Overdrive Magazine bills itself as “a free business publication for qualified owner operators and has covered the trucking industry with news and information for over 50 years.” It ran an article On March 4th, 2016 with the headline “Trucker pay has plummeted in the last 30 years, analyst says.” It’s a headline that makes it sound as if the industry is taking advantage of its drivers. It’s possible that some companies have taken advantage of their drivers, but an entire industry? For the headline to be true, it would require a conspiracy of epic proportions. Here’s the rest of the story.
Driver pay rates have been under pressure for years. The reason for depressed driver wages are, well, the drivers themselves. Hours of service rules that attempt to restrict the amount of time that a driver can drive, have been around since 1938. Enforcement is dependent on a log book that the driver is responsible for filling out. It wasn’t long before enterprising businessmen figured out how to skirt the system, so that they could drive when their log books showed them to be off the clock, resting. As a result, the United States enjoyed the benefits of an illegitimate transportation economy. Drivers who drove more than the legal limit, spread their fixed costs over 130,000 or more miles a year, giving them a cost advantage as compared to those trying to follow the letter of the law. The Department of Transportation knew it was going on but had no easy means to prove it, until recently.
Whether it was intended or not, the act of noncompliance with hours of service rules, created illegit-imate capacity, with superior cost structures to those companies in full compliance with hours of service rules.
Capitalism is an efficient mechanism for valuing a good or service. When a market is inundated with illegitimate capacity, the value placed on a good or service erodes, as is the case with driver pay. Because there were so many low-cost alternatives to companies playing by the rules, the market cleared rates well below what was required to operate legitimately. Truck payments, fuel, and tires were trading legitimately across all companies. The only cost component that could bare the softness in rate caused by the illegitimate behavior, was the labor component or driver pay. Isn’t it ironic that the very people who complain about low pay, are quick to revolt against regulations that constrain the amount of driving they do. This defiant behavior acts to depress the amount they get paid for their service.
Anyone familiar with transportation knew what was happening but couldn’t prove it because the data was handwritten in paper logs, stored in millions of paper files, locked away in tens of thousands of warehouses, dispersed all over the country. Then the digital revolution and the internet of things conspired to allow the regulators to write effective rules mandating the use of electronic logging devices. These devices were integrated with the engine control modules in the trucks themselves. This combination has proved itself tough to defeat.
The trend toward electronic logging began in earnest in 2012. Trucking companies that were found to operate in an unsafe manner were given a second chance if they were willing to implement electronic logs. As electronic log books gained traction, driver pay scales began to increase. The increases were reported in Overdrive Magazine as recently as February 10th, 2015 with a headline that read “Record year for owner-operator income: Here are the numbers”.
Isn’t it curious that a law mandating the use of electronic logs, a law that is wildly unpopular with drivers, correlates almost perfectly with record driver income? It’s not curious at all, its the law of supply and demand at work. Constraining a resource in the face of steady demand will increase the value of the resource. Driver pay is no longer under the competitive rate pressure caused by illegitimate behavior. The illegitimate behavior is easy to spot with a computer. Billions of data points are analyzed in fractions of a second. If you get caught cheating, it’s game over.
