If you have read any article about the transportation industry in the past few years, there is a high chance you have heard about a trucker shortage. Even the American Trucking Association (ATA) has been on record to say that there are not enough people hauling freight.
“Over the past 15 years, we’ve watched the shortage rise and fall with economic trends, but it ballooned last year to the highest level we’ve seen to date,” said ATA Chief Economist Bob Costello. “The combination of a surging freight economy and carriers’ need for qualified drivers could severely disrupt the supply chain. The increase in the driver shortage should be a warning to carriers, shippers and policymakers because if conditions don’t change substantively, our industry could be short just over 100,000 drivers in five years and 160,000 drivers in 2028.”
People from all angles have been working to solve this shortage, from offering paid CDL training to passing new laws to expand the workforce base of truckers. Ultimately, there is no true trucker shortage, and this can be attributed to the most basic principle of economics.
Supply, Demand, Price
Any high school or college economics class can tell you the single rule that drives all economic activity: supply, demand, and price are all linked to one another.
- An increase in supply will decrease the price, due to competition from suppliers offering the same product and wanting to be the one who offers the transaction.
- An increase in demand will increase the price, due to competition from purchasers wanting to be the one who obtains the product.
- An increase in price, which can result from factors such as government intervention such as taxes and price floors, increases supply and/or decreases demand.
To apply these economic concepts to the world of trucking, pretend there is a logging company that needs its redwood shipped. As the logging company offers more per mile (price), more truckers will enter the market hoping to cash in on the gold-rush (supply). As trucking companies exit the market due to it no longer being financially viable for them (supply), this redwood will need to increase the rate per mile (price) if they want to keep the amount of supplies hauled (demand) steady. The redwood logging company can also keep prices the same and ship less redwood (demand).
It is an intricate balancing act of the three factors. News outlets like to call it a shortage of truckers, but never seem to want to call it a deficit in rate per mile or an excess of demand. Why is this? Why are truckers blamed for not pulling enough weight if they are simply not being paid the appropriate amount to do so? It makes you think.
The trucker shortage is a term coined to shift blame. It makes it seem like truckers are selfish for not wanting to drive at current rates instead of saying that companies needing things shipped are selfish for not offering an appropriate rate.
According to the DAT, trucking rates have increased over the past five years but have stayed relatively steady the in past three. Writing about this for Overdrive, owner-operator Jeffery Hanson says that his cost per mile is $1.68. The amount he actually makes driving per mile is whatever rate he gets, less his cost. If current dry van rates are approximately $1.80 per mile, Hanson makes 12 cents per mile for dry van, and frankly finds that as a dismal motivation to even get out of bed in the morning. Naturally, he may prefer to go for flatbed or reefer where the rates are more favorable, but even then making 43 or 46 cents per mile, he might as well just become a company driver.
If the country wants to stop the dearth of freight hauling, there are a myriad of solutions. Congress can lower the age limit required to haul across state lines (as it is doing), engine builders can increase fuel efficiency to reduce the cost per mile, or technology companies can continue working to automate commercial trucks and make the barrier of entry for driving a big rig lower. But in the end, no solution is as simple as the companies needing their products shipped offering more money per mile to the truck drivers that help their business thrive. To place the blame entirely on the supply side is to ignore the most basic law of economics: supply and demand.
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