The New York Times helpfully explains the biggest problem with our supply chain these days:
Well, sure. But there's always been a shortage of truckers. You can find a story like this practically every year for the past few decades. In fact, the claimed shortage this year of 80,000 truckers is less than the claimed shortage in many prior years. For example, here's a CNN piece from 2012 claiming a shortage of 200,000 truckers just in the long-haul business.
In any case, if there really is a shortage of truckers, it sure looks like no one is bothering to do much about it:
Back in the 1990s, blue-collar trucking jobs paid a little less than $1,100 per week. That figure then declined for years until finally rising a bit above $1,100 during the strong wage growth of the past few years.
Conversely, weekly earnings for the rest of the blue-collar workforce rose slowly but steadily during the same time. Roughly speaking, truckers earned about 44% more than other blue-collar workers in 1995 but now earn only 23% more.
So is there really a shortage of truckers? Maybe, but I trust wage data a whole lot more than I trust either anecdotes or claims from industry associations. If real wages are going down, both in absolute and relative terms, there's no shortage. It's all but impossible.
So what's really going on? The specific reason this is in the news right now is that we need trucks to haul away containers from our jammed ports. This means we need to dive a little deeper and look at what it means to be a driver for a dedicated port trucking company, the only ones who are in this business. Ryan Johnson explains one big problem:
I’m fortunate enough to be a Teamster — a union driver — an employee paid by the hour. Most port drivers are ‘independent contractors’, leased onto a carrier who is paying them by the load. Whether their load takes two hours, fourteen hours, or three days to complete, they get paid the same.
....So when the coastal ports started getting clogged up last spring due to the impacts of COVID on business everywhere, drivers started refusing to show up. Congestion got so bad that instead of being able to do three loads a day, they could only do one. They took a 2/3 pay cut and most of these drivers were working 12 hours a day or more. While carriers were charging increased pandemic shipping rates, none of those rate increases went to the driver wages.
There's much more of interest here, but it all comes down to the same thing: money. There are more drivers out there, but the port business has gotten so crappy that it's a money-losing proposition for a lot of these guys. Trucking companies could attract them back with higher wages, but that's considered beyond the pale. As with so many employers, they'll whine and complain and claim to be willing to do anything—except pay more. It's an old story.
UPDATE: Here's another factor, which is yet another subset of "money":
Kevin - bizarrely enough, I just got off a call about this exact issue with a client (I'm in PR). One of the big issues is the rise in insurance (400% or so in the last decade), making barriers to entry for new and younger drivers almost cost-prohibitive in many circumstances.
— DowntonShabby (@ButternutLlama) November 9, 2021
Where is the "invisible hand" when you need one?
It's there of course, the market balancing is occuring via delays.
Of course people generally hate the market when the down-side is in action. Human psychology.
If we are focusing on wage data to tell us if there is a shortage or not.....it sure looks like a shortage has existed since 2019 and it continues through the most recent data. Analysis by squinting at a line chart is tough.....
Piecework, eh? Even under conditions where chassis are impossible to come by, and without a chassis there's no load? I'm imagining a sweatshop where workers have to sit at their sewing machines and wait for a few scraps of cloth every now and then. Except the trucking companies don't seem to have very much invested in the equipment so what's their overhead?
So this really sounds like a better deal for the employers than anyone else involved, all the way down the line. Not so good for for drivers, for businesses awaiting shipments, or for the consuming public, or really for anyone else. Seems like paying drivers hourly might give these outfits good incentive to work on getting the kinks and bottlenecks out of the process.
The port of Seattle (and I assume other ports) uses trucks to move the containers from dockside inland to facilities with better rail and highway access. These trucks are operated by independent owner/operators who contract directly with the port, so there is no trucking firm to pay hourly rates. The ports could contract with larger trucking firms but find it cheaper to use independents.
Thanks; didn't know this, and if that's what they do in Seattle it's a good bet they do the same thing at most ports.
This sounds almost like a prototype for Uber, doesn't it?
Actual structure of a business on the ground can be much more interesting than might appear.
However well this system might work in normal times (Kevin's figures, to the extent they're relevant to this small group of truckers, indicate it isn't working so well for the truckers), it really seems to further disperse the costs and responsibilities of the current situation. Ports aren't moving the containers, but these truckers are one overhead cost they're saving on, and however desperate the port operators are for chassis to ferry the containers over to transport facilities, they wouldn't seem to have much leverage or influence when it comes to getting them in. A complicated system of many semi-independently-organized moving parts is built around a certain flow range and breaks down when traffic gets out of those bounds. Then it needs a referee-- a czar, if you will.
