Pay increase for drivers likely to be carriers’ biggest cost pressure in 2018

Avery Vise, FTR Transportation Intelligence’s Vice President of Research, said that the trucking market conditions are ripe for an increase in driver pay — which, according to forecasts, could be carriers’ biggest ‘cost pressure’ in 2018.

Vise mentioned that current market conditions are perfect for drivers to demand a pay increase.

FTR is the trucking sector’s source for transportation intelligence and has served the trucking, shipping, rail, equipment, financial, and intermodal sectors for about 30 years.

Market conditions

Vise noted that the spot freight market’s growth rate improved last year, and contract rates paid by shippers to carriers “began to creep higher as well.”

As contract rates increased further into the first week of January, with various records broken in transaction data tracked by load boards, Vise said that “overall trucking conditions are improving.”

Early this month, DAT’s Matt Sullivan reported that the first week of 2018 “had broken all the records we set when we ended the old year,” citing weekly charts and graphs of spot market data he shared with Overdrive. Sullivan said that “load-to-truck ratios and national average rates spiked big time.”

He added that a lot of it could be attributed to weather and the restrictions in place as a result of the implementation of the ELD rule.

Some evidence of ballooning sign-on bonuses have been seen, as well as rising driver wages Vise described as perhaps the most significant “cost pressure” for motor carriers given the continued expectation of growth in salary.

In February 2016, driver pay analyst Gordon Klemp, who is also the President of the National Transportation Institute (NTI), said that the pay for truck operators failed to keep up with inflation since 1980, thereby slashing truckers’ wages by nearly 33 percent.

Klemp revealed during a conference call with investors and reporters that truckers’ wages were at an annual average of $38,618 since 1980. If adjusted to the dollar’s value in 2015, that would be over $111,000 yearly.

And then in November of last year, Klemp said in a conference call with investors hosted by investment firm Stifel, that with the rising freight demand and surging rates, driver pay should increase in the coming months.

Klemp told investors that carriers securing rate increases in contracts with shippers could pass some of the gains to their drivers in the form of pay hikes. Klemp, however, did not provide an estimate of the percentage of increases. He only said that driver pay would climb with freight rates.

Not all of the gains in per-mile rates will translate to drivers’ increased paychecks, but according to Stifel’s recap of the conference call with Klemp “driver pay is moving up alongside the freight increases.”

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 also recapped.

Klemp explained that even if carriers had consistently increased driver pay in recent years, notably when capacity ran tight in 2013 and 2014, on average, driver wages have climbed only 6.3 percent over the last decade when adjusted for inflation.

Klemp said driver wages are half of what they were in 1979, before the deregulation of the industry.

(The) “stage is set (at this point) for drivers to realize driver pay increases over the foreseeable future,” Klemp said.

With the potential of ELDs to force longtime drivers to leave the trucking industry for other sectors and compound the situation, Vise said this is the “strongest labor market in two decades, at least in terms of unemployment.”

Trades that compete with trucking (such as manufacturing and construction) are doing well, at least compared to recent level,” he added.

Manufacturing and construction are growing on a national level but are experiencing surges in construction markets in Florida and Texas that were devastated by hurricanes last year.

ELDs and increased profit margins

As we have mentioned before several times, carriers can use ELDs to reduce administrative burden, minimize operational cost, and increase profit margins. Most modern-day ELD systems have numerous fleet management features that make all this possible.

As industry experts believe, driver pay is going to be one of the biggest ‘cost pressure’ for carriers this year. Make sure that you are fully leveraging the potential of electronic logging devices and using feature-rich ELD solutions to compensate for the added driver pay cost.

If you are looking for a reliable, compliant, and feature-packed ELD solution, use our ELD price comparison and ELD features comparison tool to find the perfect ELD for your trucking business.

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