Guest Op-Ed: Rethinking the Truck Driver Shortage
Many major media outlets such as CNN, The Wall Street Journal, and The New York Times recently reported that the nation’s global supply chain challenges are due, in part, to a widespread shortage of truck driver, spurred by the American Trucking Associations’ (ATA) claim that the United States is short 80,000 truck drivers. But is this really the case? In this article, I make the case that there is not, in fact, a large shortfall of truck drivers. Rather, the challenge many large carriers are experiencing with recruiting drivers stems from a record level of entrepreneurship we are seeing in the trucking sector.
To begin, it is important to recognize that truck transportation is subdivided into six subsectors by government statisticians based on the type of cargo hauled and length of haul. The first figure below shows the change of truck transportation employment by each subsector relative to October 2019. While sector-wide employment is 8,400 lower than it was two years ago, this aggregate figure hides what economists term “reallocation” of employment across subsectors. For example, the General Freight, Local subsector saw an increase in employment of 19,300 employees (7.1%). The largest shortfall occurs in General Freight, Long-Distance, Truckload carriers, where employees are down 10,900 (2.1%). This is the subsector that is the core focus for discussions that the truck driver labor market is broken.
This figure certainly suggests the magnitude of any driver shortfall is well below the ATA’s estimate given evidence that aggregate demand for for-hire truck transportation has returned to pre-COVID levels. However, the question remains regarding whether employment in the General Freight, Long-Distance, Truckload carriers sector is increasing. As shown in the second figure, the answer is a definitive “yes.” Since May 2021, employment in this subsector increased at nearly the same rate observed in 2018. Thus, it does not appear that individuals are unwilling to enter this sector which, again, speaks against a chronic shortage.
The last piece of evidence that speaks against there being a true shortage of truck drivers (as that term is defined in economics) is that the past several quarters have seen a record number of new trucking establishments go into operation. The term “establishment” has a special meaning in government data in that it refers to a single physical location that performs primarily one type of activity. In the truck transportation sector, Census Bureau data indicates that approximately 79% of new establishments that open in truck transportation are due to new entrants. We can get a sense of the rate of new entry by examining the change in the total number of establishments, with the caveat that the change also includes establishments that fail. As such, change in total establishments represents a lower bound of new entry.
The third figure shows that in the second quarter of 2021, the net change in establishments in General Freight, Long-Distance, Truckload trucking was 1,758. That is the single largest quarterly gain in both absolute and percentage terms in the history of the Bureau of Labor Statistics Quarterly Census of Employment and Wages data, which dates back to 2001. Moreover, the average number of employees per establishment has fallen substantially since the start of the pandemic. During 2018 and 2019, employees per establishment was declining at ~6.5% annually. Since the second quarter of 2021, the rate of establishment size decline has increased to 10.5% annually. This is consistent with a more rapid rate of entry given Census Bureau data indicates the average establishment created by a newly founded firm has 2.83 employees based on data from 2017 through 2019.
To conclude, the truck transportation sector does not face a shortage of 80,000 workers, despite the media attention. If there is currently a shortfall, it is confined primarily to the General Freight, Long-Distance, Truckload sector and is, at worst, about 11,000 employees. Monthly employment data for this sector shows a sharp rise in employment, and we are seeing evidence of unprecedented entrepreneurship in the form of new establishments being started. This suggests the labor market will correct itself by the end of the second quarter of 2022.
Jason Miller is a tenured Associate Professor of Logistics and the John D. and Dortha J. Withrow Endowed Emerging Scholar at Michigan State University’s Eli Broad College of Business.
The views expressed above are those of the author and do not necessarily reflect the views of the Eno Center for Transportation.