Fillin' shoes

| December 01, 2006

Industry struggles with ongoing driver shortage.

Trucking companies are constantly looking to hire new drivers, a lot of drivers.

But does this need mean there is a driver shortage?

Whether there is a driver shortage or not depends on how you define shortage. But whatever it’s called, the constant demand for drivers is the biggest problem facing the American trucking industry.

The American Trucking Associations calls it the worst labor shortage in the history of the industry. Last year ATA published a report it commissioned from Global Insight, which predicted that the current driver shortage of 20,000 could mushroom to 111,000 by 2014.

The study predicted that if current trends continue, the supply of new truck drivers will grow at an annual rate of 1.6 percent over the next 10 years, but it also predicted economic growth will demand an increase of 2.2 percent (or 320,000) in new drivers. The demand doesn’t stop there, said the study, because another 219,000 drivers must be found to replace those 55 and older who retire. By this reckoning the need is really 539,000 – or 54,000 a year for the next 10 years.

“Truckload executives today will give you a uniform consensus of what the No. 1 problem in the industry is – drivers,” says Chaz Jones, an industry analyst with Memphis-based Morgan Keegan, an investment bank. “Then maybe fuel and then engines. But fuel surcharges are there to help, and with engines there are really no surprises. You know what is coming and when, so you can take pro-active measures and position your fleet.

“The driver issue is the No. 1 problem, whether it is recruiting, retention or pay. Companies struggle with those problems constantly.”

Why the shortage?
The shortfall of drivers is blamed on a number of problems.

Not only are drivers, on average, getting older and retiring faster than ever, ATA points out that “growth of the middle-age groups that are critically important to truck driver employment (35 to 44 and 45 to 54) will be flat or declining over the next 10 years.”

And fewer of their children are becoming drivers.

“You don’t have drivers coming into the industry because their father, grandfather or uncles were drivers so much any more,” says Chad Still, recruiting manager for America Central Transport. “You can’t drive over the road until you’re 21, and with any degree of good parenting, most 21-year-olds have been put on a career path. We are getting a lot of second career people, older people, retirees and ex-military. I’ve even seen someone with a Ph.D. and an ex-bank president change their lifestyle to become drivers.”

Also, there may be reluctance among young people to embrace the gypsy lifestyle of long-haul trucking, the most affected segment of the industry.

Other reasons for the shortfall are the loss of older drivers during the recession after the turn of the century, a loss still felt because many of those drivers never returned to the industry; and, more recently, the pressure of post-9/11 security measures. Tougher hazmat endorsement standards have many drivers simply giving up driving hazmat, and the introduction of a security card needed by all drivers working ports may have a similar effect, in both cases weakening these two specialized driver pools.

Chief among the problems is pay. ATA and trucking company executives have suggested that significant pay raises could solve the problem by attracting more drivers to the industry and better competing with other industries.

A booming economy – goods hauled by truck will jump from 9.8 billion tons in 2004 to 13 billion tons in 2016, ATA predicted last year – is not helping the shortage situation even as it helps trucking companies earn more. When the economy thrives, says ATA, trucking tends to lose driver jobs to construction and manufacturing.

“Industry executives see a more robust economy in other service sectors, and that tends to lead to a more challenging driver environment,” says Jones. “Drivers typically find other opportunities, especially in the housing sector. They can migrate to it easily and probably make a little more and be home every night. It’s tough to compete, not just from the pay perspective but from a quality-of-life perspective.”

ATA says that to attract truckers, earnings will need to return to the levels that prevailed in the 1990s, when they were about 7 percent higher than average wages in the construction industry. Weekly trucking earnings in 2005 were 1.5 percent below the average in the construction industry.

“It’s going to be a challenge for the truckload industry probably indefinitely,” says Jones. “If the industry can’t raise pay enough, it’s never going to change. The industry needs an equilibrium of pay and quality of life. But we are not there yet.”

Industry executives in the past, says Jones, have said that pay needs to reach $60,000 to $70,000 a year to attract able bodies from other industries. But we’re probably at a point, Jones says, “where average drivers are earning somewhere between $40K to a little north of $50.”

“In a roundabout way a driver shortage could be beneficial,” says long-haul driver Ed Gallett from Denison, Texas. “It could force companies to pay us more money and treat us right. Companies have to take care of the drivers they’ve got or they will always be looking for drivers. The cost of living keeps going up, but our pay doesn’t move. I’m topped-out at my company; I don’t know if I’ll ever get another raise. Our pay should at least match the rise with the cost of living.”

John Delery, a University of Arkansas business professor who has studied the trucking industry, says one of the best explanations of what is happening came from an economist with the Wharton School of Economics at the University of Pennsylvania.

