The economics (and politics) of trucking

Not sure if I’m alone, but I’ve been interested in trucking for a while now. I seemed to be hearing very contradictory things. Take for example being an independent owner/operator. I’ve heard that it’s great and that it’s terrible. So when I stumbled on this article, I took a look.

A lot of my confusion has been not recognizing when the conversation is about over the road (OTR) ie long-haul trucking vs local trucking.

It will be interesting to see whether robots can actually drive OTR. It’s the easiest kind of driving, so it’s the most likely. He doesn’t discuss it, but he does say that if OTR pay doesn’t increase the companies are going to run out of people they can trick into doing it, given 90% turnover. And it appears to me this has been happening, since I keep reading about the desperate need for more truckers, and the White House sees the need as urgent enough to require an action plan.

5 Likes

I have lots of things to say on the topic. I drove for nearly 10 years. All kinds of driving - OTR, Regional (a week out at a time), and local. I’ve talked to hundreds of drivers through the years.

The “tricking” is real. I worked for a company called PAM Transport and though I didn’t sign on to the lawsuit, the company was paying me less than minimum wage the entire time I worked for them. I got out as quick as I could and then was on the hook for the $6,000 “trucking school.” See this article on the lawsuit: PAM Transport $16.5M wage lawsuit settlement approved by court

(If you want to go down a real rabbit hole, just spend some time looking into the (now deceased) owner of PAM (and dozens of other trucking companies) Manuel Moroun. He owned the bridge in Detroit between the US and Canada and single-handedly kept the two countries from building a second one.

But back to the stuff at hand, the article is dead on. Pay is absolutely at the core and the ridiculous fix of having even younger men driving is a recipe for disaster. Just imagine all the road-rage of an 18-year-old hot-foot idiot in an 80,000lb truck who is mad about his $250 paycheck from last week and trying to make up time on the entrance ramp. Everybody loses.

I don’t think robot driving is a way through, either. The idea of having driverless 80,000lb vehicles is frightening.

What this does is show the weakness of the world-economy. I don’t know what the solution is but I do know that my parents couldn’t buy Florida oranges when they were in Florida last year. They were all hauled in oranges from California. (Which is a different rabbit hole of reading.)

It is a sad day when most truckers are better off signing union papers than working for the guy down the street but it is absolutely true. My best paying job paid about $60,000 a year but I worked about 85 hours a week with no overtime. Trucking companies continue to game the system and are one of the last unregulated work-pay areas in the country.

3 Likes

Or apparently explicitly exempted from regulations that are universal. I just ran across the following on a form I was reluctantly signing (emphasis mine):

You must give your consent for reports to be provided to employers. A consumer reporting agency may not give out information about you to your employer, or a potential employer, without your written consent given to the employer. Written consent generally is not required in the trucking industry. For more information, go to Learn more | Consumer Financial Protection Bureau.

1 Like

They are also exempt from many other things. One of the questions asked when gaining employment is whether you have ever been diagnosed Bipolar or clinically depressed and if you are currently medicated for it. I have been denied employment and it is perfectly legal. (For good reason, I think. You don’t want a dude who is suicidal driving an 80,000lb death machine.)

Mark Cox drove for a long time. He’s not in Sanityville but may ask him.

My brother has driven for Mr.P trucking for about a decade and finally made his way to UPS last year. He did make good money however he sacrificed any chance at a wife and children. Now, I’ve always had a special place in my heart for truckers, but Covid especially brought that to light. Tiktok was inundated with bored nurses dancing whilst sheeple had signs in their yards about them being heroes. Not to belittle medical professionals but too point to the hypocrisy of our “culture.” Truckers work way more hours, have poor home lives and have the most vital occupation in our society. Everything thing we eat, purchase, drive and live in is shipped via semi.

All that being said; I feel the elimination of OTR drivers via a drop and lift hub system is a better solution. Envision a network where drivers would drive no more than 5 to a destination and backhaul another 5 hours (of course Sundays would be eliminated.) If Tesla is any indication of the state of technology in self driving, only a democidal maniac or fool would advocate for it. Above all that the technocrats have no fear of God and respect for the biblical principle of work. In summation how can I say we’re screwed without sounding like a high school dropout?