From this distance it looks an awful lot like the East Coast railroad crisis in 1917-1919 that led Wilson to nationalize operation of the railroads.
Funny how the supply and demand Capitalist don't really believe in supply and demand.
Pay more for workers? That is socialism. Never!
Limits on CEO pay and stock options? That is communism! Never!
Wait. If congestion is so bad, that means the number of drivers can't be the limiting factor, right? Because they are all sitting around doing nothing, waiting for their turn.
So that can't be the bottleneck. If there are too few drivers, there would be no congestion.
That suggests the issue is loading speed that can't keep up with the surge in traffic, which corresponds to the Christmas surge. Maybe this will clear up in January/February?
Core spending needs to slow.
That does not follow at all. It depends on the relative movement rates as well as loading rates.
This is clearly not a binary on-off situation but a progressive one so such logic is fallacious.
Trucks are sitting there with drivers, waiting for their turn to load. How would adding more drivers, which add more trucks, make things go faster?
There might be some complex situation where this is true. If you know of one, spell it out. What you did was simple contradiction. That's not an argument.
Is there are reason behind the rise in insurance? I don't think there's been a general increase in insurance rates. Certainly not of that magnitude.
Not all truckers are employees working for wages. Many are owner-operators of their own trucks. I do not know what % are self-employed, but they should be included in Kevin's graph.
While I think Kevin is correct that there are more complicated issues here, his presumed chart does no such thing. And on fact shows evidence that there is a " shortage " .
All a shortage means is that , at the current market " price " , i.e. wage, there is more demand for those workers ( people wanting to hire) than supply ( people wanting to work ).
Which, in a free market, should cause the price ( market wage ) to rise until less demand and more supply ( more workers willing to work at a higher wage ) causes a new higher equilibrium price - wage - and no shortage.
But this does not happen overnight. Prices and especially wages can be " sticky " and it can take a while for the market to respond. And this can be exacerbated by govt policy and also made worse if it is caused by what is perceived to be a temporary situation ( covid?). Employers are reluctant to increase wages due to a temporary " shortage " because so hard to cut pay back to normal when that changes..
But what should happen is increasing wages until the market finds a new equilibrium wage .
And what does Kevin's chart show ? I spy a bump up in trucking wages in the last year or so , and relative to all wages ..which is EXACTLY what you would expect to see with a shortage.
But kevin wants to say there is no shortage today because he wants to compare to freaking 1995 ! That is just dumb and economically illiterate .
What if a trade disruption from Asia cut off semiconductor imports. Causing a huge computer shortage and rapidly rising prices. Would kevin say there cannot be a shortage because computer prices are lower than 1995?
And there was no oil shortage in 1979 because petroleum prices were lower than they were in the 1800s ( when no body knew how to drill).
A worker shortage would be evidenced by the current DIRECTION of wages, not the level.
You can even have a shortage when wages are at historical lows. If changing conditions warranting lower wages are overestimated by employers , and they cut wages too far , shortage due to wages being too low .
The comparison can help because you see the signs of structural nondebt based growth. A bunch of truckers, less absolute need for them, which subdued wages. I bet it you went back to 1945, we would see a slowdown in the mid-70's from post war boom levels. After 1979, surely. Retirements are what's driving that now. Come back in 3 years. We will ask what Trucking shortage????
Do not feed the troll. Or as they used to say it back in Usenet days, DNFTEC.
the rise in insurance isn't a problem for UPS, because they have a union and the drivers don't have to take on individual insurance.
See
https://www.bloomberg.com/news/articles/2021-11-04/labor-shortage-ups-union-drivers-give-delivery-service-edge-over-fedex-fdx
The problem is not insurance costs. The problem is a lousy job structure that pushes all the risk and costs onto individual drivers. New drivers can see how unattractive this is and are understandably reluctant.
^^^^^THIS^^^^^^
In a nutshell is "it"
Things outside the normal supply and demand forces are at work here
Insurance is one
Private vehicle use is another. Just the price of diesel alone has gone up substantially over the last year (and there is no restriction in that arena. Politics of overseas suppliers is causing that rise in prices
Finally there is regulation. Trucking working hours have been set for safety reasons. Hours of Service is what they call it. 8 hours maximum before they are required by law to take a break and they can only drive 11 total hours within a 14 hour window before they have to shut down for 10 hours straight.
Insurance is high because of previous accidents when drivers drove too many hours and fell asleep at the wheel. So the insurance industry stepped in to propose those regulations to the Dept of Transportation.
