August 16, 2014

US Xpress lets loose with 13 percent wage hike for solo drivers; will other truckers follow suit?

US Xpress lets loose with 13 percent wage hike for solo drivers; will other truckers follow suit?

Move is largest one-time driver pay hike in company history.

By Mark B. Solomon

It may not have been the first salvo fired in the truck driver wage wars, but it certainly packed a wallop.

US Xpress Enterprises, a Chattanooga, Tenn.-based truckload carrier, said earlier this week it will raise the pay of its over-the-road solo drivers by an average of 13 percent to a maximum of 46 cents per mile, effective Aug. 25. The increase will put US Xpress' solo drivers in the top 10 percent of solo driver wage earners in the industry, the company said in a statement.

US Xpress added that, on that date, it would eliminate its sliding pay scale for all its over-the-road solo drivers. It will replace that model with a simplified rate structure under which all drivers will earn the same base per-mile pay regardless of the length of haul of their trips, it said. Drivers had complained the sliding-scale formula made it difficult to calculate their base pay from week to week, the company said.

The increase is the largest one-time driver wage boost in US Xpress' 28-year history. The adjustments will boost annual pay for solo drivers to between the high-$40,000s and the low-$50,000s, depending on the level of experience, the company said in an e-mail.

The changes will not apply to company drivers that operate as two-person teams. Nor will it affect drivers providing so-called dedicated services on behalf of certain customers. Under such an arrangement, a trucker commits rigs, trailers, and drivers for a customer's exclusive use over what is normally a three- to five-year contractual period. In return, the customer compensates the provider for an agreed-upon number of miles driven on a round-trip basis. Dedicated services have become increasingly popular because they offer capacity assurance in a world of tightening equipment and driver supply.

U.S. Xpress said it made the changes now because it believes solo drivers will be the driver type in highest demand to support the "emerging business opportunities" it sees headed its way. Solo drivers account for about 1,500 of US Xpress' driver pool of approximately 8,000 people.

US Xpress already pays its solo drivers an additional 3 cents per mile if they are on the road for 30 days at a time and an additional 5 cents per mile for every 45 days at a time they are away.

Benjamin Hartford, a transportation analyst for the investment firm Robert W. Baird & Co., said the US Xpress increases are unusually high for the truckload industry. Knight Transportation, which has arguably been the most prominent truckload carrier to hike driver wages this year, came in at about a 5- to 10-percent increase, Hartford said. The analyst said he didn't expect the US Xpress increases to be the norm.

However, Nöel Perry, a leading transport economist, said that if the economy gains momentum, increases of that magnitude will be needed to attract drivers to the field and avoid the triple-digit turnover plaguing the industry. Perry has estimated the current driver shortage is exponentially higher than the 30,000 figure quoted by the American Trucking Associations.

US Xpress wouldn't comment directly on whether its higher costs would be passed on to shippers in the form of higher freight rates. "Raising freight costs is an industrywide concern, but our customers understand the situation we are in as an industry and the importance of having enough trucks to haul their freight on time and without incident," it said in the e-mail.

Wage increases are carriers' latest effort to attract and retain qualified drivers in an increasingly tight labor market. Swift Transportation Corp., the nation's largest truckload carrier by sales, said last month it plans to institute the largest driver wage increase in its 52-year history between now and year's end. According to an industry executive, some drivers are receiving signing bonuses as high as $15,000, nearly three times what had been considered the standard amount for signing bonuses. In addition, drivers are becoming eligible for bonuses after just six months, according to the executive.

About 7 percent of all carriers are now tying driver pay to performance standards, with performance-based pay adjusted frequently, Gordon Klemp, president of National Transportation Institute, a research firm specializing in driver issues, said earlier this month in a webcast conducted by investment firm Stifel, Nicolaus & Co.

Fleets are loosening their hiring standards in an effort to cope with the shortage, Klemp said in the webcast. He said some companies are looking to recruit individuals as young as 22 years of age, down from the standard minimum age of 23 to 24 years old. Carriers that recently required applicants to show two years of verifiable driving experience now require as little as three months of verifiable experience, he said.

Despite these steps, the industry faces an uphill battle to recruit qualified drivers, according to Klemp. Driver pay has been losing ground to inflation, Klemp said. Based on 2007 base wages the average dry van driver has seen purchasing power erode by about 10 percent, he said.

Additionally, over the past 12 years, drivers have lost ground compared to the general wage earner, according Bureau of Labor Statistics data quoted by US Xpress. In 2013, the typical annual wage for all tractor-trailer drivers nationwide was $40,940, 11.8 percent lower than the overall national average wage of $46,440. In 2001, the differential between the two wage scales stood at about 1 percent, the company said.

Not only is the pay substandard given the nature of the work, but new government rules and company policies have resulted in increased micromanagement of drivers and have diminished the freedom and flexibility that traditionally drew people to the profession, he said.

To seriously address and resolve the issue, truckload driver pay would effectively need to double from current levels, Klemp surmised. However, he believes such a scenario is unlikely given continued modest economic growth, a still-fragmented carrier pie, and shippers' intense focus in reining in transportation costs.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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