This article was originally published in the first issue of the Supply Chain Playbook.
Dan Chidester didn’t like his union job at the bread factory. It was 1981 and he wanted something with more adventure, more flexibility. So he bought a truck.
This was a poorly timed choice. When Chidester was growing up in the 1950s and 1960s, trucking was one of the best-paid jobs a guy without a college degree could get. But by the time he started trucking, the entire industry was changing in response to a law called the Motor Carrier Act of 1980. This law deregulated trucking, wresting control of freight rates from the federal government and allowing the free market to decide how much it would cost to move shoes, concrete, furniture and everything else around the United States via truck.
Truck driving used to be one of America’s most heavily unionized workforces. It was the type of solid blue-collar job that seems elusive nowadays: Employees could expect to work 40 to 50 hours a week, send their kids to college and retire in their 60s on a generous pension. But it was also challenging to open one’s own trucking company. Union control made it hard to break in, with labor closely guarding worker wages — paid for with higher-priced goods. Trucking deregulation was a two-sided coin. Now, anyone with a loan from the bank and a CDL can open a trucking company. Hundreds of thousands of fleets would open in the 1980s, driving down trucking rates. Fleets began to compete on price, rather than service. And as rates started to drop, so did wages.
Trucking salaries have decreased by as much as 50% since deregulation, according to economist Michael Belzer. Unionization rates are far lower, too, falling from about 50% of all truckers to under 20%. And by doing away with regular routes and hours, employers can take far more advantage of drivers.
Cheap, flexible trucking capacity made it possible for brands like Walmart, Target and Amazon to proliferate. Big-box retailers could negotiate freight rates and transport goods over long distances at a low cost. Or they could employ their own drivers at salaries that were far lower than they were in previous decades. In 1982, trucking was a $170 billion industry (in 2023 dollars). Today, it’s an $800 billion industry. Manufacturers and retailers shifted from rail to truck for their freight needs, speeding up transit times and narrowing their suppliers’ delivery windows.
Big businesses weren’t the only ones that benefited. In signing this bill into law, President Jimmy Carter estimated that deregulation would save consumers as much as $28.4 billion (in 2023 dollars) each year. Thomas Gale Moore, an economist who later served in the Reagan administration, estimated in 1978 that, thanks to trucking regulation, shippers and consumers paid an extra $3.3 billion (nearly $16 billion in 2023 figures) each year to trucking companies and their employees.
It sparks a conversation on whether decent salaries and working conditions for some justify higher prices for all. But, for Chidester, the conclusion is clear.
When he started out in trucking, his best gig was hauling paint for $5,100 (in 2023 dollars) from his native west Michigan to Dallas. By the mid-1980s, when the free market began to take over trucking, the rate had been cut in half. He still had to pay the same amount on his truck lease, maintenance and fuel. “I went in it at the totally wrong time, and it damn near took me down,” Chidester said.
Chidester believes the system that replaced deregulated trucking isn’t fair. In his early trucking days, he moved freight by trip-lease contracts. They had one key feature that owner-operators don’t usually know when they haul freight in 2023. It said on the contract how much the retailer or manufacturer was paying the carrier for the freight movement. As the driver, Chidester recalled, he would usually claim 80% of that. That data is all mysterious to him now as an owner-operator.
Chidester, who is still working in his early 70s, isn’t exactly a pro-union guy. Still, he’s convinced that deregulation wasn’t good for independent truck drivers, even though his forebears argued for it. “Deregulation crushed the independent trucker,” he said. “Being independent, I can’t make any money.”
The opposite of a ‘free market’
To understand why trucking was regulated in the first place, it’s necessary to go back to the Great Depression. Trucking was growing rapidly, in part thanks to disaffected farmers who were hauling freight to make ends meet. In both urban and rural areas, more people — mostly white men — were finding employment in the trucking industry. That flood of laborers helped crash freight rates, which wasn’t welcome to the nascent member companies of the American Trucking Associations or railroads. Railroad barons were especially suspicious of how these “fly-by-night” truckers could steal market share.
In response, the federal government passed the Motor Carrier Act of 1935. Outside of agricultural goods, the federal government would set all freight rates and hold the rights for all routes. That meant that entry into the trucking industry was effectively impossible, and the price could not be shifted or negotiated. If a trucking firm wanted to change rates, it would have to post that rate publicly and wait for its competitors to approve. (And they usually did not.)
