In 1977 a restructuring of the US trucking industry initiated by the Interstate Commerce Commission removed regulations limiting market entry, collective rate-making and allowing carriers to favour larger clients. Increased competition reduced rates, especially for larger manufacturers and shippers, but thousands of carriers went bankrupt and the wages of non- supervisory trucking employees fell by 26.8% between 1978 and 1990 (Belzer, 1994:1). Non- union drivers suffered the largest loss in wages plus a significant increase in unpaid hours (for waiting etc). This widening gap encouraged an increase in the non-union workforce and with it ever more pervasive patterns of low payments and evasion of work-rules (relating to driving hours, drug use etc). Like other neo-liberal ‘reforms’, measured economic gains mostly derived far less from efficiency improvements than a combination of crude work intensification and a massive transfer of wealth from workers and small business to large owners of capital. Further, while environment and safety laws were retained (and indeed strengthened in areas like the carriage of hazardous substances and drug testing of drivers), the economic de-regulation exacerbated risks to drivers and public road users more generally. Belzer (1994:20) argued it made compliance with rules more costly for carriers, also observing that:
Since economic deregulation, hundreds of thousands of owner-operators and drivers working for small, unregulated carriers have become harder to locate, supervise, train and monitor…In addition, the highly competitive market fostered by regulatory restructuring provides a daily incentive to violate rules designed to encourage safe operations
Updating his analysis Belzer (2000:150) has argued the collapse of wage rates in trucking, both at an absolute level and in relation to other industries (like manufacturing) may well account for the driver shortages perceived by the trucking industry. As in Australia, Belzer (2000:139) found that US truck drivers were overwhelmingly paid on a performance-related basis, most commonly on a mileage basis (equivalent to the per kilometre rate in Australia) which rewards driving but not other work activities. Belzer (2000:142) argues the popularity of these systems is because they enable trucking companies to shift some of the risks they encounter from market pressures and customer scheduling demands, loading delays etc onto the driver. Belzer (2000:100-102) also contends that the low margins trucking companies operate on following deregulation means that any miscalculation by a firm can prove disastrous, helping to explain an increasing level of bankruptcies. His analysis of the return on equity bears some striking parallels with that of Dean Croke discussed earlier showing a downward trend throughout the 1990s (with a sharp fall in 1995 following intrastate deregulation). Belzer (2000:87) also points to the combination of customer pressure and
intense competition as offsetting the benefits that might otherwise have followed industry concentration (through mergers etc).
Even though the industry is more concentrated, competition remains very high because customers are cost driven and competitors can engage in "destructive" competitive practices…The carrier making the back haul sets the rate, in this case, and nobody makes a profit. In other words, variant capacity utilization may systematically justify very different rates, and since at equilibrium every carrier is hauling freight at the lowest possible rate, profits remain chronically low. Controlling for information asymmetry, each customer will purchase its preferred bundle of lowest rate and highest service, keeping competition intense.
Belzer's analysis has found support by other studies of the US trucking industry. For example, Cynthia Engel, an economist with the US Bureau of Labor found that the intense competition that occurred in the wake of deregulation had a profound effect, with strong benefits to consumers but rather more dubious effects on the industry itself. Engel (1998:40) concluded:
Competition has resulted in increasing capital intensity in the industry, as firms strive to reduce average variable cost per load… Increased competition also has led companies to change the character of compensation plans for their workers, replacing those based on time with plans based on output. Over the years, wage premiums for unionised truckers have been bid down, and union representation has fallen dramatically. Increasing workloads and less attractive pay have led to high labor turnover and persistant driver shortages.
It is worth noting in passing that several transport company managers making submissions to this Inquiry who had visited the USA made observations about the impact of deregulation on truck driver wages, and the consequent effects on labour turnover and experienced driver shortages essentially consistent with Belzer et al’s analysis. One referred to his surprise that during a visit in 1997 major companies were experiencing turnover rates well in excess of 100% and one apparently very good operator based in Oregan reported with pride that he had reduced driver turnover to 86%. At least two felt the drug and alcohol regime in operation in the USA had exacerbated the driver shortage.
