Shipping costs have skyrocketed in 2018. This signals a strong U.S. economy. But these higher costs, coupled with the ongoing driver shortage, are pushing up the price of consumer goods.
Consumers Feeling The Pinch
Amazon has raised the cost of its Prime program by 20% to compensate for the extra cost of delivering items to customers in two days.
General Mills and Tyson Foods are both raising the prices of some foods because of rising shipping costs.
High shipping costs are even affecting the price of new homes. Prices for framing lumber and plywood were already rising this spring because of increased seasonal demand. But a shortage of trains and trucks to transport the lumber products pushed those costs even higher than normal. As a result, the Framing Lumber Index price hit record highs for three consecutive weeks in May.
The Driver Shortage Continues
The ongoing truck driver shortage isn’t helping matters.
The unemployment rate has held steady at 4% or below for months now. And young Americans aren’t getting into the trucking industry for a variety of reasons. These include: tough working conditions, concerns over low pay, and news about the imminent arrival of autonomous trucks. The result is a lack of qualified truck drivers.
“I’ve never seen it like this, ever,” said Joyce Brenny, chief executive of Brenny Transportation in Minnesota. “It doesn’t matter what the load even pays. There are just not drivers.”
Increased Driver Pay
The perfect storm of increased demand for freight transport and a lack of drivers is pushing many trucking companies to offer higher pay.
Ozark Motor Lines of Memphis, TN said it’s raising per-mile pay for its company drivers. The company raised its starting pay to 41 cents per mile, and is offering experienced drivers up to 46 cents (The top scale for experienced drivers is now 48 cents per mile.)
Other freight companies are doing away with per-mile pay entirely and are instead trying to attract drivers by offering them salaries.
One of them is Smokey Point Distributing of Arlington, WA. The company is introducing a salary of $65,000 to qualified over-the-road drivers with flatbed experience.
“Our company is taking ownership of our operational efficiency in good times and in bad,” said CEO Dan Wirkkala. “Our new annual salary pay program will mean more stable incomes.”
And both Ozark Motor Lines and Smokey Point Distributing are offering drivers bonuses and additional compensation on top of higher base pay.
However, freight companies still must fight to attract new drivers to an industry many young workers don’t find enticing. And the problem of rising shipping costs and insufficient drivers could get even worse when the 2018 holiday season hits.
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