This was the opposite of a “free market.” It allowed just 17,000 trucking companies to rule the highways. (Now, the Department of Transportation counts 1.1 million for-hire carriers.) Having few new entrants and set prices meant that trucking was stable, lucrative and at little risk of bankruptcy. The eight largest trucking companies of this era earned a rate of return on equity twice that of the typical Fortune 500 company, according to “Braking the Special Interests: Trucking Deregulation and the Politics of Policy Reform” by Dorothy Robyn. And, if for some reason a trucking company wanted to shutter, it could profit from that too. A single trucking route cost could sell for upwards of $1 million by the late 1970s, according to Robyn’s book.
If you wanted to haul scrap metal from Pittsburgh to Asheville, North Carolina, you’d have to find employment at a trucking company that did just that. Such jobs were difficult to land. Wannabe truckers had to hone their skills as school bus drivers or local truckers before hoping to apply at a trucking company, especially a unionized one. You’d also probably want a family connection. Ethnic minorities and women were less likely to crack into the trucking cabal, though the Teamsters union was less resistant to Black members than other unions. But once you were in, you had a salary that would be six figures in 2023 dollars, a pension that would last you through retirement and health benefits galore. Teamsters reported in the mid-1970s it had more than 2 million unionized truck drivers, many of whom were long-haul drivers.
Widespread trucking unionization helped those drivers outside of the Teamsters’ reach, which would have included drivers like Chidester. Shane Hamilton, senior lecturer at the University of York and author of the book “Trucking Country: The Road to America’s Wal-Mart Economy,” highlighted in an interview that all truck drivers enjoyed fringe benefits from organized labor.
The National Freight Master Agreement of 1964, brokered by former Teamsters head Jimmy Hoffa, was particularly monumental for truck drivers, Hamilton said. This set standardized wages and benefits across the U.S. for truck drivers; the agreement was particularly key for drivers in the Southeast, where wages tended to be lower.
“Even truck drivers who weren’t members of the union benefited from the relatively high wages and decent conditions expected in the industry,” Hamilton said. “All of them generally benefited from the relatively strong position that was spearheaded by the Teamsters.”
A highly unionized trucking workforce also backed other professional unions and strikes. If, say, a university’s janitors were striking as part of the Service Employees International Union, that meant Teamsters truck drivers wouldn’t service the campus. The absence of trucking — no food, no garbage pickups, for starters — would cripple day-to-day operations and force negotiations quickly. That same rule helped successful strikes at coal mines, power plants, food manufacturers and so on.
One study from the Economic Policy Institute, a left-leaning think tank, found that wages for nonunion, private-sector male workers would be 5% higher in 2013 if unionization had remained at its 1979 level.
A turn against Teamsters
Not everyone was happy with the Teamsters’ hold on the trucking industry, however. Chief among its detractors was Mike Parkhurst, the founder of Overdrive Magazine. As he told Time magazine in 1975, Parkhurst aimed “to wake the truckers up to the fact that they’re slaves to a monopoly.”
Independent truck drivers like Parkhurst believed the existing scheme was designed to keep them out — which was, in fact, true. A highly regulated trucking industry kept rates and profits high for companies, and it helped them deliver impressive salaries and benefits to employees.
Soon, Parkhurst would lead protests in Washington to push for deregulation, along with lower taxes for truckers, cheaper fuel and a host of other causes.
Politicians, for their part, weren’t particularly happy with the regulatory scheme either. Presidents Truman, Nixon and Ford all attempted to deregulate trucking, only to face strong Teamsters resistance. The American people also didn’t really care about disrupting the trucking industry. Things were moving from Point A to Point B, bankruptcies were uncommon and stores were healthily stocked. What’s more, through much of the mid-20th century, they were pro-union; many were union members themselves.
However, that changed with Carter and the economic disaster he faced in the 1970s. The soaring price of everything — especially energy — met unusually high unemployment to put the U.S. in one of the most disruptive economic periods in its history. The Carter administration was tasked with cooling this inflation off. Addressing artificially-high freight rates seemed like one obvious solution.