A detailed survey of 573 long haul truck drivers undertaken by Belman et al (no date, 1998?) in 1997 found that the majority of drivers were working at or above the 60 hour maximum specified by hours of service regulation. Further, the survey indicated that long hours were the result both of pressure of freight firms and shippers, and driver efforts to maintain their income. The survey found that although drivers had a strong commitment to their profession (the typical respondent having worked in the industry for 12 years) this did not translate into loyalty to an employer. The average driver had been with the current employer only 18 months and one quarter of drivers had quit in the previous 12 months. This turnover was seen to a consequence of a labour shortage to firms was actually a result of high turnover amongst drivers who remain in the industry. In other words, drivers were dissatisfied with their employer and the study argued for measures to address this and improve driver retention.
Again, at the risk of belabouring the point, this is yet another survey that found evidence pressure from customers was a factor in the long hours worked by drivers. In short, evidence pressure from customers/clients induces hazardous practices in the road transport industry is not confined to Australia and it is certainly more than anecdotal.
Recent research in the USA also confirms the strong relationship between reward levels and safety that has been repeatedly raised in the course of this Inquiry. In 1995 JB Hunt, the second biggest trucking company in the USA, announced a substantial wage increase for its drivers that placed it well above the norm for the industry. Professor Belzer and colleagues (2000a) were able to access company records to assess the impact of this change on safety. Belzer et al found that the increase had a significant discernable effect in reducing both the
incidences of crashes and labour turnover. Higher pay enabled the company to select more desirable driver characteristics from a safety perspective, and crash likelihood also progressively decreased with additional tenure suggesting some policies leading to lower turnover also lower crash rates. The strong relationship between pay and safety was confirmed by a later cross-sectional study based on a national survey of driver wages and UMTIP survey of carriers (Belzer et al, 2001).
In another study Belzer and colleagues (2000b) examined the hours of service issue (more than half US drivers exceed the 60 hour limit), and especially the impact of unpaid working time (ie time not spent driving but waiting for loads etc). This study was undertaken for the Office of Motor Carriers in conjunction with a new hours-of-service regulation. Belzer et al found that the more wasted (ie unpaid) time drivers have, the more likely they are to squeeze too many hours into a day, forcing schedule irregularity and excessive hours. Indeed, they found that the number of unpaid hours a driver worked was the best predictor of work in excess of 60 hours per week. At the same time, they calculated that if unpaid non-driving time could be reduced by 25% the efficiency gain would eliminate the cost of compliance. In terms of a policy response, Belzer et al (2000b) argued that the consequent safety risk could be reduced by charging shippers and consignors for delay time and paying drivers for this time so they log it on as duty (measures to reduce driver turnover were also advocated). These findings are not inconsistent with many submissions made to this Inquiry and earlier research undertaken by Hensher and colleagues.
The promotion of competition by the European Commission is having a similar effect in the European Union. According to Hamelin (2000:5), subcontracting, business start-ups and failures spread at the height of the deregulation 'fever' from the mid 1980s. Competition between freight forwarders held freight rates down, with many transport firms, some barely viable, taking contracts at 'rock-bottom' prices just to stay in business and the turnover of firms enabling the embedded costs of the haulage system (including those associated with economic swings) to be farmed out. Hamelin (2000:5) argues that fierce competition between hauliers has been instrumental in making anti-social working hours the norm for drivers. This can be seen as one aspect of a broader question as to whether the social costs of road transport, including public safety, should be borne by the industry and passed on in haulage rates, or regarded as a cost to the community.
