Pace of Driver-Pay Increases Quickens in Reaction to Tight Capacity, Demand
By Rip Watson, Senior Reporter
This story appears in the Sept. 1 print edition of Transport Topics.
The long, slow trajectory of pay raises for truckload drivers picked up in recent weeks, including a 13% increase at U.S. Xpress Enterprises that appears to be the industry’s largest since the 1990s.
Gordon Klemp, who has done quarterly driver compensation studies spanning two decades, told Transport Topics on Aug. 26 that the increase was the largest in percentage terms since a move by J.B. Hunt Transport Services Inc. That 1996 increase averaged 33%.
“We wanted to make a big splash,” Eric Fuller, chief operating officer of U.S. Xpress, told TT on Aug. 25. “There are a lot of opportunities that are being left on the dock because we don’t have enough drivers,”
Fuller tied the increase to growing freight opportunities and driver-related capacity limitations. He said U.S. Xpress could move at least 5,000 more loads monthly if drivers were available, outlining a shortage situation that other fleets also face.
The company ranks No. 18 on the Transport Topics Top 100 list of the of the largest for-hire carriers in the United States and Canada.
The U.S. Xpress increase averages 5 cents per mile, said Klemp, who is managing partner at the National Transportation Institute. NTI surveys about 350 truckload fleets to gather pay and benefit information.
Klemp’s data illustrate the room for wage growth.
His quarterly index of wages for all survey participants increased just 1.3% annually between 2007 and 2013. Truckload pay rates ended that period below the pace of inflation, meaning that drivers actually are losing ground.
Other truckload operators, including Con-way Truckload, Transport America, Melton Truck Lines, Boyd Bros. and Hornady Transportation, also have raised pay in the third quarter, and more could follow. Con-way Truckload is a unit of Con-way Inc., which ranks No. 4 on the for-hire TT100 list. Transport America ranks No. 71.
“There are a lot more carriers that are working on pay increases now,” Klemp told TT. “U.S. Xpress may be the first of a significant number of increases aimed at retention and attracting new drivers to the industry.”
Two of the largest truckload carriers — Swift Transportation, No. 6 on the for-hire TT100 list, and Schneider, No 7 on that list — haven’t yet announced pay increases. Swift Transportation said in July that it was planning to enhance driver pay, without giving details.
There also are carriers that have told drivers about pay increases, but do not want to publicize them for competitive reasons.
Scott Arves, CEO of Transport America, told TT on Aug. 27 that the ability to recover increased costs through higher rates and a desire to get out in front of competitors triggered the increase.
“We wanted our competitors to move first on price,” Arves said. “For the most part, they haven’t, so we decided to be on the front end.”
Rising demand and driver retention both were factors in the increase of 1 cent to 4 cents per mile, depending on the assignment.
Flatbed carrier Melton’s increase of at least 2 cents per mile was a bid to be a pay-increase leader, rather than a follower, Vice President Angie Buchanan told TT last week.
“We decided to step out before the market moved,” Buchanan said. “We all must be thinking about pay increases.”
“As we grow and prepare for new growth, we are having a tough time, as is everyone else,” she said. “It’s tougher to find drivers than customers.”
“It feels like we have to be more aggressive this time around,” Buchanan said. “It’s particularly difficult right now. Drivers have choices and the oilfield is hopping.”
Melton is based in Tulsa Oklahoma, which is within one of the shale gas exploration areas that have grown through fracking.
A recent report by Stifel Nicolaus analyst John Larkin gauged driver pay in the oil fields at $100,000 annually or more, roughly twice what over-the-road pay rates are now.
“The change gave us the opportunity to increase pay and move all drivers to one pay structure,” U.S. Xpress’ Fuller said.
Fuller acknowledged that there was a risk in changing from the previous structure that was tied to miles driven, while emphasizing the focus on simplifying pay structure to satisfy drivers.
“The increase was something that we felt was important,” said Fuller. “It will go a long way with the driver population.”
He noted that potential new drivers who contacted recruiters lost interest in joining the carrier because of its former complex pay package.
“A lot of carriers have gone toward more complex pay packages,” Fuller said. “That doesn’t make sense to me. Why would you want to have the drivers sitting there with their head spinning because they’re not sure how they’re being paid?”
Pay is just part of satisfying drivers, he added.
“We need to change the job to make it more comfortable,” he said, recognizing that some drivers are happier running for several weeks and others prefer more home time.
Unlike U.S. Xpress, other carriers that raised pay didn’t make wholesale changes in their compensation packages.