6 Likes

This is, technically, already being done. It just doesn’t work the way you think it should.

I rarely drove a full load from start to finish as an OTR trucker. Most of the time I drove for a day and dropped it at a yard then took another trailer somewhere else. All trucking companies with a few hundred drivers do this. There are dropyards in every decent sized city.

The trouble comes because freight is not reciprocal. The Midwest produces the most stuff, both food and general goods. Therefore, shipping from the Midwest costs a premium. There is a ton of freight and not enough drivers.

But Florida, Montana, Maine are not producing nearly as much stuff. So to get the truck back to the Midwest you either run empty or for less than it costs to drive. But you have to get the truck and trailer back to the good paying freight.

But the coasts have many more people and, therefore, a great need of freight. And the cycle continues.

Every few years an upstart freight company will come along to “disrupt” the way things are. They never last because the money doesn’t make sense and they lose their butts on the coasts.

LTL is the only successful model for this. But they make it work by not using an entire trailer for one destination. LTL stands for less-than-truckload. This way a community that only needs a few pallets of something can get it without having to pay for an entire trailer to come their way. But LTL is costlier per unit because of that - it doesn’t scale.

If you want to see how hard this problem is just look at the 5 or 6 companies who deliver furniture to retailers. Most furniture is built in the south. They have to figure out a way to get their drivers to all get back to those southern locations with the fewest unloaded/unpaid miles. Several of them have called it quits in the last couple of years.

The complexity of the problem would require, basically, a universal shipper - i.e. government controlled transit in order to stifle competition and maximize the trailers and trucks.

4 Likes

Knowing nothing about this, would shifting to more railroad shipping help at all?

That was a great and insightful response Joe. Going on the generations of being told " they" and “big oil”; I suppose that’s the rationale behind a less intensive rail system. I admire the belt and road intiative in as far as"When goods don’t cross borders, armies will."

Railroads are already nearly at capacity, and that’s after moving to double stack intermodal (big shipping containers).

Plus the infrastructure isn’t the same as with the highway system.

1 Like

From a civil engineering perspective, big trucks really pound pavement. Tracks get pounded but steel is more flexible/ductile than concrete or asphalt

Aaron is correct. The rail system we have is past capacity. If you are near any of the main rail shipyards you will see them stacked 6 or more high. (There is one on the southside of Indy that my wife noticed last week.)

You would have to not only increase rail lines, but stockyard capacity and ability to handle the extra freight. As it stands, they are way behind.

World economy always sounds good but the reality is that a small hiccup on one end (i.e. the Suez Canal) has worldwide effect for months.

This also feeds into current freighter container shipping. 3 years ago it cost about $5000 to ship a container from China. Talking with my relatives in northern Indiana (Bailey’s Discount Center, anyone?) it is now about $25,000 for the same container to be shipped.

The idea of increasing driver pay is good but the consequences are pretty massive concerning prices of goods. To give you an idea:

When I was hired for PAM in 2010 I was paid 27¢ a mile. That put about $1200 a MONTH into my paycheck after all the ridiculous rules. In order for those companies to pay adequately they’d have to more than triple their pay. This would have a massive effect on goods prices. (It was advertised as $36,000 per year starting salary.)

Are we inadvertently being forced to do America First thanks to shortages and, recently, Great Power rivalries?

That’s certainly been my impression the past few months. Trump tried to prepare us for this, but people scoffed. Now the liberals are advocating for making more stuff here. It’s interesting. I’ve certainly become more sympathetic to buying American.

3 Likes

I’m not sure it is possible without a catastrophic event (WW3). The on-demanded-ness of product and production is not feasible without a major government initiative to commandeer the means of production. I remember reading this article a decade ago: Steve Jobs Freaked Out a Month Before First iPhone Was Released and Demanded a New Screen Here’s the money quote at the end: " The end-to-end process of building the iPhones…required 8,700 mid-level engineers. In the United States, Apple estimated, it would have taken 9 months to hire this many engineers. In China, it took 15 days."