“He said, ‘I want to pay someone to mow my lawn, and the population hasn’t decreased, so there are people are out there who could do it. But I want to pay $30, and the people who come by want $50. So I can’t find someone to mow my lawn. But they are out there.’

“I don’t think there is a shortage of people who could be drivers,” says Delery. “But those people just don’t want to be drivers under the present industry conditions. They want $50, not $30, to mow the lawn. It’s all in how you define it. Some people say the shortage isn’t drivers; it is a shortage of pay and working conditions that keep capable people from taking driving jobs.”

But the problem, Delery says, is not new.

“At least 20 years ago companies were complaining about a driver shortage, and they still are,” he says. “Did the heads of the big companies just not get it, were they unable to fix it? Or is there some reason that the ‘shortage’ is still a problem? If you are an economist, you have to believe our economic system works and aberrations are short term. A shortage doesn’t last 20 years, so clearly something else is happening.”

Turnover
That something else, many experts agree, is turnover. The driver population isn’t so much too small as in a constant state of flux, some say.

In the second quarter of 2006, turnover at large truckload carriers was 110 percent, and that high number was the lowest rate since the fourth quarter of 2003. Small carrier driver turnover was 100 percent for the second quarter of 2006. The average turnover rate in 2004 for large carriers was 121 percent.

“Despite reduced rates among both groups, driver turnover remains relatively high by 1990 standards,” says ATA Chief Economist Bob Costello. “This is a clear signal that the driver shortage has become more acute in recent years.”

Consistently high turnover rates force companies to constantly hire drivers, with recent hires much more likely to switch companies – often several times a year – than well-established drivers.

On paper this situation means drivers should be hot commodities that trucking companies fight each other to hire. And to some extent that is the case. But the industry is competitive and existing on thin margins, so companies can’t simply throw money and benefits at drivers.

“Companies would like lower turnover if there was a low-cost way to get it. But they don’t have one, so they have learned to accept a high level of turnover as part of doing business,” Delery says. “To reduce the level of turnover will cost companies a certain amount of money, and the question is how much benefit they get for that. In many cases the cost of reducing turnover would be more than the benefit, so it is not worth doing. And that means the turnover is not going away.”

However, ATA says that carriers with lower turnover rates have found ways to give drivers what they want – predictable schedules or more home time – with only a minor loss of productivity. Less-than-truckload carriers have a much lower turnover rate, around 13 percent. There’s at least one glaring reason for that, says Delery: “Those drivers get to go home at night.”

Transportation consultant Duff Swain says one reason small companies can keep drivers better than some big companies, and thus don’t have to keep hiring new ones, is that personal links between management and drivers can be built and kept in place.

When Keith Miller was injured after 11 years behind the wheel, he started a small trucking company and now has a fleet of five hauling coast to coast, picking up at ports and rolling mostly to warehouses. How did he find his drivers? “They’re friends. I stole them from companies I used to work for. I could get bigger but don’t want to. I’m not just a pencil head; I know the road, but 90 percent of dispatchers don’t and that makes relationships hard. And if one of my drivers has an emergency, he calls and guess who goes out and gets into his truck? I do.”

Trucker Charles Killebrew of Houston agrees that companies that take care of their drivers are more successful in holding onto them. “I mean, take two companies, both with 100 trucks,” he says. “One of those companies will have a waiting list of drivers who want to work for them, the other one will never be able to hire and keep enough drivers. The difference is the way companies treat their drivers.”

Gallett says drivers need to feel their companies are treating them as individuals – not just talking about doing that. “For example, we need an avenue so we can fix things,” Gallett says. “We need a way to talk to companies so that problems get addressed and not ignored. If a problem comes up, I really don’t know who to call to actually get it fixed.”

Finding more drivers
Besides looking for ways to keep drivers, many companies are scouting new avenues for hiring them.

“We have to be innovative,” says USA Truck recruiting manager Eric Edins. “We have to keep finding news ways to tap into the driver pool, and we have to find ways to find new people to become drivers. Every trucking company has growth plans. And growing means more trucks, which means more drivers. Our benchmark is 15 percent growth across the board. That means 15 percent more drivers, 15 percent more equipment, 15 percent more income and so on. So we need 15 percent more than turnover.”

Recruiters are actively looking to minorities – Hispanics (the fastest-growing segment of the population), women, older drivers, husband and wife teams, and drivers from foreign countries. The Department of Labor says the number of truck drivers who are not white males increased to 30 percent in 2004, up from 26.6 percent in 2001.

Some companies are reportedly easing their bans on felons if thorough checks show an employable driver. “These are people who want to straighten out their lives, and there should be a way to give those people a chance,” Gallett says. “This is America.”

But some drivers complain that companies are hiring newbies who haven’t been properly trained. Houston driver Killebrew believes the lowered standards are negatively affecting safety.

