Truckers Reap New Riches | Hacker News Reader

Truckers Reap New Riches

bloomberg.com

58 pointslxm43 comments

Despite the article's attempt to establish a connection, Millenials' purchasing habits (online vs showroom) have little to do with this beyond their being the generation currently creating growth in demand.

Large items such as washing machines, ranges, sofas, were always delivered by last-mile delivery companies, regardless of how they were purchased.

The real story here is about consolidation and standardization of the last-mile delivery industry. That's a pattern that has occurred in other industries for a long time. The consolidation reduces cost by reducing redundancies (== laying off duplicative employees), and standardization of process and marketing creates a recognizable brand, which reduces purchase friction with customers.

This will probably continue until there are a few major nationwide white-glove delivery companies left. And I doubt there will be consumer opposition to preserve the local delivery company the way there is with the local restaurant, boutique, or coffee shop. Appliance/furniture delivery isn't a lifestyle service.

Another recent example I discovered: Automobile body repair shops. They used to be mostly independent businesses, but sometime recently, a nationwide corporation called Abra has bought up many independent body shops and turned them into a network.

One of the side effects of capitalism. Monopolies.

A recent example I discovered: Automobile body repair shops. They used to be mostly independent businesses, but sometime recently, a nationwide corporation called Abra has bought up many independent body shops and turned them into a network.

Perhaps the conditions for recognizing when an industry "needs" consolidation aren't that esoteric? Aren't they all issues of scaling?

Another example is in refrigerated shipping containers. Even though those are specialty items, prices have been driven down in that area to the point where financing the construction of new stock is becoming an impediment to some companies in remaining price competitive. Larger companies which have manufacturing in-house have a huge advantage in that niche.

Nationwide chains can spend less per shop on advertising, but still out-compete small shops in terms of advertising exposure. They're also more convenient for other large companies to make deals with. Is last-mile delivery like auto-body, in that the flow of information among consumers isn't so great, and it takes considerable effort for delivery teams to maintain quality of service even though the margins aren't always so great?

(Anecdote: I bought a portable dishwasher from Amazon. The UPS driver dropped the box right on the corner, completely smashing the packing and the bottom tray of the machine. I reported the damage and did the return. I got the replacement item and the UPS driver dropped the box on its corner in exactly the same way! I ended up keeping it, since the 2nd time, the water tightness and the cosmetics from the front weren't compromised, then eventually sold it on Craiglist.)

> Perhaps the conditions for recognizing when an industry "needs" consolidation aren't that esoteric? Aren't they all issues of scaling?

I don't think they are esoteric either, but rather, pretty straightforward. Modern communications and information technology have made it possible for a single corporate entity to easily manage an enterprise spread over many disparate geographic locations.

As a result, there are costs (basically, people) that can now be reduced because they are redundant, and the remaining people can create some level of standardization in process and branding.

This is an old story at this point - at least a few decades old. The only surprising thing is that it took this long for the last-mile white-glove delivery industry to get there.

> Is last-mile delivery like auto-body, in that the flow of information among consumers isn't so great, and it takes considerable effort for delivery teams to maintain quality of service even though the margins aren't always so great?

Sure, I'm not arguing that they don't have a strong incentive to merge. Quite the opposite, in fact.

It would be for say AGA stoves but I take your point

I don't understand your response.

Thanks for this; there was something in the logic that bothered me, but I couldn't quite put my finger on it. It was right at the moment when they said people used to buy "bulky goods from local shops and department stores with their own" and then the next word wasn't "vehicles" (i.e. customers' own vehicles) but rather "delivery services" (i.e. stores' own delivery services). Wait, but...

Bloomberg or WSJ rewrites this same "trucker shortage" article every month, like clockwork. It's amazing. I've read this same article every few weeks for the last twenty years.

Indeed. And there is also a continuous shortage of farm workers, or at least workers willing to do backbreaking seasonal labor harvesting crops for substandard wages. Astonishing.

