The driver pay problem – how we got here
December 10, 2018
So why don’t carriers simply raise driver pay and pass it along to shippers? That would seriously slow down driver turnover, right? Isn’t that what they did back in the regulated days, when most drivers earned a good living – at least better than today?
I have no sympathy for big carriers that churn through drivers like wood chippers eat logs, but they do have a problem when it comes to driver pay raises. It’s riskier for carriers to raise pay now than it was then. Let me explain.
Before 1980, the Interstate Commerce Commission regulated trucking in detail. Today we’d call it micromanagement. Then, as now, owner operators could lease to a carrier and run on that carrier’s operating authority. Many did pretty well. But operating authority itself was a big challenge. If you weren’t one of the carriers already in business in 1935 when trucking was first regulated, you had to buy operating authority from another carrier or prove to the ICC that existing carriers weren’t doing the job. That could get ugly and expensive.
Operating authority itself could be stupid, not to mention inefficient. For example, you might be able to haul from Detroit to Chicago, but have to go through Indianapolis on the way. Private fleets could go where they wanted, but for the most part they had to return empty. No backhauls. So in the Motor Carrier Act of 1980, Congress got rid of most operating authority restrictions.
But that wasn’t all they got rid of.
Originally, the ICC had to approve interstate carrier rates and required that they be published. Competitors could protest each other’s rates. In 1948, Congress went a step further and exempted carriers from antitrust laws. This made price fixing legal. Carriers formed rate bureaus and arrived at rates that suited everyone in the group.
This was fine with the Teamsters, who now negotiated contracts with groups of carriers at a time who were often competitors. The carriers that set rates together could negotiate with the Teamsters together. So they arrived at contracts even the worst carriers could live with. As a result, poor carriers made enough to stay in business, efficient carriers did well, and Teamster drivers made more and more money.
By 1964, infamous Teamster leader Jimmy Hoffa engineered its first national labor contract. It was called the National Master Freight Agreement, and it covered more than 450,000 carrier workers, roughly 60 percent of the truck drivers in the U.S. Teamster driver pay would continue to rise through the 1970s. Even nonunion carriers had to raise pay to attract drivers.
Of course, not everyone was happy – particularly shippers, which included some of the largest corporations in the world. They had friends in Washington, D.C., so the battle to undo trucking regulation was on. It would take 15 years, but the shippers finally won. Most operating restrictions were gone in the Motor Carrier Act of 1980. More importantly, so was trucking’s exemption from antitrust laws. Now carriers had to set rates individually. Trucking suddenly became price competitive. The new truckload carriers that emerged after deregulation were especially competitive. They still are.
Back in the regulated days, competing carriers could set rates together at levels to protect their profit even in a recession. Today’s carriers can’t do that.
If Good Guy Trucking raises driver pay in good times – like now – it’s more or less stuck with that pay level when recession comes.
If Bad Guy Trucking keeps driver pay down, it can beat the Good Guy rates when times are tough and competition for freight heats up. That’s why carriers would rather do sign-on bonuses than raise pay. The bonus is a one-time thing. Rates of pay tend to remain the same.
And boy, have they remained the same. Millions of drivers today take home roughly half the pay – measured in what it can buy – that they earned in 1980. At the same time, in many cases the job has gotten harder. Regulation is still with us, but now it’s about safety. In its effort to make highways safer, the new regulators have drawn an ever-shrinking band around driver options, treating human drivers like industrial machines with tightly scheduled operations, down time, and preventive maintenance.
One of the most attractive jobs in America has become one of the least attractive. But I don’t have to tell you.
So it isn’t easy for carriers to raise pay. But it isn’t impossible either. Sadly, individually and through their trade associations, carriers seem more interested in holding driver pay, benefits, and anything but efficiency down.