The Ripple Effect

 

A lot has happened since trucking deregulation back in 1980. The average OTR trucker made $48,200 back in 1984 when the full force of deregulation was just starting to take effect. In 2013 the average OTR driver made $37,700. The average OTR career lasts about 3.2 years. Only 18% of the OTR drivers out here now have been out here for more than 6 years. Those numbers are stark and they stop you in your tracks.

 

Before deregulation took effect drivers generally got paid for all of their time at work. When we ceased getting paid for that time we learned to hide it as off duty. In order to maximize our production we saved those hours to use as drive time. We got good at it. Our individual ton mile production went up. At the same time our wages went down. We continued along the path of short term thinking. We had payments that needed to be made. It is hard to feed your 401k, when you can't pay your mortgage. Long term thinking and planning took a back seat to monthly payments.

 

The problem grew as facilities figured out that holding up truckers had little or no cost. It was cheaper to hold a truck and driver, than to hire more fork lift drivers. The supply chain became less efficient. Overall efficiency took a back seat to profitability. In a true free market system contributions to overall efficiency change, positively or negatively, to the profitability to each link along the chain. The constant churning of drivers, especially at the bottom of the food chain prevent the free market from taking full effect. A well meaning government disturbs the free market by subsidizing driving schools. This practice provides an artificially high number of new recruits. That lessens the economic impact of drivers leaving the industry. It does not lessen the safety impact.

 

That made me think about my college economic classes. There we learned about the economic ripple effect. Picture calm waters. Pick up a rock toss it into the water. The ripples on the water spread out. Deregulation of the trucking industry may have had just such a ripple effect over the entire economy. Think about it. If a driver's time has no value it will be taken advantage of. Most of us have been held up at a warehouse. There is no dock space because the truck ahead of you was unloaded on to the dock and has yet to be put away. Why? The warehouse does not have enough employees to put the stock away fast enough. Why? It is cheaper for them to make a trucker wait than to ever have one of their employees sit idle.

 

What if the rock got thrown back in the pond and OTR drivers once again got paid for all of their on duty time? Companies act in their own economic self interest. If we make it more economically feasible for that warehouse manager to have a fork lift driver wait, than for a trucker to wait, that warehouse manager will hire more fork lift drivers. Then they will have to buy more fork lifts. People will be put to work building more fork lifts. Buildings will need to be built to house the increased production. Unemployment will drop. The factors in the supply and demand equation will shift. Blue collar wages will rise. They will buy more stuff. Truckers will be needed to bring them more stuff. As a result the demand side of the supply and demand equation truckers will increase. As a result rates will rise.

 

We are standing at the edge of the water with a rock in our hands. That rock is the conceived driver shortage. I wonder what would happen if that rock got thrown back in the water. Where would the the ripples take us?

Comments (8)

Jeff Clark

Jeff Clark of Kewaunee, WI has been driving a truck for 24 years. He has been an owner operator for 11 years.

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The point of the blog is to ask if drivers were paid for their time (all of their on duty time) what would be the ripple effect. Would the result be the economic need to hire more fork lift drivers, etc. But, to your point the free market is always limited by rules and regulations. Part of our jobs is to be safe. If it was a pure free market with no regs safety would suffer.

July 26, 2014 18:40:08 PM

The free market certainly does exist in trucking. The influx of new members in our industry evidence enough. Remember, the problems that you're speaking of are very minimal. The big carriers that yelling driver shortage represent a small fragment of the industry. Of the top 10 carriers in 2014, only 3 were OTR and even then, small trucking companies that have less than 20 trucks are 97% of the trucking companies out there.

July 26, 2014 12:52:54 PM

The free market does not exist in trucking. It does not exist because we are constantly bringing in new drivers. Those drivers go through schools. Many of those school are profitable BECAUSE of government subsidies. It creates a constant churn of drivers at the bottom of the experience level. The supply of those drivers interrupts the free market and artificially lowers the rates.

July 26, 2014 8:16:50 AM

Interesting points. The driver wages that you cited from the 80's were inflated and artificially high. I'm sure those drivers were on cloud 9. I've talked to some and they were making more money per mile than owner-operators were today. The free market will adjust to pay people the correct rates; it adjusts slowly though.

July 26, 2014 6:38:50 AM

True, Tyrone, We work to maximize our profits under the current situation. That does not stop me from thinking of ways to improve the industry as a whole.

July 24, 2014 22:00:12 PM

Us TRUCKER'S IT'S A LOT TO WORRY About. I found out that if you control what you can. And leave what you can't. Works for me. Just saying. ....

July 24, 2014 16:40:21 PM

I think you nailed it with JIT. Whatever costs the most is economized the most. Whatever costs the least is exploited.

July 24, 2014 15:08:42 PM

Some great thoughts in there. Several years ago the industry buzz word was "just in time delivery". This seemed like a good idea, lowering on hand stock and shrinking warehouse sizes as product was only required as needed with no extra overhead. We had become rolling warehouses, forcing us to cut our productivity until they were ready to receive their product.

July 24, 2014 11:12:53 AM