A new study commissioned by the Federal Motor Carrier Safety Administration looking into the impacts on safety and driver retention of various methods of truck driver compensation drove a stake into a long-held belief among larger motor carriers that the trucking industry is plagued with a persistent "driver shortage."
The study, conducted by the National Academies of Sciences, Engineering, and Medicine (NASEM), was required by the 2021 Infrastructure Investment and Jobs Act, in which Congress directed FMCSA to contract with the National Academies to conduct the study. While FMCSA is not authorized to oversee and regulate driver compensation, the agency has an interest in understanding the ways compensation and working conditions may affect highway safety, NASEM said.
The organization said its report focuses primarily on trucking’s for-hire long-distance truckload sector, where drivers are most often paid “in a piece rate manner that is based on output produced, such as loads transported and miles driven to deliver a load.” That's as long entrenched, and as some owner-operators like it, furthermore. Overdrive research in 2021 showed a strong preference among owner-operators for percentage pay over others, with 7 in 10 indicating such.
Yet according to the compensation study report's authors, utilizing piece-rate structures instead of hourly pay “can raise concerns about whether drivers who are intent on providing that output,” by delivering a load “in a timely manner, perhaps to return home or pick up another load,” may drive unsafely “by speeding to maximize miles driven within regulated driving hours,” NASEM added.
The report also noted that the “irregularity of available loads ... can lead to drivers earning inconsistent pay on a weekly and monthly basis. Irregular earnings, coupled with working conditions that can be stressful when drivers must scramble for paying loads, contributes to the persistently high rates of driver turnover shared by nearly all long-distance [truckload] carriers.”
Using what it called “traditional economic principles," furthermore, the study concluded that the truckload sector's long-asserted "persistent shortages of drivers" simply can't be supported, in part echoing conclusions of reporting in Overdrive and elsewhere, and the thoughts of many owner-operators besides, over the past decade.
[Related: Demanding an hourly-pay standard for truckers: ‘A rising tide lifts all boats’]
Truck driver pay’s impact on retention, turnover
One key aspect of the study was for NASEM to examine the effects of compensation methods and work conditions on driver retention by trucking companies.
The study noted that the American Trucking Associations periodically surveys its members and reports average turnover rates, but not the variation around the average. Yet “anecdotal evidence suggests that high driver turnover is both common and persistent among [truckload] carriers,” NASEM added.
NASEM cited ATA data that showed the average annualized turnover rate from the third quarter of 1996 through first quarter of 2023 was 92.7% for large truckload carriers (those earning $30 million or more in annual revenue) and 77.6% for small truckload carriers earning less than $30 million in annual revenue.
NASEM found that one reason turnover is so high at large truckload carriers could be that the truckload sector is fundamentally based on the supply of a low-cost service, which requires carriers to keep costs as low as possible to be able to offer the lowest price to move freight.
[Related: Recognize the skill that goes into truck driving, and pay accordingly]
This also requires carriers to “make tradeoffs among different costs to manage their total costs,” NASEM noted. High turnover rates create costs for recruiting and training new drivers, while experiencing lower productivity and generally higher crash rates from new drivers, the study added. To reduce turnover and retain drivers, however, carriers “may choose to pay a driver more than the worker’s next best earning opportunity.”
Carriers might also “reduce the efficiency of driver dispatching” by sending drivers not to loads nearest their drop-off location, but closer to their home base. (NASEM found that, unsurprisingly, lack of home time leads to higher turnover.)
“Adjusting dispatching to allow drivers to be routed in the direction of home more often and more regularly, and to operate in more familiar service areas, will improve overall working conditions,” NASEM said.
The tradeoff here, of course, is that making dispatching less efficient also could make the business less profitable, “as revenue decreases due to missed loads," and as "costs increase due to more empty trailers and out-of-route miles for which the carrier is not paid.”
One theory was cited from a 2023 research paper from Stephen V. Burks and others analyzing driver turnover. The authors used a model that found “a typical long-distance [truckload] carrier will tend to favor the cost-minimizing choices of an intense, efficient dispatching practice and controlling driver pay expenses while accepting the costs associated with the resulting high turnover.”
Essentially, they found that many truckload carriers may be more willing to accept the costs of driver turnover -- and recruiting and training new drivers -- than the costs of retaining drivers and reducing turnover.