American support of unions had also declined by the 1970s thanks to rampant corruption through much of organized labor, particularly in the Teamsters, which was the largest and most famous union. Hoffa, once championed as a working-class hero, had mysteriously vanished amid his reported connections to the mafia. The general resistance from organized labor to allow more minorities and women into its ranks was also distasteful to some Americans.
How much of the trucking industry was supported by corrupt activity is hard to pinpoint. But the data proves that trucking firms were able to offer such high wages and placate the Teamsters organization thanks to federal regulation of the trucking industry. “The trucking cartel shared its rents with unionized labor,” wrote Jerry Elig, then a research professor at The George Washington University Regulatory Studies Center, in 2020. “During the 1970s, employees of regulated intercity trucking firms received compensation between about 40 percent to 55 percent greater than employees or owner-operators at comparable unregulated trucking firms.”
Regulators at the time knew that deregulation would hurt truck drivers. But the importance of bringing down the cost of household goods overruled inflating certain salaries. So, the Carter administration shrugged off dogged lobbying from the Teamsters and the American Trucking Associations and passed deregulation — a move applauded by Republicans and his fellow Democrats.
Carter said upon signing the bill, “The Motor Carrier Act of 1980 will bring the trucking industry into the free enterprise system, where it belongs.”
Long hours and low profits in trucking – for workers and managers
As it turned out, the free enterprise system wasn’t particularly kind to the trucking industry — at least in those first few years. Hundreds of large trucking firms went bankrupt or consolidated. The ATA counted 338 trucking companies with annual revenues exceeding $1 million in 1974, according to a 1982 New York Times article. By 1982, only 208 remained.
Many of the firms that went bankrupt were unionized ones. The drivers who lost their jobs following deregulation were almost always rehired by nonunion firms. In the early 1980s, a third of Teamsters truck drivers were on “long-term layoff.” This gutted a key part of the Teamsters’ membership base and its funding.
Further, when truck drivers no longer had to respect picket lines, it meant strikes of all types became less powerful. In 1980, the last year of regulated trucking, nearly 800,000 workers participated in strikes. That number had fallen to 80,700 by 2021.
“Deregulation in the 1980s is clearly one massive blow to organized labor and the Teamsters,” Hamilton said.
To paint deregulation entirely as an attack on the working man, though, would be inaccurate. Indeed, rural truck drivers like Parkhurst were left out of unionized, regulated trucking and advocated for this change. They surmised that the system was rigged against smaller players like them — and they were right. And politicians did believe that the deregulation of trucking would be good for the average Joe, who could suddenly spend far less on everyday necessities.
The average Joe also started buying more stuff than ever, and it was more likely to be manufactured overseas. In 1980, the U.S. imported some $320 billion worth of goods (in 2012 dollars). By 2000, that inflation-adjusted number grew to $1.6 trillion. Growth in imports far outpaced the overall growth in the economy from 1980 to 2000. Robust supply chains made it possible to quickly move products from East Asia to ports in Southern California to population centers in the Northeast; previously, factories would need to be actually close to where an end product was consumed.
Now, truck drivers can dart all over the country for not much pay. It’s not unusual for a truck driver based in West Virginia to have to drive all the way to Los Angeles to pick up a load of T-shirts made in Shenzhen, China, drop the shirts off at a warehouse hub in Las Vegas, then criss-cross his way back east to get home. It’s wildly inefficient, but labor costs are not the expense they once were.
The idea of slashing wages in order to make things cheaper may strike Americans in 2023 as misguided. Nelson Lichtenstein, a distinguished professor of history at the University of California, Santa Barbara, said this was the leading mindset through the late 20th century, when much of the New Deal’s legislation was dismantled. “When you do have regulation, this stifles innovation and ultimately creates monopolies — and we don’t want to do that,” Lichtenstein summarized.
Trucking today very much shows the opposite characteristics of a monopolized system. It’s been characterized by what University of Pennsylvania sociologist Steve Viscelli calls “destructive competition.” There are more than 1 million trucking firms. These companies, many of which employ fewer than six drivers, have to vie with a seemingly endless number of competitors to land a freight contract. That keeps the price of freight as low as possible. Shippers, who buy freight services, can move whatever they want, whenever they want, wherever they want — at a highly competitive rate. That’s the complete opposite of trucking prior to 1980, when routes and their prices were cemented.
