CeDEx Seminar - Stephen Burks (University of Minnesota Morris)

Location
via Zoom
Date(s)
Wednesday 30th March 2022 (14:00-15:00)
Description

Why Teenaged Truckers Will Not Fix What the US Trucking Industry Perceives as a Driver Shortage

Abstract: The primary trade associations of the US trucking industry have argued since the middle of the 1980s that there is a shortage of truck drivers. As a result of industry lobbying about this situation, the US Department of Transportation recently initiated a large pilot program to permit teenaged truck drivers (ages 18-20), who are normally restricted to intra-state operation, to operate across state lines, and thus, across the entire US. Many observers think that the strong consumer demand from fiscal stimulus actions taken to recover from the COVID-19 pandemic may temporarily have created a true shortage of many types of workers, including truck drivers, during 2021. But economists are skeptical that a true labor shortage can last more than 35 years. We argue that this skepticism is well-founded. A review of the structure of the US trucking industry suggests that one key segment, long distance truckload motor freight (NAICS code 484121: General Freight Trucking, Long-Distance, Truckload; hereinafter “LD TL”) has a specific continuing business challenge that leads to the industry perception of a shortage. This part of the industry, which makes up about half of all for-hire motor freight, and which employs approximately one quarter of all heavy and tractor-trailer truck drivers, has a labor market in a persistent “high-turnover equilibrium.” Indeed, trade association data shows that average annual turnover rates at large LD TL firms averaged 93.5% per year, from the beginning of data collection in 1995 through 2021. The same data source shows long-haul drivers in a related industry segment, but with different economic conditions, averaged only 11.8% annual turnover. We discuss the economics structure of the LD TL segment, and compare it to the structure of other parts of for-hire trucking. We then present a cost-minimization model capturing key elements of the business model of LD TL firms, and show that not only is a high-turnover equilibrium consistent with industry economics, but that the introduction of teenaged truckers, if generally allowed, will either make no difference, or may actually worsen the turnover levle, once the pandemic recovery period is over. 

Centre for Decision Research and Experimental Economics

Sir Clive Granger Building
University of Nottingham
University Park
Nottingham, NG7 2RD

telephone: +44 (0)115 951 5458
Enquiries: jose.guinotsaporta@nottingham.ac.uk
Experiments: cedex@nottingham.ac.uk