An executive of FTR Transportation Intelligence believes that a driver pay increase would be the biggest “cost pressure” on carriers this year.
During the FTR’s series of “State of Freight” web seminars, FTR Transportation Intelligence Vice President of Research Avery Vise said that conditions in the trucking market could result in drivers seeking a substantial pay increase in 2018.
FTR is the industry’s source of transportation intelligence and has served the shipping, trucking, rail, intermodal, equipment, and financial sectors for almost three decades.
Vise said that about a year ago, the growth rate of the spot freight market began to turn positive, and contract rates paid by shippers to carriers “began to creep higher as well.”
Vise said that “overall trucking conditions are improving”, as contract rates rose further into the first week of 2018, with various records broken in transaction data tracked by load boards.
Matt Sullivan of DAT Carrier News recently reported that the first week of the new year “had broken all the records we set when we ended the old year.”
“Load-to-truck ratios and national average rates spiked big time,” Sullivan said, adding that a lot of it can be attributed to weather, on top of constraints in the wake of the implementation of the ELD mandate.
Based on the continued expectation of growth in driver pay, Vise said that the rising driver wages would be the most significant “cost pressure” for motor carriers.
In February 2016, Gordon Klemp, a driver pay analyst at the National Transportation Institute (NTI), said that the pay for truck operators failed to keep up with inflation since 1980, reducing truckers’ wages by almost a third.
Klemp revealed during a conference call with investors and reporters that truckers’ wages were at an annual average of $38,618. If adjusted to the dollar’s value in 2015, that would be over $111,000 each year.
In November last year, Klemp said in an investor conference call hosted by investment firm Stifel that with freight demand rising and the rates surging, driver pay should go up in the months ahead.
Klemp told the investors that if carriers could secure rate increases in contracts with shippers, they could pass on those gains to their drivers. He didn’t provide a forecast of percentage-based increases in driver pay, noting only that driver pay would climb with freight rates.
Not all of the gains in per-mile rates would translate to drivers’ increased paychecks, but a conference call recap released by Stifel said that “driver pay is moving up alongside the freight increases.”
Klemp mentioned that although carriers had consistently increased driver pay in recent years, notably when capacity ran tight in 2013 and 2014, driver wages have climbed only 6.3 percent on the average over the last decade when adjusted for inflation.
“For-hire drivers have lost effective purchasing power over the past 10 years or so and have had to adjust lifestyles accordingly,” said Stifel’s conference call recap.
Klemp also said driver wages are just half of what they were in 1979, before deregulation. “[The] stage is set for drivers to realize driver pay increases over the foreseeable future,” Klemp said.
According to Vise, this is the “strongest labor market in two decades, at least in terms of unemployment.”
“Trades that compete with trucking (like manufacturing and construction) are doing well, at least compared to recent level,” he added.
Manufacturing and construction are growing on a national level, with construction markets in states like Florida and Texas, which were devastated by hurricanes last year experiencing surges.
Increasing profitability with electronic logging devices
ELDs can help carriers increase profitability by reducing administrative burden, minimizing fuel wastage, increasing efficiency, and improving productivity. In 2018, carriers may have to bear additional expenses because of increased driver pay. Ensuring truckers are equipped with feature-rich, FMCSA-registered, and affordable electronic logging devices would help.
If you are looking for a reliable, FMCSA-registered, and feature-rich ELD solution, try Motive.