What a bunch of cheapskates

January 11, 2018

John Bendel


Trucking is too cheap.

 Sure consumers eventually benefit, but the nickels they save at the Walmart come straight out of the well-being of drivers and of our families. Shippers don’t pay what the service really costs.

 In 1980, when President Jimmy Carter signed the law that gutted regulation, the average driver earned about $37,000 a year. The equivalent today would be $110,000. Sure, some of us earn that now, but most of us don’t come close.

 So what happened?

 Well, the truckload industry happened.

 Until 1980, commercial trucking was ruled by LTL, less-than-a-truckload freight. Companies like Consolidated Freightways, PIE, and Yellow Freight carried much of the long haul traffic. Thousands of smaller carriers handled local and regional shipments. While they were called LTLs, they hauled truckloads too. If you were a truckload shipper without your own trucks and with no contract carrier, you were pretty much stuck with the LTLs.

 An LTL hub-and-spoke network meant real estate and terminals across the carrier’s operating area. Operating authority itself was a capital investment. Even those LTLs not organized by the Teamsters had the same expenses. So LTL rates were high, even for truckloads.

 It was no surprise in 1980, when Pres. Jimmy Carter signed deregulation legislation, that truckloads were the first chunk of business the LTLs began to lose. Now a carrier could operate without geographic constraints. Any truckload could go straight from the shipper to the consignee wherever it was. There were no relays between shipper, terminals, and consignee. The driver who picked up was the driver who delivered. It was simple, it was fast. Shippers loved it. So when the doors opened to new trucking entrants, virtually all those new entrants were truckload carriers.

 Deregulation brought something else at least as important. Before 1980, carriers were immune to antitrust laws. They were allowed to set rates together. Price fixing was perfectly legal, though they did have to publish those rates. Generally, the carriers who set rates together published them together. Their groups were called rate bureaus. The published rates were called tariffs

 All of that went away with deregulation. Now carriers had to set competitive rates individually, though they were no longer required to publish them. A truckload carrier who paid nothing for operating rights and little if anything for real estate could easily undercut an LTL rate with a phone call. All trucking rates were suddenly competitive and volatile.

 Competition meant the end for most Teamster carriers. As union jobs disappeared, so did wage stability in the industry. Minus inflation, driver wages fell. Meanwhile, volatility created new customers for freight brokers who earned their money largely by pushing rates downward. It would be a long slide.

 Even while deregulation offered many new opportunities for contractors and small fleets, those openings came in the context of an increasingly competitive industry. Owner-operators who prospered in the early days of deregulation weren’t doing nearly as well two decades later when a former trucker named Michael Belzer wrote a book called “Sweatshops on Wheels, Winners and Losers in Trucking Deregulation.” We all know who the losers were.

 Drivers lost income. We lost job security. Work in the truckload sector keeps us from home. We miss our children’s great moments and our marriages often suffer. Just because you can’t put a price tag on those things doesn’t mean they have no cost. They do, and those costs are ours alone. They do not figure into the rates that shippers pay.

 Yes, regulated trucking was wasteful and inefficient. Transportation became less expensive after deregulation, no doubt. But how much of the savings accrued to consumers? How much went to stockholders and executive bonuses?

 Funny thing is, while regulated transportation was unnecessarily costly, the economy absorbed those costs. Before 1980, consumers made out just fine. Meanwhile, drivers and their families ate well, lived in decent homes, sent kids to college, and enjoyed their leisure time.

 Oh yeah. You might be surprised to learn there actually was some leisure time.