“I saw a driver in North Little Rock, Ark., who drove into a yard, got out of his cab and went to find someone to back it up to the dock for him,” he says. “He’d been driving a week. He’d been hired, and he couldn’t back his rig. Drivers like that lower the safety of the industry. Another place you see it is at truckstops. You can get run over; there are so many drivers who don’t know what they’re doing there.”

Another driver sees the same problem of undertraining affecting the number of drivers who stay in the industry.

“They just want warm bodies in seats,” says owner-operator Daniel Peck, a 33-year trucking veteran from Rainbow City, Ala. “It’s dollar sign motivation. Sign here, pee in this bottle (drug test) and you’re ready to go. Fact is, you can’t train a kid to do this job in two weeks. I think the best companies have not lowered their standards, but some companies have just so they can keep hiring.”

Gallet also echoes these feelings: “Companies need to train new drivers properly and teach them the reality of driving. If they don’t, a lot of new drivers won’t stay in the job because they come to see it’s not what they expected.”

The need for drivers is so extreme that companies routinely try to hire drivers already trained by and working for other companies, which continues the cycle of high turnover.

“You either train and grow them or you steal them,” says ACT’s Chad Still. “I hate to say that, but we, like a lot of companies, go out and find experienced drivers and we have a really good package to offer them, a sort of smorgasbord they can choose from to get the job structure they want. For us it’s a good thing that some of the big companies bring in and train new drivers.”

USA Truck’s Edins agrees that actively recruiting drivers from other companies is commonplace.

“I would say no major company would rule out contacting drivers at other companies,” he says. “We are aggressive because we have to be, and we are also very responsive. We have to be ready when a driver talks to us; he has too many choices if we don’t interest him quickly.

“You can’t just advertise,” says Edins. “We do that, but we also have to be pro-active. We also use outside recruiters, people who go to trucking shows and truckstops. We call drivers who are out there on the road to see if they want to come work for us.”

Conversely, analyst Jones says some companies – particularly the largest, publicly traded companies – have become more selective, not less, about who they hire.

“It’s not necessarily that there are not enough drivers out there willing to drive,” says Jones. “Carriers have had to become more selective about who they hire. There are a lot of carriers today that carry self insurance and have $1 million, $2 million and in some cases $10 million dollars of deductible, so they have to take care who they let drive for them.

“Most drivers have to pass physicals to drive for publicly traded companies, and a lot of them can’t pass them,” says Jones. “I have spoken to big companies in this industry that say they hire about 1/25 of the people that they talk to.”

“This isn’t going to change,” says USA Truck’s Edins. “The trucking business isn’t going to go away, and the need for drivers isn’t going to go away.”


Foreign Drivers
Are many of the drivers that the long-haul industry needs living in other countries just waiting for a call to come to America? One leading industry figure says they just might be.

Tom Sanderson, CEO of Transplace, a third-party logistics firm in Plano, Texas, says that finding anywhere from 20,000 to 100,000 highly skilled new drivers to work for $55,000 a year is not an insurmountable problem. There is a readily available solution, says Sanderson, that has already worked wonders in the software industry, where in 1990 the U.S. adopted the H1-B visa program to alleviate the shortage of skilled technical workers. Those visas allowed skilled workers to remain in the country for up to six years, and many gained permanent residency and remained here indefinitely. Skilled drivers could come from Eastern Europe, Asia, South America and many other places.

Some say this will hold down wages for U.S. drivers, says Sanderson. “This could be true if too many immigrant drivers were admitted,” he says. “However, this can be controlled by monitoring the pay required to fill trucks.”

“That’s a two-edged sword,” says Texas driver Ed Gallett. “It opens the door for foreign drivers to come in and cut our throats. If companies hire foreign drivers, they should pay them what they pay us.”

U.S. demographics, says Sanderson, show that there aren’t going to be anywhere near enough people coming into the industry to match those that are retiring or to handle economic growth needs.

“Just accepting the turnover, even if you try to be efficient at it, is not the right approach. I think this is something for the OTR segment where we just don’t have enough skilled people in this country that want to do that job and who are willing to spend weeks out on the road sleeping in the back of the truck and eating at truckstops.”

Sanderson says a company hiring foreign drivers under such a visa program would be committed to training them and retaining that driver for three years. “Drivers coming in this way would have a very, very strong incentive to play by the rules,” he says. “Imagine facing deportation for falsifying a log.

“Bringing in foreign drivers for the OTR industry doesn’t mean unemployed American truckers or lower wages. In today’s economy anyone with a CDL and a good record can get a job with a top-notch carrier probably as easily as anyone in the workforce, and that wouldn’t change. Companies would lower turnover costs and be more profitable, something that benefits both driver and company.”


‘It’s Not Your Truck’
Could a major driver lifestyle change solve the shortage?

