Increases in Driver Pay Grind to Halt on Lower Freight Rates, Demand
This story appears in the June 6 print edition of Transport Topics.
Downward pressure on truckload rates and a weak freight market this year have almost eliminated driver pay increases that were widespread as recently as early 2015, according to an industry official who tracks compensation trends.
Gordon Klemp, who heads the National Transportation Institute, told Transport Topics last week that 0.3% of dry van, 0.1% of refrigerated and 1.1% of flatbed fleets surveyed by his firm raised pay in the first quarter. Driver pay raises have been slipping steadily since the third quarter of 2014, when a record 42% of truckload fleets boosted wages.
“We are not seeing any movement in the national pay packages,” he said. “Everyone is holding on and hoping that rates go up. Until we see changes in freight rates, we think the only changes that we will see are niche and region-specific.”
The most recent Cass Truckload Linehaul Index, showed a 2.3% drop in rates per mile during April on a year-over-year basis. It was the biggest decline on that basis in six years and continued a sequential drop-off in freight rates.
A May 24 report by BB&T Capital Markets analyst Thom Albrecht estimated that the weak pricing and equipment utilization have led to a surplus of 3% to 4% in capacity.
The result, he said, is that “whether there is an official [gross domestic product] recession is a moot point as there is already a “freight recession.” Because of solid retail sales, Albrecht said, he believes the U.S. economy will avoid a GDP recession after a first quarter when growth was just 0.8%.
Klemp said he believes the current poor pricing environment is a result of the realization by shippers that today’s market may be the last chance they have to exert rate leverage due to the advent of federal electronic logging and other mandates starting late next year.
Klemp offered one example of a targeted increase, an 11% boost by a specialized flatbed carrier the upper Midwest, which he didn’t identify.
While pay increases were scarce in the first quarter, Celadon Group last month instituted a pay increase for team drivers of 8 cents per mile, following up on an earlier enhancement for solo drivers.
Celadon ranks No. 42 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
It’s significant, he said, that there have been no reported pay reductions, which last occurred during the recession in 2008 and 2009.
Pay may not be dropping, but sign-on bonuses for solo drivers are slipping about 20% to an average of about $4,000 since mid-2015 as freight levels softened and drivers have become easier to find, Klemp said. Team driver sign-on bonuses remain around $10,000, he said.
Klemp said that although pay is not changing overall, fleets are continuing to monitor competitors’ wages so that drivers don’t leave.
In addition, he emphasized that while driver wages have stayed flat, fleets continue to struggle with turnover.
“We are continuing to hear that turnover is impossible to control,” he said.
Tim Hindes, CEO of Stay Metrics, based in South Bend, Indiana, told TT on May 24 that driver pay isn’t the leading reason why drivers leave, though pay is what they cite as the reason why they left.
He said other reasons are behind their actions that his firm uncovers through predictive analytics before drivers actually leave. Instead, Hindes said the most common reasons drivers leave is because of personality clashes with dispatchers and job stress.
Fleets that use the Stay Metrics approach have achieved a 14% reduction in turnover after one year, said Mary Malone, director of esearch.
The firm uses those analytics to create surveys that are intended to predict behavior such as anger and lack of organization that could lead a driver to quit or have an accident. In addition, its program includes feedback through regular surveys and creation of a reward points system similar to those used in the travel industry.
In addition to fleets, the program can be used to study personality traits of students in driving schools with the goal of predicting which of those new drivers is most likely to stay. That is important, Hindes said, because half of new drivers quit in their first six months.
Hindes said the program is tailored to a specific fleet’s needs.
