Supply Chain and national security vulnerabilities rooted in driver pay methods

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Updated Jan 19, 2022

Since Congress passed the Motor Carrier Exemption (MCE) to the Fair Labor Standards Act (FLSA) in 1966 that ended the requirement for overtime pay differentials for all hours worked beyond 40 hours per work week, we have effectively subsidized transportation costs at the sole detriment of truck drivers’ earnings.

Some 56 years ago, carriers had no means of tracking its trucks. Instead of today’s electronic logging devices (ELDs), drivers logged their duty status on paper log “swindle sheets.” ELDs have replaced paper logs and created an automatic means to provide change of duty statuses that can also serve as an accurate pay-clock, thereby making the pay-by-mile business model technically obsolete.

Prior to cell phones, drivers had to stand in line to use a pay phone. Cell phones provide instant communication capability. Today we enjoy satellite-based GPS devices with trucks equipped with telemetry devices to provide pinpoint location and speed data to the dispatcher. None of that existed when the MCE was enacted.

In order to address the safety aspect associated with overtime pay without tracking capability, the carriers successfully lobbied Congress for the MCE. The conditions precedent to the MCE’s enactment have all been addressed making its continued existence not only unnecessary, but also compounding the supply chain bottleneck and creating a national security vulnerability.

Undervalued inland transportation costs allow offshore manufacturers to leverage their lower labor costs to be competitive with our higher domestic manufacturing labor costs with lower (shorter distance) transportation cost: 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑀𝑓𝑔 + 𝐼𝑛𝑙𝑎𝑛𝑑 𝑇𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡 < 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑀𝑓𝑔 + 𝑅𝑒𝑔𝑖𝑜𝑛𝑎𝑙 𝑇𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡

This under-valuation of inland transportation cost allows a foreign-made products’ all-in delivered cost to be less expensive than a domestically-produced product, which undermines our domestic manufacturing competitiveness with economically devastating consequences to our local cities and towns, which only compounds our supply chain woes.

On the surface, this sounds great for the end-consumer – right up until that domestic end-consumer loses his/her job to offshore manufacturing. Now, without a job that end-consumer cannot even afford the foreign-made good. Just ask a Midwest auto plant assembly worker or parts supplier how his exported job is putting food on the table and the necessary material goods that his family needs for the home. Not so great anymore, is it?

From a national and economic security standpoint, centralized parts distribution makes us more vulnerable to supply chain disruption, especially when the centralized location is overseas.

Part of the current supply chain snafu is a result of offshore manufactured goods that, when there is a COVID-19 or its variants outbreak, centralized manufacturing or large shipping port gets shut down. Take computer chips, as an example, where we have a backlog as far as the calendar can see. In addition to an increased vulnerability to our own manufacturing, foreign manufacturing is at even greater production risk. Moreover, this presents a significant national security risk that undermines our nation’s ability to respond to global military and cyber threats.

The solution is one of the sorts where Samsung Electronics is considering Austin, Texas, as one of the sites for a new $17 billion chip plant that the South Korean firm said could create 1,800 jobs, according to documents filed with Texas state officials – domestic manufacturing to the rescue!

With respect to fleet "pay-by-mile while regulated-by-the-hour" paradigm of its company drivers, consider this: Where else do you show up to work at 8 a.m. until 5 p.m., only to work without pay from 8 a.m. until noon?

And, knowing that, how many licensed, capable drivers would sign-up for such a pay scheme when the rest of the working labor market gets paid for a full day’s work? Yet, trucking associations and member carriers are asking for exactly that. When the revolving door has less than its full complement of applicants, they run to Congress asking for help to recruit veterans, women, 18-year old kids, tax credits for hiring unemployed workers and the like.

Even the recently unveiled Biden-Harris Trucking Action Plan is attempting to make it easier to streamline the CDL application process without addressing the underlying fundamental problem of pay inequity compared to other labor markets. This, too, will prove wholly ineffective. As the adage goes, “If you do what you’ve always done, you’ll get what you’ve always got.” 

In 1980, when we deregulated transportation (in addition to the MCE), we opened the floodgates to driver abuse, which has since resulted in a 40% decline in real, inflation-adjusted driver earnings, even while drivers are twice as productive as they were 40 years ago. Let that sink in.

Economically, wage deflation is not conducive to recruitment or retention, requiring a perpetual revolving door at the major carriers, which presents a national highway public safety issue as well. The "pay-by-mile while regulated-by-the-hour" paradigm reduces driver pay when the driver’s skill requirement is at its highest. Construction zones, accident scenes, traffic congestion, inclement weather and mountain driving are all such examples where the driver’s skillset is most demanding. It is imperative that we have a robust transportation system – both infrastructure and drivers to move goods – when 72% of all goods are moved by truck.

Lastly, I am not proposing any new regulations nor am I suggesting unionization or looking to the government for help. We already have an abundance of laws and regulations.

What I am suggesting is a much-needed fix – an adjustment – to those existing laws and regulations to make drivers’ pay model more equitable to other labor markets, to address unintended consequences to our national and economic security, and to promote the revitalization of our local cities and towns by supporting domestic manufacturing, thus raising the economic standard of living across the board. 

Alec Costerus is President of Colorado-based Aerodyne Transportation, LLC, an over-the-road long-haul trucking company hauling freight throughout North America; and is co-founder of Alpha Drivers Testing & Consulting, a consulting firm specializing in optimizing drivetrains for owner-operators and fleets. He is the immediate past-Chairman of the Trucking Solutions Group, a peer-to-peer group of owner-operators who collaborate on trucking business and regulatory matters. He can be reached at alec@aerodynetrans.com.