Competition Drives the Trucking Industry
Engel, Cynthia, Monthly Labor Review
In the wake of deregulation and the intense competition that followed, the trucking industry has radically changed the quality and types of services it provides its customers; today, the emphasis is on efficiency, and the ultimate beneficiary is the American consumer
The Nation's freight bill hit an all-time low in 1996, with shipping costs accounting for only 6 percent of gross domestic product, compared with 7.6 percent in 1980.(1) Nearly 75 percent of freight is transported by truck at some point in the distribution chain,(2) and consumers have benefited from a myriad of factors that have improved service and lowered freight costs. The trucking industry has weathered many challenges, some of which emerged from within the industry, and others that sprang up in the economic environment.
The adoption of just-in-time delivery systems, new developments in technology, deregulation, and increasing competition between transportation sectors have forced the trucking industry to pay more attention to customers' needs. In particular, companies have sought to meet requirements for more reliable and frequent deliveries, and thus reduce warehousing and transit costs. These savings, passed on to consumers and businesses, have contributed to more competitively priced products in a global economy.
Cost savings have been achieved largely at the expense of for-hire truckdrivers,(3) whose real average hourly earnings (in 1982 dollars, as deflated using the Consumer Price Index for Urban Wage Earners and Clerical Workers) declined by 40 percent(4) between 1978 and 1996, compared with a 13-percent decrease for all private sector workers. But while the payments for labor services in trucking have declined in real terms, the demand for these services is increasing. The industry gained 586,000 jobs between 1980 and 1994, and trucking jobs are projected to increase by 299,000 between 1994 and 2005,(5) which places them among the top 25 occupational groups for projected employment growth. Increased demand and deteriorating wages have resulted in an industry that is plagued by frequent labor shortages.
This article examines some factors that have affected trends in employment and wages of for hire trucking employment over the last 30 years. First, we review employment trends in the industry, and then look at the changing character of the trucking labor market, as well as other factors that have wrought change in this industry.
Employment growth related to industrial production. Trucking employment(6) generally correlates with industrial production(7) declining in recessions and increasing during recoveries. (See chart 1.) The cyclical pattern of employment in trucking thus contrasts with that of the other private service-producing industries. For example, employment in the service-producing sector actually increased during the 1973-75 and 1980-1982 recessionary periods, while industrial production and trucking employment fell. Although employment trends in trucking appear to have been less cyclical in the 1990s, a large portion of industry sales continues to originate from the manufacturing sector. Therefore, the trucking industry, while classified among the service-producing industries, still tends to react quite strongly to changes in industrial production, as indicated in the following tabulation of recession-related peaks and troughs in trucking and warehousing employment (monthly data, seasonally adjusted):
Trucking employment Recession (in thousands) Peak Trough Peak Trough Loss November 1973 April 1975 1,198 1,090 108 June 1979 September 1980 1,360 1,256 104 January 1981 February 1983 1,268 1,177 91 June 1990 April 1991 1,632 1,600 32
[Chart 1 OMITTED]
While most job losses in trucking are related to economic contractions, developments between the 1980 and 1981-82 recessions are in need of explanation. …