The shear scale of production in the US is hard to fathom. Take a few examples from my own time driving:

The Brown-Forman Cooperage in Louisville (Jack Daniel’s barrel maker) goes through about 500,000lb of white oak per day. That’s one whiskey maker. That requires 10-12 trucks per day, hauling from several processing mills, from hundreds of miles away. And that doesn’t include the metal banding and other products necessary to make the barrels.

In late 2010 I ran one of 5 loads per day from St. Louis area to Ft. Wayne, IN. They were truckloads of Chevy Silverado hoods. We were not allowed on site at the GM plant in Fort Wayne until 15 minutes before our window. If we came early (as I did the first day) we were turned away. If we were more than 15 minutes late, they refused the load and it had to be trucked to a yard and rescheduled.

Near Nashville, TN 20 or so trucks loaded with 40,000lb of steel shelving are loaded and emptied into a storage facility outside of Indy each day. That steel shelving is the regional hub for Home Depot. The entire facility is dedicated to just the shelving for the facilities - no actual products. Those 20 trucks are only a portion of the ones that come in each day. And that is one business, in one region, stocking shelves for their own store-use. Every day. The scale is almost incomprehensible.

American consumerism and demand is unsustainable. I’m not sure we could produce what we want even if we tried.

A few weeks ago a warehouse for Walmart burnt to the ground outside of Indy. That will likely have an impact on all of us in the region for a few months until supply can be rejiggered to other facilities. And on and on it goes.

2 Likes

So your opinion is that current high inflation is just a return to the true price of goods?

Not the current inflation - that is a direct result of the ridiculous cash pump over the past two years.

But is globalism a cause of inflation? Yes. Everyone thinks the cost of goods going down is what globalism caused but, I think, it actually just made the cost of goods artificially low. Now that globalism is shattering due to conflict via trade wars we are seeing the rise of costs accordingly.

This is beginning to derail from the original topic but globalism isn’t the biggest cause of inflation - I think that’s the federal reserve.

3 Likes

I won’t search for a link now, but I’ve read that the rail system has consolidated and removed capacity over the past couple of decades as the railroad shed less profitable routes and focus on the most profitable routes.

There is a trade-off between efficiency and resilience. Just-in-time manufacturing and delivery, even from halfway across the world is very efficient and raises corporate profits and CEO bonuses, but there is no slack in the system when hiccups occur. A resilient system would be more robust, but less profitable, especially when the government is ready to step in with bailouts and special laws to save big corporations from their own stupidity and criminality.

It would take many years to build back capacity, but it was policy choices that brought us to this point, and different policy choices would move us to a better place.

2 Likes

The relative peace of the post Cold War years is not normal. People my age who were born at the end of the Cold War and have no memory of it think the world we grew up in was normal.

I listen to David Bahnsen’s podcast Capital Record occasionally, as well as read his articles on his website. He’s a wealth manager as well as Greg Bahnsen’s son. His contrarian take is that it’s deflation, not inflation, we should be worried about. His reasoning is that heavy government borrowing crowds out other borrowers from capital markets. Companies have profits and there’s money out there, but either they can’t access it, or if they can, they’re not interested. There’s a loss of nerve, a loss of mojo. That’s why there’s this odd combination of lots of gover ment spending, low interest rates, low unemployment and low growth. Bahnsen says that’s been the status quo since the Great Recession.

Obviously I’m summarizing Bahnsen and he knows what he’s talking about and I don’t. His take could be wrong. He doesn’t deny the current inflation woes; he says that in the long term, the inflation is temporary and deflation is the long term danger.

This could be shifted to a new thread.

3 Likes

That’s true, but it’s referring mainly to smaller spurs from larger cities to cities or towns with only one or a few small industries. Those railroads are still online and active, they’re just not under the big five (NS, CSX, etc…).

And the main lines are still operating full steam. So connecting or even increasing the smaller spurs would only add to the already significant demand on the larger infrastructure.

1 Like