Posted on October 29th, 2022.

The trucking industry has rapidly increased driver pay in recent years, but with a softening freight environment that trend is spinning off in several directions.

Demand has slowed, and Noel Perry, principal at the market research and consulting firm Transport Futures, believes it may shrink further.

“When that happens, the demand for drivers does the same thing with the usual overshoots,” he told Transport Topics. “And with the overshoot, that means there’ll be an overreaction in the other direction.”

Perry pointed to a similar trend that occurred during the recessionary period of 2008 and 2009; however, he noted that period was not as dramatic due to a tightening labor market. Instead, Perry believes that much of the wage gains in recent years will hold long-term.

Rob Hatchett, president of Fleet Intel at Conversion Interactive Agency, contends carriers have approached driver pay differently during the last two years.

“When I talk to a carrier and as we look at the market as a whole, we’ve got to know which group do they fall into,” he told TT. “The people that have done the huge pay increases over the past two years, they’re not having to do more pay increases because they’ve already made a big jump and they have been able to get drivers.”

Some carriers, Hatchett said, have not raised pay because of market uncertainty, but are still facing pressure to increase their wages. Meanwhile, other carriers issued incremental pay increases over time to keep up with the market.

“I’m literally talking to multiple carriers who say our trucks are full. When they look at recruiting, they’re saying ‘we don’t have to increase pay if our trucks are full.’,” he said. “The next conversation, I’ll talk to somebody that’s got 50 open trucks, but again, they didn’t do a big pay increase so they’re talking about maybe it’s time.”

Hatchett has mostly seen this split among the more traditional longhaul and regional carriers. He also noted that this dynamic applies to sign-on bonuses. Some carriers have rolled back such bonuses because their trucks are full.

“We have seen the hiring frenzy stabilize a little bit in the last 30 days as driver applications increased,” Darin Williams, president of the online driver job application data and advertising company CDLjobs.com, told TT, adding that pay increases have also stabilized as a direct result. “Sixty to 90 days ago, we would get a notice of a carrier pay increase daily, if not more than one daily, and that has slowed considerably.”

Effects of Higher Pay

Some carriers like Fleetmaster Express have invested in driver pay over the last two years. But despite the softening in demand they are continuing to stay ahead of living costs and inflation.

“Over the last couple months, we’ve seen a softening in demand,” Travis Smith, chief operating officer at Fleetmaster, told TT. “The spot market, where a lot of carriers do business, has softened.

Smith added that with inflation growing more than 8% year-over-year, insurance and fuel costs have drastically increased in the last two years.

“Although there’s a softening in pricing and demand, driver pay is still at the forefront,” he said. “Now, carriers generally aren’t issuing the increases that we’ve seen historically over the last two years. We think that’s leveling off.”

In July, Fleetmaster increased its pay package with a boost in cost-per-mile and other benefits. Smith believes the ability to attract and retain drivers comes from a combination of programs including additional bonuses, driver pay increases and holiday pay.

“We’ve seen a 92% increase in hiring from late last year into January of this year till June,” Smith said. “We’ve seen a huge spike based on all of these programs we’ve put in place. I don’t think there’s any one golden egg.”

Hatchett started to see the early signs of shifting around March 2022, when some carriers were reporting their available equipment full.

“We have raised pay to where people are valuing the position of a professional truck driver,” he said. “That’s a good sign that we’ve accomplished that through our pay raises.”

Hatchett also noted carriers that have a training program are more likely to be packed now.

“There’s a lot of carriers where their trucks are full, not because they want that, but because they can’t get equipment. So, that’s actually relieving some of the recruiting pressure because it’s like we don’t have any trucks,” he explained. “I’m watching the rates, but I’m also watching new truck deliveries. ... Are they getting what they ordered?”

Outlook Ahead

The U.S. Bureau of Labor Statistics showed in its monthly employment report that truck transportation has risen since June 2022. The number of truck drivers has increased 5.1% year-over-year to 1.6 million from 1.52 million — 1.3% higher than the previous month at 1.58 million.

“I think that’s going to stop, but these things have a way of lasting longer than you expect,” Perry said. “We’ll be adding drivers for another two or three months before it stops and when that occurs, then the pay increases will stop.”

California Assembly Bill 5 sets stricter standards for classifying workers as independent contractors. It was signed into law in September 2019 but legal challenges kept it from going into effect. The U.S. Supreme Court has now opened the way for the law to be enforced by rejecting a case that attempted to stop it. Perry says that spells more continued pressure on driver pay in California.

“Whenever you impose regulations that run against the realities of markets, people work their way around,” he said. “But there is just a little cost of inefficiency that will show up in driver compensation.”

The 2021 Gartner Supply Chain Talent Imperative Survey outlined that the majority of logistics leaders believe their salary and wage offerings are above that of their industry peers. But despite this the driver shortage continues to increase, which indicates systemic issues.

“In response to this unprecedented driver shortage, many organizations have increased the financial remuneration of their incumbent driver pool,” Susan Boylan, senior director analyst at Gartner, told TT. “Additionally, other companies are offering further monetary incentives, such as signing and annual bonuses, in an effort to attract new drivers. This short-term and reactive approach to the shortfall in supply versus demand does not address the fundamental deficit of driving talent and resources.”

Boylan added that this approach by employers only increases the migration of drivers to better-paying companies. This perpetuates the constant cycle of re-recruiting and training. She believes this has resulted in a broken industry that faces spiraling costs and acute talent shortages.

“While financial incentives are certainly welcomed by those working in the industry it will not be enough to solve this issue,” Boylan said. “So, what do logistics talent and drivers value more — what EVPs [employee value proposition] should employers be offering to help increase their rates of retention?”

The survey also showed that flexibility in relation to working hours or the work week was the most-valued benefit or perk by logistics talent, followed closely by retirement as well as health and wellness benefits.

“This supports feedback we have received that sign-on bonuses in particular are viewed with a certain amount of cynicism from the driver talent community,” Boylan said. “Large sign-on bonuses tend to be staggered over one to two years, which makes sense from an employer perspective but is not clarified early enough in the acquisition process for drivers.”

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