The trucking industry has gone through some ups and downs over the past several years, largely centered around two intertwined issues: a shortage of truck drivers and the low wages paid to truck drivers. Drivers who have seen their wages decline over the years are wondering if and when the industry will recover. Of course, it’s impossible to predict for certain. Wages and the success of the industry depend on a number of complicated factors: the economy as a whole, freight demand, government regulations, competition for positions, and more. Let’s talk about these various issues and what they likely mean for the trucking industry in the rest of 2016 and moving forward.
The American Economy
The first major factor affecting not only trucking, but all industries, is the American economy. So far in 2016, the economy has been recovering at a consistent but slow pace. If the economy continues to grow steadily, that will correspond with positive growth in the trucking industry. Strong industry and demand for freight help to keep trucking rates high. In May this year, for example, tonnage increased by 2.7%. Higher freight demand usually corresponds to bigger paychecks for drivers.
On the other hand, a strong U.S. dollar in comparison with foreign currencies leads to a decrease in exports, which is bad for commercial trucking. The U.K.’s recent exit from the European Union, and the subsequent shift in currencies, may cause demand for exports to be rocky in the coming months.
Truck Driver Shortage
Another major issue currently facing the trucking industry is a shortage of drivers. This problem has persisted for a few years. In 2014, there was a shortage of 38,000 drivers. In 2016, the shortage is estimated to be about 48,000 drivers. This deficit is due to an extremely high turnover rate, large numbers of drivers retiring, and competition with other industries such as construction. In order to attract and retain drivers, trucking companies need to offer competitive wages. High capacity utilization has created a soft pricing environment, but low salaries won’t work to keep full staffs as the driver shortage worsens.
Some trucking companies are beginning to raise their wages as a solution to his problem. In January, C.R. England increased its driver wages by 12.3%., and Swift Transportation instituted pay hikes in August 2014 and May 2015. The companies that increase wages are going to be most successful in beating the driver shortage and in attracting the most experienced drivers.
Government Regulations on the Trucking Industry
Government regulations will also continue to influence the trucking industry. Often times bureaucracy clashes with common sense to create additional issues. The ELD mandate and HOS regulation will place extra operating costs on companies, who must install ELDs and implement new guidelines. They will also cut into productivity, as drivers must abide by limited driving hours. It’s difficult to predict exactly how these regulations will impact the industry once they take effect. They will likely hurt the industry as a whole and increase rates. However, the HOS regulations will mean companies need more drivers and trucks in order to complete the same number of deliveries. This will likely worsen the driver shortage and may ultimately add pressure to increase wages.