And HN reposts "programmer shortage" stuff every few weeks, too, even though there's really no shortage. There's shortage of willingness to pay a little more, but not the shortage of skill. And there will always be the shortage of willingness to pay: that's how market finds the right pricing.

I know a few truck drivers. They're not getting paid any more than in past years. Trucking companies may have increased demand, truckers are still getting paid trucker's wages. Enough to get by on at the cost of having to work 12+ hour days.

Truck driver earnings today are roughly the same, in nominal dollars, as they were in 1975. So over the past 40 years they've taken a 70% pay cut.

They are getting squeezed so tightly a lot of them don't even make minimum wage.

They have seen a serious pay cut since the Motor Carrier Act of 1980, however 70% is a big exaggeration. That would imply the typical trucker was earning the equivalent of $135,000 per year in 1975 based on today's BLS numbers. And if it were accurate, I'm not sure how anyone could think that would be sustainable across a field flooded with 1.7 million drivers. With the pay decrease, there are dramatically more drivers today than in 1975 after adjusting for population growth. It's now providing a lot more jobs at a lower pay. The reason wages dropped was due to increased competition and deregulation, the value of their services declined. The reason wages were so high before was due to artificial labor scarcity and price controls via a cartel system (which Jimmy Carter fixed when he signed the MCA bill), ie it was fake.

Business Insider covered this extensively, they found the typical trucker has seen a 21% pay cut since 1980 in real terms -

"Business Insider compared freight wages, adjusted for inflation, from the BLS 1980 area wage survey and location-specific wage estimates from the BLS' Occupational Employment Statistics. For the five cities in which comparable data existed in both surveys, wages decreased by 21%, on average."

https://www.businessinsider.com/trucking-shortage-eld-mandat...

https://www.businessinsider.com/truck-driver-salary-decrease...

While a 135k sounds great, now consider they have to pay for their fuel, they are independent contractors generally. Then taxes on top of that. when truck drivers attempted to get a loan at a previous employer the conversation of "but I make a 100k a year" happened several times. No you really make 50k.

I used a 'typical' driver earning $75,000/year in 1975. $75,000 today, after expenses, is considered well-payed. New drivers earn $20,000 to $30,000/year.

According to the BLS CPI inflation calculator[1], $75,000 in 1975 would be equivalent to $362,000 today.

Business Insider has, shall we say, a very Capital-oriented view of the trucking industry, constantly shilling for low driver pay. Drivers who read it are always amazed that they never seem to mention that there would be way more drivers than needed if they could earn what they used to.

[1] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=75000&year1=19...

Long haul trucking should go away, in favor of long haul rail. The reason the former can compete with rail is because of heavy government subsidy in the form of free highways.

Trucking causes most of the damage to highways (fatigue damage), and the environmental costs of trucks are huge (fuel, rubber dust, brake dust) compared to rail.

The US already moves over 40% of its total hauled tonnage by rail, more than twice that of the next largest economic entity, the EU, which is pushing about 20%. Long haul trucking isn't just competitive because the "subsidy" of not being banned from the federal interstate highway system. Pretty much all the freight that can be economically shipped by rail already is. Rail is inflexible and requires substantial investment in fixed infrastructure to add terminals. Intermodal facilities frequently add so much difficulty at both ends that it's often simpler and faster just have one truck drive 300 miles than to run a trailer 100 miles, piggyback by rail 200 miles, then another truck run the trailer from the intermodal terminal 100 miles to the destination. Charging trucks a toll to use the interstate or whatever isn't going to make rails magically appear over steep mountainous areas in the western US, or bridges for parallel tracks materialize over all the rivers and streams in the midwest/south, or new rights of way appear through the densely populated northeast. It's not like government sugar tariffs and corn subsidies combining to perversely make corn syrup cheaper than sugar. Rail and truck transport fill different niches and are both necessary to a functioning transport network.

No one is expecting magic, but if we priced in the externalities of trucking (mainly increased fuel taxes or tolls for road damage) that would help shift cargo transportation mix a little more towards rail.

