How does increasing driver pay change driver turnover?
Trucking companies have spent 2018 declaring their intentions and rolling out plans to raise pay to attract and retain drivers.
While raising driver pay sounds like a common sense approach to fill seats for empty trucks, new research from Michigan State University might throw some cold water on this wage strategy.
Their research shows that increasing driver pay also creates the adverse affect of increasing driver turnover at an expotential rate.
So any gains in hiring is likely offset by thier current drivers fleeing for competing companies offering higher pay along with a change of scenery.
Research Notes and Methodology
Researchers at Michigan State and the Naval Postgraduate School examined how changes in the motor carrier industry, specifically changes in employment and wages, affected turnover rates at large TL carriers.
They utilized the American Trucking Association's quarterly Large TL Driver Turnover data for 2006 through 2017; industry employment and wage data were obtained from the Bureau of Labor Statistics.
Holding constant macro-economic conditions, capacity tightness (CAss TL Index), aggregate industry activity (ATA's Truckload Tonnage Index), and employment changes in both the Oil & Gas and Construction Industry, they found that a 1% increase in industry employment predicts a 4.2 percentage point increase in large TL carriers' driver turnover rates; conversely, a 1% decrease in industry employment predicts a 4.2 percentage point decrease in large TL carriers' driver turnover rates.
In contrast, they found that changes in industry wages had no impact on turnover so long as this change, measured relative to the prior year, was less than a 1.8 percent increase.
When wages rose faster than 1.8 percent from the prior year, a 1% increase in wages predicted a 9.6 percentage point increase in large TL carriers' driver turnover rates.
Their statistical models were able to capture over 84% of the variability in large TL carriers' turnover rates, pointing to the key role that macro-economic conditions, which are largely beyond carriers' influence, play in affecting turnover.
For more information please contact:
Jason Miller, PhD
Assistant Professor of Logistics
Michigan State University