With the U.S. economy strengthening, and industries booming, truck drivers are seeing some of the largest wage increases in years. As encouraging as it is for drivers to be seeing bigger paychecks, the reasoning behind the pay raises can’t be ignored: the nationwide truck driver shortage.

Why are truckers’ wages going up?

It’s no secret that truckload capacity has been tight lately. Truckers who were unable to afford the shortage of loads when the economy was suffering left the industry behind for jobs that allowed them to be closer to home. Not only that, but the tougher federal regulations introduced in 2013, which put tighter limits on driving hours, didn’t exactly persuade truckers to stay in the industry. That leaves about 35,000 spots unfilled, according to the American Trucking Associations (ATA).

Now that the economy is bouncing back and there is an increase in demand for goods, there is also a stronger need for getting those goods to market. A limited number of truck drivers and high demand from shippers leaves even some of the largest carriers in a scramble to get their unmanned trucks on the road.

With hundreds of trucks left idling and the average turnover rate for drivers with large carriers being just over 90%, fleet managers have had to make the driver’s seat look more appealing to potential truckers. The best way to get that message across is by fattening paychecks, as well as taking on licensing costs and offering signing bonuses. This means higher salaries for those who are left, but also those in the younger generations that need to make up for the 96,000 drivers leaving every year for retirement.  If carriers don’t take measures to boost hiring numbers, we will see a shortfall of 240,000 drivers by 2020, the ATA said.

Read our blog about truckload capacity to learn more.

What impact will this have on my supply chain?

So, here comes the bad news for shippers. Since carriers are upping their labor costs, they need to still protect their profit margin. In order to do this, they must raise their bottom lines – in turn, raising their rates.

Until the driver shortage flames have been put out, expect capacity to be tight and rates to be high.  There are still not enough drivers to cover the volume of loads needing to be shipped. Carriers are forced to turn down loads because of not having trucks available, and if they’re not turning them down because of capacity, they are hanging up because the rates offered are just too low.

How can I avoid the higher costs?

As long as you’re shipping truckload, rising rates are something you’re just going to have to factor into your budget. You will not be able to continue shipping at the same rates you locked in one year ago. This is the unpleasant truth.

However, there is an alternative.

If paying higher rates for truckload shipping is simply not an option, consider moving freight over the rail (intermodal).  Not only is intermodal usually cheaper than truckload, it’s environmentally friendly and can meet many of the requirements demanded in the truckload industry, like transporting reefer shipments in temperature controlled cars. However, its most appealing characteristic is the fact that it can offer plenty of capacity when trucks are hard to find for a reasonable price.

Just this year, intermodal volume for all of North America increased 5.7% to 13 million trailers and containers, according to the Association of American Railroads. Intermodal freight shipping is on the rise, and shouldn’t necessarily be your last option, because it’s easily becoming your best. Even if you only utilize intermodal shipping a few times a year, it could save you time, money, and stress.

Check out our blog about intermodal shipping to learn more.

Sources:

“ATA MC&E: Economy Improves, Driver Shortage Continues”, Truckinginfo
“Turnover at For-Hire Carriers Largely Unchanged During the First Quarter”, ATA
“Drivers Gain From Wage Race as Truckers Turn Away Cargo”, Bloomberg
“Expanding U.S. economy exposes rising truck driver shortage”, Reuters