Driver Pay Cuts
Truckload carriers have been aggressive in reducing driver pay during this economic cycle, so much so that demographic and regulatory changes could exacerbate an upcoming driver shortage in the next few years, according to Morgan Stanley. This could limit any growth in truckload capacity and support pricing gains in 2011 and beyond.
According to research by Morgan Stanley, driver pay has decreased by 6.6 percent from the third quarter of 2007 through the first quarter of 2010. In contrast, from 2001 to 2003, driver pay was down 3.3 percent. The most recent decline is the largest peak to trough drop since Morgan Stanley began conducting the survey.
Morgan Stanley said a few private carriers have had problems with driver recruitment, most likely because the low pay has caused drivers to stay on unemployment.
As the economy recovers, truckload carriers will likely be forced to bring wages back up to support driver recruitment, Morgan Stanley said.
Cutting Back on Recruitment
Fleets will also be constrained by their ability to hire and train new drivers, according to FTR Associates' Driver Supply Update for May.
While there are drivers looking for work, fleets have cut down their hiring and training departments so severely during the downturn that most will face the challenge of being able to process new hires, FTR says. FTR estimates that the industry's hiring ability has been cut by one third.
The Effects of CSA 2010
Fleets will also be hard-pressed to find drivers once CSA 2010 kicks in, according to analyst group Stifel Nicolaus. In a letter to investors, Stifel Nicolaus said that under CSA 2010, drivers will be responsible for their safety violations, which will stay with them as they go from carrier to carrier.
Under the new safety system, while there is no intervention threshold for drivers, FMCSA will list 11 "red flag" violations that could trigger regulatory actions against the driver.
"We believe that many carriers will refuse to employ drivers with poor safety rankings; not only will poorly ranked drivers be more likely to cause accidents, but having the poorly ranked driver on staff would cause a carrier's overall safety rating to deteriorate," Stifel Nicolaus said.
Carriers are also likely ramping up their safety training, personnel and information technology resources in order to cover their bases under CSA 2010. Fleets will want to do everything they can to avoid a safety investigation.
"This preparation likely includes thoroughly screening new drivers and a heightened focus on training existing drivers," Stifel Nicolaus said. "We believe that increased driver training is necessary in many cases because, under CSA 2010, drivers will become increasingly responsible for managing their own safety record."