Container drayage hauliers are shifting to driving for Amazon. It’s a clear economic case— they can make more per shift driving for Amazon, and with easier work.
Of course it is the holiday season, and there is plenty of Amazon work. That may not be true after the season is over.
But it shows the line of thought independent trucking firms follow. And the same would be true for owner drivers. They are tired of being jerked around by container shipping firms.
Cargo movers need to start being sensitive to the drivers’ concerns.
The author of this piece contends that a UK tax law called IR35 is responsible for at least part of the driver shortage.
In the past, UK drivers were allowed to choose whether to be classified as contractors or employees. But with the change in April of 2021, employers now must decide whether drivers they use are contractors or employees.
According to the author, since April, many trucking firms have chosen to classify the drivers they hire as employees, due to the tax law. This has resulted in lower take-home pay for drivers. Naturally, drivers are upset about that. They can easily decide to quit driving and choose another form of work.
I don’t know whether there is statistical evidence for this phenomenon in the UK.
In the US, drivers themselves choose how they are classified. And they can be chosen to drive by any firm. Some firms, through union arrangements, or by choice, may decide not to hire contractors. However, a firm may also hire a mix of employees and contractors. In the US, employers are required to pay benefits, which include health insurance, unemployment insurance, and other services. According to the ATRI white paper An Analysis of the Operational Costs of Trucking: 2020 Update, benefits represent 10% of total average marginal cost, and wages represent 32%. This is a large amount.
But they do not need to pay those benefits to contractors. In the US, rates received by driver contractors are piece rates, and often the drivers come out worse than they would as employees, because they must buy their own benefits.
Also, contractor drivers must pay the costs of their vehicle, including fuel costs and lease payments. According to the ATRI study, in 2019, fuel costs were 24% of total average marginal cost and lease payments were 16%. These costs would be assumed by trucking firms hiring employees rather than contractors.
But in the US a major concern for drivers are the specific requirements associated with loads, such as picking up and returning chassis and containers, a shortage of parking to meet hours-of-service rules, and delays loading and unloading at warehouses and port terminals. These working conditions can be changed at will by trucking firms, on a trip-by-trip basis, and cause loss of income and waste of time for drivers.
I believe that in the US, this ‘supply chain adaptation’ is making many drivers look for other work. It’s hard for a contractor to avoid these work conditions, and employees, though they may be compensated for some of the time, may find it unsatisfactory for lifestyle reasons. They’d be very tempted to try some other line of work. Anecdotally, construction work is an important alternative.
While the contractor-employee distinction is equally important in both countries, the reasons offered seem to be different. Unions in the US trumpet the value of making drivers unionized employees, and it often does result in greater benefits for drivers, as well as the right to grievance arbitration. But it also means the driver does not get to choose which load to accept. Drivers choose to be contractors because they can choose who they work for and which load they take, in an atmosphere of changing and disadvantageous handling requirements that are often imposed. Regularize that, and drivers would be happier to work.
Triple figures is worth reporting, even though we’ve been hearing about this problem for a long time now. And it seems no one will put up the money to do something about it.
Opening terminals to 24 hour operation would clearly improve things. It would not be a total solution, because the drayage trucks and warehouses, and container flows and availability, would still need to be coordinated. But it would be a start.
But 24 hour operation for terminals means more longshoremen and staff would need to be employed. Terminals will not be willing to hire these new longshoremen as union workers, because they don’t see a long-term need for them. When the rush abates, they can’t fire them readily.
It’s a similar story for drayage, though they have more flexibility, with the ability to use owner-operators if they can get them. But with the driver shortage, this kind of transport is one of the hardest hit– drayage carriers have been so ready to alter contracts for delivery and pickup of cargo and chassis that drivers don’t want to do this work. They’d rather be doing construction work.
The situation with warehouses is similar. Keeping a warehouse open for extended hours to be sure trucks can get in and out requires more staffing, and the firms don’t want to put out the money. Warehouse workers are often on 90-day contract time frames; many these days are supplied by temp agencies rather than the warehouse operator. The warehouse operator would need to commit to a much larger workforce, and on overtime at that, to handle extended hour deliveries.
I am starting to think it all comes down to businesses not wanting to extend their labor requirements. People don’t want to give work to people, or institutions and rgulations are now flexible enough to allow people to go to work and get the job done.
It’s more than just jawboning the port authorities, who have little to say about their terminals’ operations or labor practices, and almost no influence. Ports themselves have no leverage except as a contract for port spavce comes up for renewal. And most are nmany year contracts. That’s the dilemma of current port governance practice.
19 October 2021
Jack Donnelly
Ports and Terminals, Shipping Lines
Supply Chain and Logistics 