What drives trucker compensation low?

TORONTO, Ont. – In his groundbreaking book Sweatshops on Wheels, published at the turn of the century, Michael H. Belzer argued that truck driver compensation was so low because the drivers performed a quarter of their work for free. “They suffer the indignity of being forced to wait for hours to get loaded or unloaded while people whose time is more highly valued are taken care of first,” the Wayne State University economics professor wrote.

Prof.

Michael H. Belzer’s Sweatshops on Wheels was published 20 years ago. He says driver remuneration has gone down since then. (Screen grab)

Twenty years on, the situation has gotten worse, Belzer told Today’s Trucking in an interview from Ann Arbor, Mich.

“Compensation has declined between one-third and one-half in the last 40 years,” he said, quickly adding that “it really won’t work to blame drivers or trucking companies”. Who is responsible, then? “The really responsible market players are the cargo owners, but they will say that they are just responding to pressure from other cargo owners.

Everybody is trying to sell underwear for 25 cents less,” the former truck driver said. He said shippers tend to have some market power. They control the relationship, can pressure carriers for unreasonably low prices, and force them to accept detention for which they will not pay.

Belzer said intense competition drives carrier and driver rates so low that fleets cannot hire the highest-quality drivers and create safety-centric incentives. These safety and health costs are not incorporated into prices, and become what economists call “externalities.” “Here, the externalities are the driver safety and health problem, and the public safety problem.

They are reflected in the labor market failure, which you see in the form of high turnover and the so-called driver shortage,” Belzer said. Many people still go and become truck drivers anyway, because they don’t have many alternatives, Belzer said. “And, fleets are unable to raise wages substantially because they are caught in a race to the bottom.”

What drives trucker compensation low?Joanne Ritchie believes driver pay is at the base of so many issues. (Photo: OBAC)

Joanne Ritchie, executive director of the Owner-Operator’s Business Association of Canada (OBAC), said she has had “thousands of conversations’ with truck drivers about compensation over the years.

“I think driver pay is at the base of so many issues,” she said. “Carriers and shippers have been complicit in this too. I mean, as long as they can get away with free labor, they’re going to take it,” Ritchie said.

Ross Reimer, president of supply chain recruiting firm Reimer Associates, agreed that drivers need to be paid more. “Now, we’re also talking about a trucking industry that runs on tight margins. The rates that shippers pay need to go up in order to pay the drivers more money,” Reimer said.

“Carriers need to earn more margin, so that they can share that margin with the drivers.” Reimer said better pay will also help attract more young people to the trucking industry.

What drives trucker compensation low?Prof. Belzer has concluded that truck drivers are performing a quarter of their work for free. (Photo: iStock)

Incentive for over-work

For North American truck drivers, there is no such thing as a 40-hour week.

Belzer cited a 1997-98 survey conducted by the University of Michigan, which concluded that employee drivers worked an average of 64.5 hours per week.  Another poll, conducted in 2010 by the U.S. National Institute for Occupational Safety and Health (NIOSH), revealed that, on average, long-haul truck drivers worked 50% more hours than typical workers, he said.

“Unfortunately, truck driver earnings have been so low for decades that the average rate of pay would have to be 50% greater than it is now to create an incentive for truck drivers to reduce hours of work to 60 per week,” he said. Ritchie said mileage rates have gone up lately, but that doesn’t help much because the drivers are still not paid for all the work they do. “So, if you look at the number of hours that drivers actually work, or on duty, and compare that to what they are making, I would say that their actual income is probably below minimum wage.”

Ritchie believes the solution to the compensation problem is to pay drivers for everything they do. Some employers are addressing the issue by initiating a hybrid pay structure that includes some sort of pay for wait times, said Craig Faucette, director of policy and programs at Trucking HR Canada. “In our Top Fleet Employer program, we have seen a significant shift where most employers are offering a hybrid pay system for longhaul truck drivers where they offer hourly pay for wait times,” Faucette said.

“Also in our employer survey in 2019, we have seen a positive trend from employers to switch completely away from mileage pay and offer hourly pay for their longhaul drivers.” 

What drives trucker compensation low?Over-work leads to driver fatigue and crashes. (Photo: iStock)

It’s a safety issue

Belzer noted competitive pressure leads to a strong incentive for over-work, which in turn, causes driver fatigue and crashes. Drowsy driving causes thousands of truck crashes in the U.S. each year. In 2013, the last year for official figures are available, there were 800 fatalities and 44,000 injuries from 72,000 crashes, according to the National Highway Traffic Safety Administration.

Another reason for the current situation is regulatory negligence, spawned by deregulation, the subject of Belzer’s book. He said the U.S. Federal Motor Carrier Safety Administration (FMCSA) continues to try to solve the problem by increasing hours of work.

“Like the FMCSA did in 2003-04, when they could not enforce the law, they moved the goal posts. That is, they could not enforce the 60-hour rule so they legalized an 84-hour work week,” he said. And this year, Teamsters and safety advocates have taken the FMCSA to court, arguing that the latest hours-of-service (HoS) rule that went into effect at the end of September will actually lead to more driver fatigue.

“They (the regulators) cannot continue to ignore the research that in my view shows the truth of the adage that time is money. As they continue to relax the regulations on drivers’ hours of work, they contribute to the safety problem.”

What drives trucker compensation low?Visitors at the Road Today-Truck News Jobs Expo in Mississauga, Ont., in September 2019, (Photo: Abdul Latheef)

Driver shortage

The shortage of drivers is a topic that has been beaten to death, but that hasn’t stopped organizations such as the American Transportation Research Institute (ATRI) from conducting more research on it. ATRI said last week that the problem remains the most pressing issue affecting the trucking industry.

Most drivers don’t buy that argument. Neither does Belzer, who believes there is no driver shortage. “From the standpoint of economics, broadly speaking, I would argue that it is not possible to have a shortage of truck drivers,” he said.

“There can be a shortage of physicists, there can be a shortage of engineers, there can be a shortage of computer scientists or programmers, but it is not that hard to become a truck driver. Training is not that hard. It is easy to get a licence.”

Ritchie said the trucking industry has been talking about the problem for nearly a century now. She said the Western Truck Owner magazine ran a three-part series in 1928 on the issue. “It talked about how we have to treat our drivers better because there’s a shortage.”

Ritchie said there are shortages of all kinds of workers in every industry, and that is a population problem. “But specific to the trucking industry, the problem of driver shortage, using it the way that most people use it, there is a lot of truth to what drivers say that there isn’t (a shortage).” There is a shortage of well-trained good drivers, and a lot of that has to do with the fact that it can it can be a very crummy job, Ritchie said.

What drives trucker compensation low?Canadian fleets are struggling to attract young people, who don’t see trucking as the road to freedom. (Photo: Abdul Latheef)

Canada is expected to face a shortage of 25,000 truck drivers as early as 2023, according to Trucking HR.

In the U.S., the American Trucking Associations (ATA) estimates that the country will be short of more than 100,000 drivers by 2024 and 160,000 by 2028 if the conditions don’t change substantively,

Belzer, however, insists the “perception of driver shortage” is caused by poor pay.

He is certain that a better pay package and a proactive effort to make sure that drivers are paid for their non-driving labor will help attract more people to the industry.

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