Arkansas Trucking Association

Rising Driver Compensation Could Up Truckload Pricing

Hefty increases in truck driver wages are expected to propel truckload rates higher in 2015, pushing pricing up by double digits, a transportation analyst warns.

“While our current earnings models assume low-to-mid-single-digit (truckload) price increases over the next couple of years, we would like to point out these estimates will likely be proven wrong,” David G. Ross, a managing director at the Stifel Transportation and Logistics Research Group in Baltimore, said.

Truckload carriers will need to raise driver pay substantially to attract the type of qualified candidates needed to haul freight. On top of that, a host of new driver-related regulations will make hiring truck drivers harder, and more expensive.

“The biggest cost component for a truckload carrier is labor (which is primarily drivers), comprising anywhere from 25 percent to 35 percent of revenue,” Ross said. “Therefore, if we believe (truckload) driver wages need to go up approximately 50 percent to bring them in-line with the (wages paid in the) LTL market and attract significant new entrants, underlying pricing would need to rise 12 percent to 18 percent, all else equal, to fund these increases.”

Continued economic growth will create more trucking jobs but those jobs are likely to be even harder to fill. As the U.S. unemployment rate drops toward 5 percent in 2015, fewer hireable candidates — those who are drug-free and have good driving records — will be available for trucking companies to bring onboard. They’ll already be working elsewhere.

That will only serve to push driver pay and trucking rates higher, especially if U.S. wages overall begin to rise, as many economists anticipate. And that may finally narrow or even close the widening gap between the average truck driver wage and the average overall U.S. wage, a gap that widened from 1 percent in 2001 to nearly 12 percent in 2013.