What is Causing Truck Driver Shortage and How to Solve It - Strong Tie Insurance Services

What is Causing Truck Driver Shortage and How to Solve It

Strong Tie Insurance December 17, 2020 Commercial Truck Insurance

As the New Year rolls around, the trucking industry is set to shine as one of the few bright spots in the U.S. economy. Spot load, flatbed, and refrigerated rates are all up, anywhere from nearly 10% to almost 30% year-over-year. The one dark spot is the current driver shortage.

There are several factors creating the shortage and only a few solutions. Let’s take a look at what the trucking industry is up against, what they plan to do about it, as well as the mandatory insurance for commercial trucks.

5 Factors Creating the Truck Drivers Shortage

US Xpress CEO Eric Fuller recently shared in a Yahoo Finance interview that, due to the projected freight demand in 2021, the shortage of drivers is expected to reach an astounding 200,000.

Like a snowball rolling down a hill, the situations all seemed to conspire to create an avalanche of trucker shortages that is deeply affecting the trucking industry.

1. 2019 Layoffs

2019 was not a good year for the trucking industry. Almost 800 carriers went out of business due to the decline in manufacturing and escalating insurance costs and commercial insurance is required by federal regulations.

Tens of thousands of truck drivers left the industry in 2019 due to a slump in manufacturing. Some drivers called it a bloodbath, and many of those never returned or retired.

According to the Bureau of Labor Statistics, 1.3 million people in the trucking industry remained unemployed, as of August 2020.

2. The Pandemic

As the pandemic laid to waste the economy of the U.S., trucking companies found themselves with no goods to carry as freight volumes and trucking rates collapsed.

Cass Information Systems reported that shipment volumes dropped almost 23% in April when compared to 2019. This represents the lowest levels seen since 2009.

The result was the layoff of over 88,000 truck drivers, the biggest single-month loss of trucking jobs on record.

3. Limited Capacity at Truck Driving Schools

The need for new drivers is evident. Unfortunately, obstacles are limiting the ability to become a truck driver.

Since the closures and social distancing measures brought on by the pandemic went into place, schools for training truck drivers have experienced decreased capacity.

Transport Topics reported on a virtual panel discussion involving three leading trucking economists. According to American Trucking Associations’ Chief Economist Bob Costello, “The pipeline of new drivers coming into the industry is significantly less. When I talk to truck driver training schools, they are down 20% to 50% in terms of the number of drivers trained this year compared to last year.”

These same restrictions have left most state motor vehicle offices open by appointment only. Going through the testing required to obtain a new Class A Commercial Driver’s License (CDL) can now take several weeks to a month or more.

4. Drug and Alcohol Clearinghouse

The new Drug and Alcohol Clearinghouse went into effect on January 6, 2020. This online database contains records of violations of drug and alcohol prohibitions including positive drug or alcohol test results and test refusals on drivers. Most carriers are required to report these violations.

Drivers with violations must complete a treatment program before returning to on-duty status. Currently, over 34,000 drivers have been disqualified and 26,500 have not begun the process to return to duty.

Once they do return, they may experience a commercial insurance rate increase.

5. High Driver Turnover

Long-term truck driving is not for the faint of heart. Long days and sleepless nights have left many leaving the industry in search of better pay, benefits, and healthier working conditions.

Some long-haul drivers have opted to sign on with local companies that enable them to be home after a long day on the road.

4 Solutions to the Truck Driver Shortage

1. Increase Driver Pay

The good news for drivers is that the current shortage of truck drivers has resulted in pay increases. Companies are experiencing an increase in freight rates as capacity tightens and passing this on to their drivers.

Starting pay at Crete Carrier and Shaffer Trucking now range from 53 cents to 59 cents per mile. According to their website, the top 50% of their drivers average over $80,000 per year.

2. Offer Benefits and Bonuses

Additional benefits and bonuses offer an incentive to return or start anew as semi-tractor-trailer drivers. These include shifts that allow for some weekends at home and extra pay in cases where drivers lose money due to incremental weather, breakdowns, or traffic congestion.

K & B Transportation’s new pay packaged guarantees $1,350 minimum per week, paid vacation, a starting rate of 54 cents per mile, scheduled raises, a full benefits package, and safety bonuses.

3. Provide Better Working Conditions

Driving a truck is a dangerous job. In 2019, 2,734 fatal crashes involved trucks and buses, while close to 61,000 individuals were injured in these types of accidents.

Shorter routes with teams picking up trailers at various drop-off points would result in drivers getting to spend more time at home, and not so much time on long-hauls.

Most drivers are paid by the mile which means that unexpected time spent loading and unloading freight, or slowing down due to unsafe driving conditions, results in decreased wages. With the increase in shipping rates, some fleets may consider paying drivers by the hour.

4. Hire Underutilized Groups

One problem is that the industry has been dominated by older men for quite some time, with the average age of a commercial truck driver being 55 years old.

Recruiting younger people and women may help this sector increase their percentage of the labor pool. Data reveals that less than 7% of people driving trucks are women.

While the industry faces challenges, it is also experiencing tremendous opportunity that is expected to surge well into 2021. Make sure your fleet is covered and protected.

Commercial insurance is a necessary expense for a trucking company. According to FreightWaves, insurance rates can triple for those that have had accidents with fatalities. Just being in a high-risk state such as California or New York can increase rates by 30% or more.

Find the Right Insurance for Commercial Trucks

At Strong Tie Insurance, we understand the need to limit costs in order to increase profits, while still maintaining the protection you require. Call us for a no-obligation quote.