| 10/9/2014

The energized economy and surging freight demands have ripped the mask off of a long-simmering predicament in the trucking industry. How will companies deal with the current shortage of professional drivers? OOIDA’s Jim Johnston says increasing driver pay should have been the first step, not the last step, but now it’s time to ‘ante up.’

By Sandi Soendker, editor-in-chief
“Land Line Now” News Anchor Reed Black’s distinctive voice delivers the daily news via Sirius XM’s airwaves to hundreds of thousands of trucking listeners. Every week, his radio news includes more and more biz briefs announcing that trucking companies are paying more to hire and retain drivers.

In the news are truckload carriers like U.S. Xpress, which raised pay by 13 percent for solo OTR drivers, more than four times the industry-wide increase this past year. Celadon Group, Transport America, Boyd Bros., Swift Transportation and others announced increases, too.

Interstate Distributors of Tacoma, Wash., said it will give a 3 percent pay increase to owner-operators who sign on before the end of the year. Saying it’s facing the biggest driver shortage it’s ever seen, Con-way Freight announced a month ago it is raising driver pay and moving drivers to the top of the pay scale faster. The roll call went on.

Also making the news were sound bites from financial analysts like John Larkin of Stifel Financial in Baltimore, who said the industry is seeing the early stages of what “could be a wage war” and that “it’s hard for others to stand pat and not take pay up.”

Black wrapped up the news of the day recently with a bit about a 10 percent driver pay increase from Hirschbach Motor Lines, adding the refrigerated carrier to a long list of others digging into their pockets.

Hirschbach was established in 1935 and is owned by the Grojean family. Like most motor carrier execs, CEO Tom Grojean isn’t ready to call it a wage war, but says the industry is in the middle of a process to reach a “new, higher pay equilibrium.”

“Some carriers might be quicker than others to adjust, but in time that level will be reached,” Grojean told Land Line.

Among research companies watching those levels is National Transportation Institute, a consultant group that began an annual driver wage survey in 1994. According to the survey, the biggest jump in driver wages in 20 years was 7 percent; that happened in 2005. This year is expected to show another eye-opening spike in wages because of trucking companies tackling the driver shortage, turnover and retention issues with their checkbooks.

Kenny Vieth, president of ACT Research Co., predicts it could be as much as 6 percent across the board.

Vieth says that the industry is not experiencing a driver shortage, but a driver-pay shortage.

He said companies can’t underpay for decades and then expect them to keep lining up for jobs. “It ultimately circles around,” he says, “and bites you in the butt.”

Some motor carrier executives currently suffering from posterior punctures say pay is a “consideration,” but they are stubbornly hesitant to say it is the biggest reason for the shrinking pool of good drivers.

“Motor carriers are in denial,” says OOIDA President and CEO Jim Johnston. “Driver pay is absolutely the biggest reason and raising driver pay is what it’s going to take to put – and keep – drivers in the seat.”

Johnston says for years, short-sighted motor carriers have been getting away with completely ignoring inflation and not paying good drivers what they are worth.

“Now they are trying to figure how they can convince those good drivers that pay isn’t the most important thing,” he says.

A number of surveys are backing Johnston up, like a recent one by National Retail Systems showing that 79 percent of the 2,000 drivers participating listed pay as their top reason for deciding where to work.

Although Celadon is upping pay, its chairman Steve Russell stirred up some attention in September. In the same article where he touted the increase in pay, he was quoted as saying the fix for the driver shortage shouldn’t be a “wage competition.” Russell wants to avoid that by hiring more drivers without experience and doing the company’s own instruction. Celadon runs training schools with free room and board.

OOIDA’s Johnston is all for driver training, but says drivers still need a raise and any other stance is simply a dodge. With the anticipated need for 330,000 more drivers by 2020, the OOIDA president says the one sure way to put a dent in the driver turnover and retention is to increase the pay to where it should be.

Vieth agrees.

“Trucking is a hard job,” he says. “In a coddled society, it’s hard to find people to do hard jobs. You are away from home long periods, living in a box on an asphalt parking lot – and that won’t change. But one thing you can change is to pay them more.”

Carriers to shippers: time for the talk
Today’s highly competitive trucking companies have been resistant to asking customers for more money and have been sidestepping driver pay raises for years.

Going back up the money chain, Vieth says in order for carriers to pay drivers more, they must make more money. That means shippers need to have more freight to be hauled and be willing to pay more.

“We are at that juncture,” says Vieth.

More and more carriers are reporting they are “having the talk” with customers and it’s not going too badly. Hirschbach’s Grojean says he thinks that the industry has done a “good job of educating the shipping community” about the driver shortage.

“We are starting to see shippers get behind their carriers with rates to adequately compensate drivers to the level that will start to attract new drivers and to lower turnover,” says Grojean.

Swift Transportation President and COO Richard Stocking said in a Sept. 25 press release that Swift has been “actively working with our customers to achieve the commensurate rate increases required to help cover the cost of the changes to driver pay, and has been encouraged by their response.”

Johnston says OOIDA is not ready to give out any achievement awards.

“Sure, costs need to get passed on to shippers, but it’s not totally been their fault. A good number of these motor carriers could find a way to raise driver pay. For example, they could rein in their budget on more Big Brother technology and put their money where the steering wheel is. Truckers make less now than they did 10 years ago. You want a professional; you pay drivers like professionals and ante up.”

It won’t be an instant fix, but it’s a start
The old saying, “don’t wait until you are so sick you can’t get to the doctor” may be good advice in today’s capacity-crushed world of trucking.

Swift’s CEO Jerry Moyes said a year ago the way to address the shortage and driver turnover was to pay drivers better. On Aug. 4, the company announced its pay increase, about the same time that business news was buzzing about Swift’s stock diving 18 percent in a single day. Not because they didn’t have the business, but because they didn’t have the drivers.

The Phoenix-based carrier says it’s getting better, though. At the end of September, the company reported that its driving schools were full and feedback from drivers was “positive.”

‘It’s a wage war’
OOIDA Member Russ Vitt owns Modern Moving and Storage Service, a small-business specialty hauler out of Sullivan, Mo. He doesn’t have to worry about stock plummeting the way Swift does, but he, too, finds hiring drivers a challenge. That’s not because he’s not been paying them. He says he offers the best job on the market today.

Vitt currently has 19 trucks and seriously needs to expand his nationwide piano moving business. The company has been in business since 1935. He bought it in 1985 and says his drivers have been paid well, but thinks there’s a general sense of distrust amongst drivers regarding pay that will take years to heal. Vitt says all motor carriers, good and bad, are suffering from that. Vitt recently increased his pay package and even put up a billboard on a major highway offering $60,000 a year.

“My pay package is really more like $70,000, but I was afraid drivers wouldn’t believe that so I advertised a more conservative number,” Vitt told Land Line.

Johnston says drivers are so used to being lied to that it’s made them leery of all offers. Companies well known for good pay practices and companies known to take advantage of drivers – they are now in the same boat when it comes to finding good qualified drivers.

“It is a wage war, and it has been brought on by carriers themselves. It won’t be won by cheap companies who are lowering their standards to find drivers and inventing schemes like lease-purchase programs,” says Johnston. “Those companies are deluding themselves by thinking they can ride out this capacity crisis without making changes. The most effective, long-term fix is to pay good drivers what they are worth.”

Johnston says keeping those experienced professionals in the industry and attracting other respectable individuals to the job will not be achieved any other way.

Copyright © OOIDA