay is based on how they are performing.”

Another significant topic of the discussion was the company role in training.

The training program that Nussbaum described was not a program from the ground up; he said the students in it already had come out of driving school, looking to earn their CDL license. The training program starts after that, structured with a partnership with a local driving school and a local community college. A “train the trainer” program leads to internal Nussbaum drivers to become the trainers in the program. Nussbaum said he expects about 20 percent of their new drivers will emerge from the program.

The need for it is clear. Panel moderator Jim Ward, the president and CEO of D.M. Bowman, said he has been receiving reports that enrollment in many CDL schools is down by a third.

Hitchcock gave a familiar lament, one heard in many fields today: “It’s really hard to get good people.” Ward noted that the employee squeeze is not just happening to drivers, but also “inside the walls” of the company.

Hitchcock’s review of the situation facing a lot of companies–though earlier talking about price as the barometer of a shortage–was more structural and sociological. There is a large group of people who were “bled down by the world after 2008. You have this whole group of people who never got developed.” They were unemployed or underemployed, and were in dead-end jobs that enabled little upward movement. Things are better now, “but the applicants are getting kind of unemployable.”

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.