Even if you are not in the trucking business (yet), there have been many indicators about the chaos the industry has fallen under since the beginning of 2018. From lesser freighters seen on the highways to produce missing on supermarket shelves – the signals are clear – there is a truck driver shortage. This leads to the rise of freight costs, but what are the root causes of load price growth? Apart from the economic boost in 2014, there hasn’t been a year where freight volume or cost experienced such a significant breakthrough.
The year 2014 was tremendously successful for the transportation commerce – hitting $700.4 billion in revenue according to the ATA reports (exceeding $700 billion for the first time in the industry’s history), which was all due to market expansion, but what is happening now is more than that.
There are more than one reasons for the rising prices, which were first noted at the end of 2017, and precisely – after 18.Dec, when the ELD Mandate became effective.
You may be asking yourself – how could the ELD influence the market and cause an increase in freight costs? The answer is both simple and more complicated, but we will get deeper into that. First of all, we will start with the fact that the ELD Mandate caused a huge CDL driver shortage – and especially an owner-operator shortage. All businesses are affected – but mostly small companies, operated by an independent contractor. Self-employed drivers experience the hard hit of the ELD – since the device must be synced with the engine, the chance to write misleading numbers in log books is practically nonexistent. Furthermore, being trackable through an ELD – fines are rising by the second, and speeding without paying the price is barely an option anymore.
Most owner-operators quit, because of the fear that they will not be able to earn the same amount of money anymore, which is not the case, but we will get to that later. Team driver loads used to be given to a single driver, and this was more than a conventional practice – it was the only possible way to work for many. E.g., a trucking corporation pays $1600 to a team for a single load, but a driver offers (or is offered) to do it alone for $1200 – a win-win situation for both the client and the driver. Since the ELD Mandate, such deals are impossible to make, because of the transparency of the whole process.
The despair that drivers will be earning half of what they were until now is the main reason why many owner-operators and CDL drivers gave up on their careers. All of these factors related to the ELD Mandate are partially causing the drivers shortage which results in freight costs rising immensely. Actually, according to our trusted sources – even if many CDL truck drivers haven’t resigned yet, a rise in load prices would have been observed due to the despair of transportation companies to keep their drivers. The concern that drivers may quit due to the doubt that they will be earning a lot of money made transportation corporations pay much more per delivered freight. We even have some examples on hand to show the difference between last and this year’s load prices:
Reefer Load: WI to OH – 420 miles: $1800 now vs. $1100 last year
Dry Van Load: WI to OH -673 miles: $1600 now vs. $1000 last year
As you can see – the difference is substantial with a 63,6% increase in the first and a 60% rise in the second example. So do not fall into discouragement – ELD Mandate might be changing the industry for the better. Not only do you work less (no need to fill out an inaccurate paper log on your HOS), but you will get more money at the end! What could be better than that? Not to mention the safety this regulation brings since most motor vehicle accidents are a result of overtiredness.
We believe it is an excellent time for you to join the trucking industry if you haven’t yet, and we, at CDL Advisor, are here to make it easier for you find that dream trucking job, regardless of your experience.
Even though the federal requirement is not new – it became effective in 2015 for some states and 2016 for other, its weight is felt more remarkably at a time where drivers shortage is at its peak. This law mandates states to require a Proof of Legal Presence in order to issue or renew a Commercial Driver’s License, along with a proof of residency in the state where the CDL is obtained. This means that CDL truck drivers must show proof of U.S. Citizenship, Lawful Permanent Residency, or Legal Presence making it impossible for many drivers to renew their existing CDL, since they are immigrants, and in many cases – illegal immigrants. Only foreigners from Mexico and Canada cannot receive a U.S. CDL.
They need to obtain it from their respective countries since The Federal Motor Carrier Safety Administration (FMCSA) has concluded that commercial licenses issued by Canadian provinces and territories, and the United Mexican States, are in accordance with U.S. law and standards.
Such regulations are yet another barrier and complication for many truck drivers, making the renewal of CDL unimaginable for a vast majority of the CDL drivers and owner-operators.
These colossal changes in the trucking industry – ELD Mandate and CDL Proof of Legal Presence regulation – are accountable for most truck drivers quitting their careers. As mentioned above, there might be a bright side regarding the ELD Mandate – more money, less work, as well as drivers being able to make higher demands.
One thing is sure – many experts and analysts suspected that the rise in loads prices would be temporary, but we at CDL Advisor, are expecting freight costs to remain high throughout the whole 2018.