In recent weeks, it has been difficult to watch a newspaper or tune into the economic news without seeing a headline about the so-called “trucker shortages”.
This is not a new conundrum, of course. Discussions of labor shortages always tend to bubble up whenever the freight market tightens for an extended period. It is undeniable that right now, businesses and consumers are feeling the effects of short-term spikes in demand – and the immediate limitations of the supply chain, including “driver shortages”, to meet that demand. . Even so, the current chatter is extreme.
To some extent, labor shortages are now, and always have been, somewhat of a Rorschach test: Employers looking to hire tend to see shortages on every corner and workers on the street. Job seekers constantly see seemingly simple solutions in higher wages and more on-the-job training.
For most people, the idea of a labor shortage is quite straightforward: When the demand for a particular type of worker exceeds supply, it is called a shortage. But the whole concept becomes more confusing once you get past the gut-feeling of Economy 101. There are three common mistakes that the industry’s conversation today falls victim to.
First fallacy: incomplete information
The first is the incomplete information fallacy.
Two data is commonly used to support the idea that there is a shortage of truck drivers: the level of employment and the average wage reported by the Bureau of Labor Statistics (BLS) Monthly Current Employment Report (BLS) ( often referred to as the “jobs report”).
At first glance, the interpretation of the level of employment and the rate of wage growth should be obvious: at the end of November, the number of jobs in the seasonally adjusted trucking industry was still slightly below what it was. it was just before the pandemic, and wages for transport workers were at their fastest pace since the early 1980s.
But below the surface, things are not what they appear to be.
BLS employment data is based on “salaried employment” – which only counts the number of workers on the employer’s payroll. For most industries this is fine, but it is a big deal in trucking because it excludes independent contractors. In 2021, self-employed drivers were the fastest growing segment and now represent almost 40% of truckers, by my estimate. Yet, they are not included in the data which is often at the root of the “shortage”.
[Related: ‘Driver shortage’ claims miss self-employment explosion]
Additionally, workers who are in between jobs – having left a previous job and already lined up the next one – are not counted in BLS payroll data. During times when the quit rate is accelerating, like today, payroll data is likely to underestimate employment. Considering the current rate of departure from the industry, this counts for the magnitude of 6,000 to 11,000 workers nationwide who are employed but are not counted as employees in official statistics due to the definitions. and data collection practices.
There are a number of other issues associated with the average wage rates reported in the Monthly Jobs Report – most importantly, the fact that it does not attempt to control the changing composition of the workforce. artwork. (For example, historically, when new college graduates hit the job market in June, average wages drop – at the very least, that’s because entry-level workers tend to be paid less than more experienced workers. pulling the averages where college graduates are strongly represented down slightly.) The key to note is that the data does not show wage growth for individual workers, but rather wage growth in an ever-changing labor pool. .
Equally important right now: wages are nominal – not real (inflation-adjusted) – wages. Like an all-inclusive negotiated rate after weeks of rising fuel prices, when inflation accelerates as it has in recent months, wage growth appears stronger than the power of buying workers doesn’t actually feel it. So while recent nominal wage growth for transport and warehousing workers was 8.2% per year in October 2021, real wage growth was much more modest at 3.4%. This is still high compared to the virtually zero growth in real wages over the past two decades, but it is still low compared to other service sectors. (Like the data on employment levels, the BLS wage data excludes owner-operator incomes.)
Overall, accounting for owner-operators, truckers who are likely in between jobs, and the statistical oddities of the wage data shows a definitely more mixed picture of the trucking labor market: where it was before the pandemic (see table above showing survey ‘truck drivers’ figures of current population, including owner-operators). Wage growth has also accelerated (albeit modestly after adjusting for inflation), in large part because trucking wage growth for so much of recent history was so dismal.
Once we recognize the reality that employment levels have recovered more than conventional measures suggest, this raises a difficult question: why is there a “shortage” of truckers now, when there is no hadn’t there been in January 2020? (Remember back then the industry headlines focused on carrier bankruptcies due to a weak market and a carrier surplus in the market.)[Related: Capture 2020 vision with proactive attention to repair, operating and finance costs]
Second Fallacy: Confusing Short- and Long-Term Shortages
The answer, of course, is demand – and this is the crux of the second common fallacy behind today’s labor shortage angst: Too often the conversation about worker shortages conflates cyclical shortages (to short term) with structural shortages (long term) shortages.
Huge doubts remain as to whether the current level of high freight demand associated with the pandemic – the shift to e-commerce, associated port arrears, accommodating fiscal and monetary policy, high spending on groceries and food. home, shorter commute times as supply chains realign – will last once economic life “normalizes” (whatever that means). Indeed, most trucking experts agree that sooner or later freight demand will decline from its current level. If this happens, and depending on the extent of the decline, it is very likely that there are currently enough drivers to meet this reduced level of aggregate demand.
[Related: Intermodal haulers fight off a ‘system collapse’ at ports]
Third fallacy: ignorance of basic economics
The third and final common mistake is a fundamental misunderstanding of long-run economics – what economists would call “general equilibrium analysis” as opposed to “partial equilibrium analysis”.
At this point, the conversation about labor shortages is in many ways reminiscent of the hysteria surrounding the idea of ’peak oil’ that gained attention in the 1970s and then again in the 1990s. (In its original formulation, it was the belief that any finite resource would ultimately be depleted for any level of consumer demand.) While few would dispute that there is a theoretical limit to the supply of barrels of oil (or truck drivers), time and again, economic history shows that high prices spur innovation, which pushes the production frontier back allowing the economy to meet increasing levels of demand. higher with fixed rates (or even reduced) supply.
This is obviously already the case in the trucking industry. Drop-out and power-only options allow owners and operators to use their time more efficiently by not having to wait at facilities, paperless BOLs and automatic detention mean less time doing paperwork , to name just a few examples.
None of this would negate the short-term reality that many trucking companies have to hurry to attract drivers – especially new entrants to the industry who have many alternatives in adjacent booming industries like delivery. last mile / parcel and warehouse work. There is no doubt that the current job market favors job seekers. The competition for experienced drivers is stiff. The recent increase in the number of new single-truck haulage authorities appears to be mainly due to the return of older workers to the labor market after a brief hiatus; they won’t be here forever. But to blame current market conditions on a genuine long-term “shortage” of labor is to oversimplify a more contrasting reality and overlook a number of embarrassing facts.
Merely emphasizing labor shortages is shortsighted for any industry. Innovating to increase productivity – making the most of your time, primarily for an owner-operator – is a more viable long-term solution.
[Related: Know the value of your time to assess true profit]