This gets confusing because a LOT of privately owned trucks use 2 drivers one drives while the other rests. This doubles labor costs. And with the sheer number of vehicles on the road today compared to say the early 60s there are far too many hours spent "in traffic". (at a standstill).
Supply and demand is only PART of the problem
I live in a small town on the west coast that has at least two truck driving schools. They are busy. Use to see maybe one in a big old parking lot now there are three. Seems the guys are signing up to drive. I just hope they sign up for the union while they are at it. Time those with the money, at the top, started shaking some change loose. They are the bottle neck.
I think the University of Austin, to truly embrace egalitaria & the GQP's marriage of the academically rigorous professional class & the salt of the earth Travis Tritt listening Oxy dependent, should offer an adjunct vocational training program, including CDL courses.
Also, to show they welcome left-liberals on the faculty, Kevin Drum should be a visiting lecturer in Wokeness Studies.
Need some comments from Gypsy drivers about life on the road. Somethings money can't buy.
Bob Seger's "Turn the Page" has entered the chat.
There is no shortage because there;s always been a shortage?
Drum that's weak even by your own standards.
Containerized shipping is what is driving this. Yes it's more efficient but it does require more drivers. At the dock to take the container off the crane and bring it either to it's ultimate destination or to storage where it has to be handled AGAIN once there's a truck,chassis available to bring it to its final destination.
But living in a port city I have watched the trains leaving the port. They carry few, it any containers. Why? Well NC is still an agriculture state and it makes no sense to ship feed stocks by container. They are usually put in grain handling rail cars and then placed near the grain mills using a rail spur, or private line that runs right though the mill proper. Once they dump ONE car they usually have a mule or small engine that the mill owners use to move the next car over the dump bin then the next etc. Once all grain stocks have been dumped then they start the mill up, mix the various grains in place make sure they're all hte same size, add the chemicals to it then they dump the mixed grains into silos for their trucks to pull up to, load up and deliver to the various chicken, Turkey and poultry farms we have here.
Containers allow for more efficient shipping of refrigerated or frozen goods - OR - electronics goods that need to be kept dry. They are limited by a number of factors but containers are great for many things.
But once they get UN loaded dockside? They are either stored on site or moved off site. Either way you need truck drivers.
I can easily see smart cranes being used in the future to off load ships. That would be relatively easy (but expensive). But I could see a "from scratch" container port being built where the containers go from ship to rail car to a off load hub miles away where containers get off loaded into warehouses, near major high way interchanges.
But at some point truckers will have to touch the container.
Here's another factor, a central drug testing database that started last year. https://nypost.com/2021/11/07/supply-chain-stalled-by-72000-truckers-who-failed-drug-tests/
Is this why serial killings are down?
Do not feed the troll. Or as they used to say it back in Usenet days, DNFTEC.
The Johnsson aricle is quite a good one now having read it.
This paragraph:
"What is going to compel the shippers and carriers to invest in the needed infrastructure? The owners of these companies can theoretically not change anything and their business will still be at full capacity because of the backlog of containers. The backlog of containers doesn’t hurt them. It hurts anyone paying shipping costs — that is, manufacturers selling products and consumers buying products. But it doesn’t hurt the owners of the transportation business — in fact the laws of supply and demand mean that they are actually going to make more money through higher rates, without changing a thing. They don’t have to improve or add infrastructure (because it’s costly), and they don’t have to pay their workers more (warehouse workers, crane operators, truckers)."
As it happens I am investor in logistics - although not in the USA - and a factor he cites on a mismatch between interest in transport business and supply chain needs is a real one (although our logistics assets are now making EBITDA margins that are mad, we recognise it's not sustainable). And the binding constraints on infra items - like container carriers (of course in emerging markets one simply straps the things to a flatbed and the odd container falling and crush a FIAT is part of cost...) - and other infrastructure.
But raising capital for our infra expansions is quite painful, development banks and USAID, everyone loves talking "enabling apps" and the like, forgetting apps to manage your logistics flow are meaningless when the actual physical infrastructure is not there.
In many ways what emerges from the California profile is that the pandemic has brought to a head a long-term under-investment in upgrading of physical infrastructure and modernising it. Perhaps Mr Biden's infra initiative will help - the particulars are not in my purview but for US to solve it's issues, more and climate change responsive modernising infra is needed.
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I blogged about the independent contractor trucker issue a month ago. Wrote it into a newspaper column three weeks ago. Nothing new to me.