More drivers won’t entirely solve the driver shortage problem, says consultant Duff Swain.

“We do need more drivers, no question about it,” says Swain, president of Trincon Group, a transportation consulting firm in Columbus, Ohio. “But we need them driving fewer trucks so that the productivity of the truck – and the industry – rises. That sort of economic health would let a driver build a career.”

He offers a two-part plan: restructure to put more miles on trucks and make the job important to the driver.

“If all we do is find more drivers and don’t solve the problems causing the turnovers, we have the same problems,” Swain says. “If a company has over 20,000 trucks and has to hire 25,000 drivers a year, and their fleet builds and they have to hire 32,000 a year, where does it end? Going out and hiring Hispanics, elderly, military – if all they do is inject these people in the same environment, all they’re doing is throwing more fuel on the fire.

“We’ve got to stop the bleeding.”

Swain says the job has to be made more attractive so that the industry hires better-qualified new drivers who want to be a trucker for the right reasons. “Hiring people who see the industry as a place to be an outlaw or a ‘rebel’ or a ‘free spirit’ just keeps the problem in place,” he says. “We need to hire people looking for personal growth, a career, a way to raise a family, a job they can become involved in and take more and more responsibility as they gain seniority and move up in a company.

“That’s a radical change for the industry because it is not now set up to create this sort of job. It attracts drivers looking for a lifestyle, not a career. That’s a huge problem. It leads to lower standards and earnings, and potential good new drivers see that and don’t come into the industry, and experienced drivers see it and realize they can only go so far in this job.”

Swain says the turnover problem won’t go away until the industry makes significant changes.

“You have mutual accountability, and that doesn’t happen in the trucking industry,” Swain says. “A lot of drivers work here because they know they are not held accountable and can leave and get a job somewhere else. You see the first turnover in the first six months. After a driver is there two to three years, turnover dwindles. For whatever reason the driver has got to know the company.”

Swain says one old attitude is gradually changing.

“You’d hear companies say, ‘Hey, there’s always going to be a shortage. We have to recruit and keep recruiting.’ It was called ‘Turn and burn.’ We’re seeing less of that. I see the industry finally becoming conscious that this can’t go on. There’s a lot of talk, but what I don’t see is anyone doing what’s necessary to make it happen. No one has come up with a strategy.”

Swain’s strategy is to focus on equipment utilization.

“In transportation, boats, trains, steamships, aircraft, river barges, you name it, they work 24/7,” he says. “When was the last time you got off an airplane because the pilot was out of hours? Almost all trucking companies are not using trucks 24/7.

“What’s the difference? There is none.”

Swain thinks this way: a truck is designed to run maybe one million miles and has a warranty of about 750,000 miles. It is most effective to operate while it’s under warranty, so the idea is to run it 750,000 miles in three years to maximize profit. Companies that don’t do 750,000 miles in three years – and can’t do it in three years with one driver per truck – are underutilizing the equipment.

“Truck is the driver’s ticket to the future, not their ticket to a good ride. The company owns the truck, not the driver. Drivers need to understand the industry, and the industry needs to educate drivers about how it makes money and how the driver can, too.”

Swain advocates the widespread use of slip seating, and the use of double or triple shifts to keep trucks on the road 24/7.

“It’s better for both of us,” he says. “More profit means more money for drivers and a healthier company where a driver can build a career.”

But even Swain admits that there will always be a shortage. “A major university study a few years ago thought that about 35 percent would be a satisfactory turnover rate in the industry. Long term – there will still be turnover and there’ll always be cowboys behind the wheel, but fewer and fewer of them because companies will realize they can’t make much of a profit with one driver/one truck.”


In-Cab Electronics?
Could the increasing use of in-cab electronics like on-board recorders affect the way companies use drivers?

Yes, says the University of Arkansas’ John Delery, but that may also be bad news for experienced drivers.

“It only makes sense to invest in a driver to the extent that drivers are vital to your success,” he says. “Today we see some companies investing more money in electronics and equipment for dispatchers than in drivers. The idea is that a driver just has to get in the truck and drive; computers will tell that driver where to go, how to get there, what speed to run, if there is ice ahead, when to change gears and so on.

“So its possible companies won’t need the most experienced – and most expensive – drivers in the future. The driver becomes a commodity that can be monitored and controlled, so it is not necessary to have the best driver. And if that driver quits, it is not too expensive to replace him. One of the reasons to develop a stable work force with people who stay with a company a long while is that those people learn more and more about their job, much of it not written-down knowledge. But if computers can tell a driver what to do and how and when to do it, how much does a company need a highly experienced – and expensive – driver?”

So instead of raising pay, says Delery, we might see companies finding ways to hire less skilled people to drive, people who can demand less money.

“But some companies will invest in the best drivers and may then have a substantial advantage over those companies that don’t,” he says.

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