Research on driver shortage claim points to churn rather than burn

Yahoo

02-05-2025

Recent research published by the Owner-Operator Independent Drivers Association's Research Foundation took aim at the theory of a persistent driver shortage in the long-haul truckload segment. The report titled 'The Churn: A Brief Look at the Roots of High Driver Turnover in U.S. Trucking,' argues that despite claims by other trucking associations of a shortage, it's the turnover rates of upwards of 90% across large truckload fleets that are to blame. The researchers argue that a persistent shortage would lead to higher driver wages, as a lack of labor would, according to some economists, result in higher wages from demand for said labor.
The research outlines many structural issues that it deems a feature, not a bug, of the long-haul driver labor market. The first comes from the intense competition that prevents carriers from raising wages for fear of losing out to a cheaper competitor. The carrier that raises wages needs a higher rate, and that means that among price-sensitive shippers, someone else gets the coveted incumbent spot on the routing guide. The second argument the report notes is labor subsidies via industry and government initiatives that increase the labor pool of available drivers without resulting in higher wages.
Overtime and regulatory loopholes also exist, with truck drivers not qualifying for overtime under the Fair Labor Standards Act. However, this exemption has been around since the 1930s. This results in a fragmented pool of drivers who, by the nature of their job, are unable to negotiate for better working conditions. The final piece of the report talks about information asymmetry, in which new drivers who enter trucking are misled and believe the earnings starting out are much greater than the reality. From personal experience, it took this long-haul over-the-road driver at least a year to learn the habits the lifestyle needed to become economically productive. Those same new drivers who graduated from CDL school had a 50% success rate to make it past six months.
On Monday, President Trump signed an executive order requiring that truck drivers be able to speak English or be placed out of service. According to a fact sheet published by the White House, the order rescinds previous guidance that had watered down the law that required English proficiency, which had removed the out-of-service criteria. Additionally the order instructs the secretary of transportation to review state issuance of nondomiciled commercial driver's licenses to identify any irregularities and ensure the drivers are licensed and qualified.FreightWaves founder and CEO Craig Fuller weighed in, noting on the X platform, 'This is a positive development for safety, but it will have a significant impact on trucking capacity and could help the industry right-size from excess capacity.' Fuller added that one insurance executive from one of the largest firms in the U.S. estimates 40% of truck drivers are first-generation immigrants and 10% of the total driver population lacks English proficiency.
The White House notes that safety is one of the reasons behind the move, with over 120 people killed every day as a result of motor vehicle crashes. This is roughly the equivalent of a Boeing 737-700 crashing each day.
Another challenge is resources. An estimated 45,000 people work for the Federal Aviation Administration. The Federal Motor Carrier Safety Administration has 1,000 to 1,100 employees.
Werner Enterprises' first-quarter earnings came as a surprise. The company reported a net loss of $10.2 million compared to last year's Q1 gain of $6.2 million. In the earnings release, CEO Derek Leathers cited elevated insurance costs, extreme weather, a smaller fleet and customer changes related to tariff uncertainty as reasons behind the earnings miss. Fewer trucks did impact top-line revenue, which fell $36.8 million in Q1 to $433 million. The company's operating ratio net of fuel was 99.6%, a 430-basis-point decline from 95.3% in Q1 2024.Fleet count also took a hit, with the combined truckload transportation services segment shedding 520 tractors from 7,935 in Q1 2024 to 7,415 units in Q1 2025. Broken down by segment, one-way truckload fell by 154 tractors y/y from 2,786 to 2,632, while dedicated saw a larger loss of 366 units from 5,149 to 4,783 tractors. The percentage of empty miles, or deadheading, also crept up, from 14.9% in Q1 2024 to 16%. A good rule of thumb for deadhead percentages is to try to keep them around 10%, which is easier said than operationally done.
During the earnings call, Leathers gave more details and noted the possible impacts of tariffs. While the quarter is an outlier due to the rare instance of Werner's posting an operating loss, Leathers notes the company is in a better position regarding liquidity, having recently secured a $300 million receivables-backed line of credit. Leathers also referred to the impacts of tariffs on Werner's business as an air pocket, referencing the reduction in inbound freight to U.S. ports from Asia. That pocket will need to be filled with substitutes to offset the loss in freight demand. FreightWaves' John Kingston adds: '[Leathers] said Werner customers have been telling him their inventory levels 'are in good shape,' so there won't be a rescue from those customers needing to increase their freight demand.'
Summary: Dallas' outbound tender volumes (OTVI.DAL) have grown approximately 20% over the past five years compared to the national average of 15%. The two largest outbound markets in the U.S. — Ontario, California, and Atlanta — have both lost significant shares: 2% and 13%, respectively. The ongoing capacity glut is hiding a rather significant shift in national freight flow patterns.
In a more balanced market, freight demand changes are discovered through isolated pockets of tightening, where spot rates increase and carriers flock to cover the freight. In the current market, where supply is abundant, there is no tightening or increased rates as carriers are nearly sitting on the sides of the streets ready to pounce.
Import demand has dropped, but that hasn't been strongly felt in the domestic freight market as of yet. It does create volatility in the market that makes for uncertain long-term planning.
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