Supply and Demand

Quick, name the most basic remedy you can think of for there not being enough of something available in the market. Did you say, offer more money for it? Well, if so, that would indicate that you have a good understanding of how a free-market economy actually works, with the laws of supply and demand stating that anything for which demand exceeds supply with experience a price increase, and anything for which supply exceeds demand you should expect to see prices drop. It would also indicate that you know more about economics, or perhaps business in general, than the American trucking industry, which apparently can’t figure out why there aren’t enough truck drivers available despite lowering wages repeatedly over the last decade…

I got the story from the New York Times online, but apparently this issue has been kicking around for a while now. Adjusting for inflation, the average trucker’s salary is apparently 6% lower than it was a decade ago, despite an increasing demand for people to haul various goods and resources around the country. It seems obvious that this might be having a negative impact on the size of the labor pool – or, as reporter Neil Irwin puts it in the original article, “It takes a peculiar form of logic to cut pay steadily and then be shocked that fewer people want to do the job.” But what I found shocking, and truly appalling, about the facts of this case is the response from the industry, which is apparently complaining about a lack of skilled workers rather than instituting higher pay scales…

Now, I should come out and admit that while I have some experience with both shipping and logistics issues, I have no formal credentials in either of these areas, and I have certainly never run a trucking company. However, this has nothing to do with the issue at hand, because as Mr. Irwin correctly points out, saying that there is a shortage of skilled workers is effectively the same thing as saying we aren’t paying our workers enough. A significant number of drivers who are already qualified to handle these jobs have left the industry over the last decade due to declining wages, and the same factor makes training to be a truck driver increasingly less attractive. It is no exaggeration to say that this whole “crisis” is entirely within the ability of senior management to fix…

Without a great deal of additional research I can’t tell you if this situation is an outgrowth of runaway executive compensation (as Mr. Irwin implies), a decrease in the importance being placed on the role of labor, effects of an global recession, effects of an international economy, or some more subtle cause; I called the situation shocking because whatever the cause the solution is relatively simple. I called it appalling because this mentality – treating the workers like an unfortunate nuisance or an annoying inconvenience – runs counter to everything we have learned about management over the last hundred years, not to mention psychology, sociology and economics. The belief that you can ignore the workers, mistreat the workers, or act against the best interest of your workers and hope to achieve any long-term economic success has been debunked over and over again, and any first-year business student could explain the fallacy to you in detail – but apparently the people being paid multi-million-dollar salaries to run these companies can’t…

I can accept that even highly educated people might have trouble with subtle ideas – like the concept that outsourcing work to another country will throw people here out of work, eliminating the customers who would otherwise have purchased your product. But the idea that if your wages are too low, no one will be willing to take those jobs is another matter. I don’t know how this crisis is going to turn out, or if the Trucking Industry will be able to pull out of this tailspin while there is still time. But I really hope we can nip this kind of thinking in the bud before it destroys anything else…