For the typical truck driver, the industry is no longer that stable, blue-collar job. For 70 hours a week of work, truck drivers earn a median wage of $48,000 annually. They spend weeks away from their families. Health concerns abound, too. Nearly seven in 10 truck drivers are classified as obese, compared to one-third of American adults. Truck drivers are twice as likely as the typical American to have diabetes and 2.6 times more likely to smoke cigarettes. They’re also more than twice as likely to lack health insurance than the average American worker.
Truck driver Michael Dow makes less money today than he did in the early 1990s. “You’ve sacrificed your whole life for this country to keep the wheels of the country going and you get spit in the face every day,” Dow said. “It’s terrible.”
The situation was even bleaker at the sprawling Long Beach-Los Angeles port complex, which handles nearly 40% of all imported goods to the U.S. As revealed in interviews in a USA Today investigation from 2017, port truck drivers have been physically barred from returning home at the end of a workday, experienced workdays up to 20 hours long, or lost their jobs and trucks after taking a week of sick or bereavement leave.
It’s not only truck drivers who have suffered from this chaotic structure. The turnover rate at large truckload carriers averaged 94% from 1995 to 2017, according to data from the ATA. Large carriers regularly list driver retention and a driver shortage as their No. 1 concern. Increased pay would likely boost retention. Regular routes, as more truck drivers enjoyed prior to deregulation, would increase the amount of time drivers spend at home, which would also improve driver retention. It would eliminate the need for, say, increased truck driver parking as well.
Deregulation wasn’t just bad for truck drivers, but trucking companies, too. From 1980 to 1996, truckload companies managed to reduce their operating costs by an astounding 75% — but profit margins had shrunk. “Low wages and long hours may actually be the mortar that holds together the foundations of distribution and trade, and those conditions characterize both labor and management in trucking,” wrote Belzer in 2000.
Trucking deregulation hardly happened in a vacuum. Democrats and Republicans alike were keen on taking the government out of industries like airline, rail, energy, banking and telecommunications through the Carter and Reagan administrations.
In the 1990s, President Bill Clinton sealed deregulation in transportation by approving the Federal Aviation Administration Authorization Act of 1994, which doubled down on lifting entry controls into trucking. He also terminated the Interstate Commerce Commission.
“These reforms have reduced the cost of transporting everything we buy and use,” Clinton said in his statement shuttering the commission, which had previously regulated cargo air, rail and trucking. “They have also enabled U.S. producers and retailers to employ ‘just in time’ manufacturing and inventory systems to save many billions of dollars in warehousing and distribution costs.”
Of course, regulation hasn’t completely gone away. What’s replaced price setting and formal restrictions on entry to an industry is a different set of regulations, particularly in the trucking industry. Environmental rules, the ELD mandate, and stringent drug-and-alcohol testing all limit who can be in the trucking industry — and these rules did not exist even at the height of the Interstate Commerce Commission.
“To call it deregulation is not right,” Hamilton said. “We should call it reregulation. That economic approach trying effectively to allow cartelization of trucking has been replaced by environmental regulations, safety regulations, intensive interventions with hours of service — all kinds of interventions in the work process that don’t necessarily help the drivers that much and often make it very difficult for trucking firms to schedule deliveries in a way that meets shippers’ expectations. There’s more regulation now in some ways than there was in 1979.”
It’s clear that deregulating transportation as a whole has been a boon for consumers — and the companies from which we love to consume.
Lichtenstein said deregulation was a way to transfer power not just from workers to consumers, but also from carriers to shippers. That shipper has the power, Lichtenstein said, to “squeeze labor all along the supply chain.”
“That creates kind of a sweatshop universe,” Lichtenstein said.
Contact the reporter at [email protected]. Subscribe to MODES for weekly transportation insights.
Future of Supply Chain
JUNE 21-22, 2023 • CLEVELAND, OH • IN-PERSON EVENT
The greatest minds in the transportation, logistics and supply chain industries will share insights, predict future trends and showcase emerging technology the FreightWaves way–with engaging discussions, rapid-fire demos, interactive sponsor kiosks and more.