1Q Driver Pay Accelerates

This story appears in the May 12 print edition of Transport Topics.

Driver pay rose in the first quarter at a faster pace than at any time since trucking’s last peak period almost a decade ago as industry capacity shrinks and the driver shortage worsens, a new report said.

Gordon Klemp, who does a quarterly driver pay survey covering 350 fleets, said the average increases are about 2 cents per mile for van drivers, with higher increases for refrigerated drivers and owner-operators.

That is an increase of 5.8% in a single quarter, far faster than the average annual increase between 2009 and 2013, according to the report by Klemp, who is a principal at the National Transportation Institute.

“We are seeing increases that are greater than they have been in a long time,” he told Transport Topics on May 5. “Drivers will continue to be courted with increasing ferocity by carriers as there is more freight than capacity.”

The last time that driver pay spiked was 2004 to 2006, when freight levels surged and turnover hit records. Over that two-year span, average mileage pay rose at a 7.5% annual rate for van drivers with three years’ experience.

“Drivers are almost impossible to find,” Klemp said, making it likely that pay will rise further, particularly if there is a sustained pickup in freight demand.

Last week, the tank truck unit of Schneider, which ranks No. 6 on Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers, provided the latest evidence of pay increases.

The increases of 8 cents to 10 cents per mile amount to a raise of $4,000 annually on average for company drivers. Last month, owner-operator pay was raised 10.5 cents.

“We believe it’s important to reward [drivers’] level of expertise,” said George Grossardt, vice president and general manager of Schneider’s Bulk division.

Joe Dagnese, president of Con-way Truckload —a unit of Con-way Inc., which ranks No. 3 on the for-hire TT100 — said on a May 1 conference call the company is considering driver pay-increase options “to not only keep drivers in the seats but to get new drivers to come to our company as well.”

“It appears truckload capacity will remain tight because of driver availability issues, and rates will have to continue to rise to cover driver pay increases in order to meet capacity requirements,” said a report late last month from William Blair analyst Nate Brochmann. “Industry experts for years have been predicting a truckload pricing revolution, and it feels like we might finally be on the doorstep.”

Bloomberg Industries analyst Lee Klaskow told TT on May 7 that “carriers have had to get a lot more creative in terms of pay as hours-of-service law changes lowered miles driven during the week.”

He said that carriers have been able to raise rates 3% or more this year, which should increase their ability to increase drivers’ wages.

Increasing pay is “a temporary fix for a deeper issue,” said Megan Younkin, a consultant at Strategic Programs. “The guy who comes or stays for an extra 2 cents per mile will also leave as soon as your competitor raises their pay or offers a more attractive bonus. Ultimately, driver treatment, equipment condition, home time, treatment by customers, etc. will take their toll and pay will no longer be an effective retention strategy.”

Winter weather in the first quarter made both the capacity and the driver situation worse, Klemp said, as drivers couldn’t run enough miles. He recounted anecdotal reports that some drivers switched carriers to collect upfront sign-on bonuses that were used to make mortgage payments.

“Fleets know that there is almost no one out there to replace drivers who leave, so they are working harder than ever on retention,” Klemp said.

Steve Prelipp, a consultant and former industry executive, told TT he agreed. On average, he said, companies are spending twice as much as they did 10 years ago on recruiting and retention.

One area in particular that is growing, Prelipp said, is lease-purchase programs.

“Someone who is new to a lease-purchase program already knows how to drive a truck,” Prelipp said. “They know the lifestyle. They know they have to be more efficient. Students just coming out of school have just spent a lot of money but they haven’t learned the lifestyle. That is a lot of the reason they don’t make the transition successfully.”

But Klemp believes student programs still have promise.

“Schools are the only way to bring new drivers into the industry,” he said. “Now that the model has restarted, I think we will see more carriers that will have to adopt a student training program.”