The National Driver Wage Index, which measures over-the-road driver pay, rose 0.9% year-over-year in the second quarter, but the index is likely to grow at a faster pace as truckload carriers experience the positive effects of economic growth and the electronic logging mandate on freight rates, according to the National Transportation Institute.
The National Transportation Institute’s second-quarter combined index was 155.1 compared with 153.7 in the same period a year ago.
The flatbed index grew 0.7% year-over-year to 158.1, dry van improved 1.7% to 151.5, and refrigerated eked out a 0.3% gain to 155.8. The index uses 100 as an index to represent pay in 1994.
However, sequentially, dry van and refrigerated showed virtually no growth in the first and second quarters.
“While we’re seeing growth in certain markets, it’s not generalized in any way. When we look at the national picture, the driver pay numbers are pretty paltry,” said Gordon Klemp, founder and president of the National Transportation Institute.
Despite the results, the Commerce Department reported that second-quarter gross domestic product rose 3%, the highest rate since the first quarter of 2015. During the first three months of the year, GDP grew at a 1.2% annualized rate.
Nonresidential fixed investment, covering commercial construction and equipment, contributed 0.86 and 0.85 percentage points in the last two quarters, respectively, the highest since the third quarter of 2014. Flatbed trucking, which benefits most from fixed commercial investment, saw a 0.5 point increase in the index sequential on driver pay.
“We’ve managed below 3% fairly well, but we need to be above 3% to have robust freight movement and tightened capacity,” Klemp said. “But for now, shippers are being brutally stubborn about contract rate changes and until their freight doesn’t get moved, rates won’t change enough to fund a broad based driver pay increase.”
Nevertheless, some truckload carriers raised pay in the second quarter, opting to slice into profit margins temporarily until the effects of GDP growth and ELDs trickle down to contract rates.
If we think we’re below market or not paying enough to attract the right type of safe driver, then we adjust it.
CRST President Dave Rusch
Cowan Systems announced a 2% and 5% raise in May — based on location — even though it was unable to secure contract rate hikes to offset the rising health care, insurance and maintenance costs.
Cowan President Dennis Morgan said the decision was difficult, but ultimately concluded that had he not given a pay increase he may not have had enough drivers for when conditions improve later in the year.
“You’re in a box of ‘our margins are eroding already because all the other costs are going up, so what do I do with drivers?’ You’re in that ‘I’m not sure what to do’ window. You want to do it because you know you need to do it and if you don’t do, you’ll end up paying for it later when drivers leave for another company,” he said.
The Baltimore-based carrier ranks No. 67 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
CRST International announced a 15% pay hike last month to hire at least 200 drivers entering the industry for the first time. CRST President Dave Rusch said too many trucks are lined up against the fences without drivers. New hires will work in CRST’s Expedited division, which employs about 1,800 drivers.
“If we think we’re below market or not paying enough to attract the right type of safe driver, then we adjust it. We hadn’t adjusted our pay in the Expedited division since mid-2015, so we thought drivers coming into the industry needed more money,” Rusch said.
Dart Transit Co. raised pay 2 cents per mile for over-the-road owner-operators in April and 5 cents for company drivers in January. On Sept. 1, longhaul owner-operators living in certain lanes also began receiving up to 4 cents more per mile. Dart ranks No. 64 on the for-hire TT100.
“You’ve got a perfect storm going on right now between the upcoming ELD mandate, a natural tightening in capacity in the marketplace and improving unemployment levels. As unemployment improves, these drivers might choose different jobs and leave the industry. So the pay for drivers is off and needs to be addressed,” Chief Operating Officer James Langley said.
Sharp Transport Inc., a dry van carrier based in Ethridge, Tenn., upped the pay 4 cents to 8 cents per mile last month. Drivers with less than one year receive 41 cents per mile and the scale increases a penny until four-or-more years at 45 cents. Sharp also offers performance bonuses of up to 2 cents per mile. Previously, drivers made between 37 and 38 cents per mile.
“The drivers have also worked really hard to control our costs, and we told them we’d reward them if they did that, so we’ve kept our word,” said Gary Shelton, Sharp’s vice president. “There will be opportunities to make it back up.”