[Related: Driver shortage: Readers weigh in on turnover, rates, pay, working conditions and more]
Does a 'driver shortage' really exist?
A perceived "driver shortage" has ranked as a top 10 industry concern, according to the annual survey by the American Transportation Research Institute, throughout the entire 20-year history of the survey. This year’s survey, released earlier this month, had driver shortage ranked as No. 9 overall, yet it was the No. 3 concern among motor carrier respondents participating in the survey.
NASEM took note of the driver shortage assertions, highlighting that “many long-distance [truckload] carriers believe there is a chronic shortage of drivers available to work for them and that this shortage, in turn, may contribute to the sector’s persistently high rates of driver turnover.”
The organization noted that because ATA’s studies “have been conducted using proprietary techniques and assumptions that are not publicly defined, it is not possible to evaluate the validity of their claims of driver shortages.” What NASEM did instead was apply “basic economic principles of supply and demand” to look into the issue.
First, NASEM said labor economists maintain that when the demand for workers in an occupation increases, the normal response is to increase wages. Based on average wages from 2006 to 2024, NASEM said the “trends are not indicative of the wage premium one would expect for long-distance [truckload] employees if they were indeed working in an occupation experiencing a chronic labor shortage.”
Another way of examining claims of a driver shortage is by looking for lags in the supply of long-distance truckload service relative to the demand for service. NASEM looked at both spot rates (for a look at possible short-term capacity shortages) and contract rates (for longer-term capacity shortages) from 2014 to mid-2024. Researchers, of course, found periods of increasing rates followed by periods of decreasing rates in both markets. These dynamics held true during the pandemic shutdown and recovery from 2020-2022, “albeit with a very large spike in demand that was reflected in higher spot and contract rates, which was followed by a large drop in rates in response to falling demand.”
One implication here, NASEM found, is that when spot rates fall below contract rates, there is excess capacity, meaning an excess of trucks and drivers.
“Thus, although spot and contract price changes may be indicative of driver shortages and surpluses, the shortages and surpluses are resolved, albeit with time lags, through the operation of normal market processes without suggesting that driver shortages are a chronic problem,” NASEM concluded.
Applying these “traditional economic principles, therefore, does not support assertions of persistent shortages of drivers in the long-distance [truckload] sector.” Ultimately, these labor economics insights "suggest that claims of long-term driver shortages are spurious and not likely to be helpful in explaining the sector's turnover patterns and the possible influences of compensation."
[Related: Framing the trucking labor situation: 'Shortage' at what price?]
What’s more likely, researchers found, “is that carriers in the long-distance [truckload] sector have come to believe there are chronic shortages of drivers because of the constant need to replace them during both expansions and contractions” in the market. “However, that need, as evidenced by the research and data presented [here], may be explained by the overall effect of the industry’s competitive structure, which compels carriers to employ cost-focused managerial strategies.”
The Owner-Operator Independent Drivers Association has been arguing against the driver shortage narrative for as long as it has existed. OOIDA President Todd Spencer, who was an owner-operator in 1976 when he first joined the organization, said he still has a copy of ATA’s first report claiming a driver shortage from the late 1980s.
“We’ve always known that was mythical,” he said. “And we’ve always known that there is a connection between pay, and how you’re paid, and driver turnover and people coming and leaving the industry.”
Spencer and OOIDA have long argued that “every year between four and five hundred thousand new CDLs are issued in an industry that, even if you believe the BS claims of a shortage of 60,000 or 80,000 or whatever,” that many new CDLs issued each year “is a lot of people. Where do they go?”
Spencer highlighted NASEM’s conclusion that carriers are more willing to pay for new recruits instead of retaining current drivers impacts highway safety.
“Pretty much the conclusion that the report lays out is that carriers have determined that paying … either enough and in methods that basically improve driver retention are more costly than continuously to recruit brand-new people,” he said. “The reality is, newer people, inexperienced people, are going to be more likely to crash. ... So, in essence, what we’re saying here is it’s cheaper for bigger carriers to put new people out on the road, even though they’re going to crash more, than it is to pay those folks well enough that they stick with the industry and ... get the needed experience and learn the professionalism that would improve highway safety. That’s frustrating.”
The American Trucking Associations stood by its long-held belief that a driver shortage does, in fact, exist, noting that the conclusions in the NASEM report “fail to account for several important points and distinctions that are critical to understanding the market for professional truck drivers.”