By the mid 1990s, if not before, regulators (and others) were expressing serious concern at the safety implications of the simultaneous growth of the road freight task at the same time as freight rates and profit margins were being squeezed. In 1996 Derek Gibbons from the British Department of Transport (Bousfield, 1996:66) observed:
As profit margins get smaller, we are worried about the 'cowboy' companies that aren't properly licensed and don’t train their drivers correctly.
As in Australia, there have been recurring complaints from drivers that the pressure from customers and the just-in-time system is undermining safety (Bousfield, 1996:66).
From 1998 onward the level of competitive pressure was intensified as a direct result of the European Commission's economic reform process. As in Australia, agencies, interest groups and academic economist and policy analysts supporting these regulatory reforms conspicuously ignored occupational health and safety effects or other externalities associated with the change (see for example, Kerwer and Teutsch, 2000). The first (anti) cabotage regulation on road transport introduced in July 1998 effectively removed license requirements to drive in particular countries, enabling drivers to not only take loads into countries where they were not licensed but also to do domestic trips within these countries on an ‘occasional’ basis. Precisely what ‘occasional’ means is yet to be decided, with individual countries reluctant to make a move that might jeopardise the competitive position of their own transport
operators. Given significant disparities in licensing requirements and safety legislation, wage rates, working conditions and union density between countries (especially between southern and northern Europe), the cabotage regulation has intensified competition between transport operators in different regions in Europe. According to Hamelin (2000:25) this competition has led to a further cut in already low freight rates. This has occurred in a context where the only common law governing labour management amongst European hauliers is EEC Safety Regulation 3820/85 (passed in 1985) and there are serious disparities and omissions in the legal framework governing driving hours. In other words, there is a mismatch between direct competitive pressures and a patchwork quilt of regulatory protection to prevent anti-social outcomes.
Even the largest operators in the Netherlands have sought ways to cut operating costs by changing their employment practices and manipulating legal categories. Analogous to the maritime industry, it has also led to emergence of companies using drivers from Eastern Europe at low 'flag of convenience' wages. This practice has already caused concern amongst representatives of British haulage industry. A recent inquiry into the industry by the House of Commons Environment, Transport and Regional Affairs Committee (2000:xxvii) heard evidence that drivers from Hungary, Romania and Slovakia were being between 16 and 23% of the pay of a driver from the United Kingdom. These low wages enabled companies to 'double man' their lorries and so operate for much longer hours and more cheaply.
The aforementioned issues have also caused concern in Sweden, which has around 35,000 long and short haul truck drivers. In Sweden, with a highly unionised transport workforce (paid under a single collective agreement despite pressure for separate enterprise agreements from the Swedish Competition Authority), and, unlike other parts of Europe, relatively few self-employed drivers, the effects are liable to be most profound. Already, a number of Swedish transport firms have sought to relocate their operations. As elsewhere, researchers (see Frick, 2000) have pointed to the fragmented nature of the industry, a poor understanding of OHS, the inability of operators to resist customer demands, the impact of deregulation (especially the right of cabotage and leasing of Eastern European drivers) and lack of enforcement of minimum standards. It is argued that cost savings achieved through inferior working conditions and compromises on safety have emerged as major means of competition. There is also growing evidence of undercutting of working conditions by smaller operations and drivers accepting below agreement rates or individual (ie kilometre rate) contracts in an effort to safeguard their jobs, as well as an increase in hazardous work practices (Segerdahl, 2000). The Swedish Transport Workers Union has countered the threat by pursuing a Scandinavia wide collective agreement (it is difficult to see how this response more than partly meets the challenge posed) and more effective EU Directives to govern the industry. As in the USA, there is growing debate in Europe as to how to retain a solid core of professionally trained and experienced truck drivers. Yet as in the USA, there are signs that intensified competition is leading to a more volatile, younger and inexperienced workforce, and there is clear evidence that new inexperienced entrants have a significantly higher rate of crashes and work-related injuries than their more experienced counterparts (Hamelin, 2000:22). In other words, the shift to a more volatile workforce will also mean a more hazardous workforce.