First, ATA said the researchers “entirely ignore the issue of driver quality and the fact that this is a highly regulated industry by multiple state and federal agencies.” ATA highlights some barriers to entry for new drivers -- including age requirements, CDL testing standards, strict drug- and alcohol-testing regimes, and safe and clean driving records -- which other “blue-collar” jobs the researchers compare trucking to, such as residential construction, don’t have to deal with.
“Carriers repeatedly report that they have enough applicants for their open positions, however, what they do not have is enough applicants who meet the required qualifications to be hired,” ATA said in a statement to Overdrive. “In some cases, carriers report having to reject 90% of applicants out of hand, because the applicants fail to meet at least one of the prerequisites to drive in interstate commerce.”
ATA contends that these challenges “mean that the classic economists’ definition of a ‘shortage’ -- that the workers don’t exist to fill jobs even when wagers are raised -- is not applicable to the dynamics of the driver market.”
Beyond the barriers to entry, ATA said the researchers also missed the mark on lifestyle factors like time away from home when discussing turnover rates because “they do not account for these factors when analyzing the existence of a shortage.
“One of the most critical differences between over-the-road driving and other ‘blue collar’ jobs is that truck drivers are away from home for long stretches as part of the job,” ATA said. “Not adjusting their conclusions for something as important as work-life balance leads the authors to make ill-found claims.”
[Related: Driver shortage: Where are the empty shelves?]
Does method of pay impact driver safety?
In addition to determining if truck driver compensation and method of compensation impact driver retention, NASEM was also tasked with determining any safety impact.
The report highlighted a couple challenges faced when conducting this part of the study, including that motor carrier compensation methods and records “are often proprietary.” Possibly a bigger challenge, however, was that there is little variance in pay methods in the truckload industry, providing “limited opportunities to observe their respective effects by comparing the experience of carriers in the same business that use different pay methods.”
While the goal of the study was to gain insights into how driver pay affects safety, NASEM said that “a multitude of factors related to the driver, carrier, and environment can have a bearing on the safety of trucking, complicating efforts to isolate the safety-related effects of individual factors such as compensation.”
Ultimately, NASEM concluded that available data and research “are insufficient to determine whether driver working conditions and compensation methods” impact drivers’ safety performance in the long-haul truckload sector.
Though most truckload carriers use piece rate pay -- either mileage or by the load -- “there is observed variability in carrier-level safety performance, including in rates of carrier compliance with traffic and motor carrier safety laws and regulations,” NASEM said in the report, adding that understanding why that is could help inform FMCSA’s priorities.
NASEM’s report does highlight the fact that trucking is exempt from the Fair Labor Standards Act’s (FLSA) overtime pay requirements, noting that employee drivers in trucking do not have to be paid time and a half after 40 hours worked in a week.
There has been movement in Congress toward potentially removing the overtime exemption, which OOIDA has supported and ATA has opposed. Following NASEM’s report, Spencer reiterated that, while owner-operators as independent contractors would not directly receive overtime pay, the result from requiring carriers to pay it to driver employees would be that “shippers and receivers would start improving their practices” as carriers put more value on drivers’ time.
Overall, however, OOIDA’s Spencer called it “disheartening” that more solid conclusions were not found during the research.
[Related: 'It's unconscionable' overtime pay not required: Operator to driver-compensation committee]
NASEM’s recommendations to FMCSA
Given data limitations, particularly on the safety and compensation fronts, recommendations on how FMCSA should proceed are also limited. Primarily, NASEM is recommending that the agency collect more data on the issue of driver pay and how it relates to safety.
Based on the findings of the study, NASEM offered two recommendations to FMCSA:
- Explore cost-effective opportunities to tap already existing and planned research and data collection efforts to help regulators, researchers and industry examine the potential effects of driver compensation and working conditions on long-distance truck drivers
- Support further research on why safety performance varies between truckload carriers despite uniformity in compensation methods and working conditions
Spencer said FMCSA should “make a priority of gathering the data that relates to level of experience and professionalism.” One way to do this is at the scene of accidents. “We need to gather the data that can really be useful in terms of better policies to improve highway safety, and if you capture it from crash scenes, from accident scenes … that has to be pretty valid data if we're looking at the right things," such as experience, training and qualifications, he said.