I drive I5 regularly. It's flat all the way from Canada to San Diego. The train tracks run parallel to it.

It's also jammed with semis.

There's a lot of low hanging fruit in transitioning to rail.

Not everything is simply going north south on that axis

It doesn't have to remove every truck from I5 to be a huge win, either. Like I said, I5 is packed with trucks 24/7.

The transformation in the article is the usual one we've seen for the last several decades in other service industries like foodservice, retail, home system service, and even transportation. An uneven patchwork of limited-region small businesses is being abstracted away, albeit not necessarily replaced, by national middlemen with deep pockets, vast experience, consistent standards, and powerful negotiating position. Those looking to hire them to perform a service are pleased with the consistent standards, tailored solutions, and their ability to keep costs predictable across the board. Those middlemen often contract out to the exact crop of companies and people who were doing the work before, but the standards are higher, the competitive price pressure is higher, and a cut goes to the coordinator which didn't before.

With time, this will result in consolidation, as it has always has. The most underperforming subcontractors will be shed, some will be directly acquired, existing employees will be handed new responsibilities, geographic bases will expand and redundancies will be identified. Both the job alarmists and the capitalist extollers are right, because this is the path to efficiency among whose chief instruments is reducing labor cost, but also because this process has always played out for hundreds of years in the exact same way.

The silver lining here is that this particular transformation isn't based on regulatory arbitrage (or simply ignoring the law), doesn't result in the sort of homogenization that imperils an intangible heritage (like foodservice consolidation did), but is actually about a middleman inserting real value into the supply chain. It's exactly what it says on the tin, and that's quite nice.

I'm still waiting for Ikea to take the friction out of home delivery. If they could do that, their market would double.

They actually do home delivery in Japan for ￥3,000, or roughly $30 USD: https://www.ikea.com/ms/en_JP/customer_service/ikea_services...

I get IKEA deliveries to my Bulgarian village 1-2/month. Have been for years.

To inside the home, or a central drop off point?

Ikea does delivery here in the United States, but their delivery service has a bad reputation.

There are small businesses that have been created around this. I found a business that would purchase, deliver, and assemble items from Ikea. All I had to do was send them a copy of my Ikea shopping list.

In my particular case, they purchased items at the Elizabeth, NJ location, which has a 3.3% sales tax [1]. If I didn't use their service, I would have had to shop at Ikea Brooklyn, which has an 8.8% sales tax [2].

[1] http://www.sale-tax.com/ElizabethNJ [2] https://www1.nyc.gov/site/finance/taxes/business-nys-sales-t...

Yes, Ikea delivery is wonky in the US. Ikea themselves will deliver, but the cost is based on how far you are from the nearest store, and it's not cheap. Some of those third-party delivery services are good, but none of them are cheap.

Ikea stores give me nightmares. You can get in, but you can't get out again. What I really want is to be able to order stuff from Ikea online so I don't have to set foot in their store, and have it delivered quickly for a low flat fee. They probably should think about doing some kind of partnership with Amazon to make this happen.

(edit: added link) https://www.ikea.com/ms/en_US/service-offer/delivery.html?ic...

Is Ikea actually providing that service or are they merely reselling local logistics companies? When I had a kitchen installed "by Ikea" here in Germany, it was done by contractors who have every bit the impression of being completely unaffiliated.

I think IKEA has recently dropped their price for home delivery in the US by a lot. I think it was maximum $50 or less? I don't recall exactly, but I know when I bought IKEA furniture 10 years ago it wound up being more practical to borrow a pickup and drive three hours each way than to ship it, and they seem to have corrected that at least.

France lets you rent one of their trucks for 2,3,4 hours.

But I guess that’s less efficient than having one bigger truck go around the neighbourhood.

You can rent a Uhaul for $20/day + gas. The problem isn't the delivery. It's that a lot of buyers don't want to wrestle a washing machine into and out of a truck. If you don't move stuff that big or bigger on the regular it makes it harder.

Honest labor made possible by the Internet that can’t be automated away, and it improves the experience for the consumer. Some may criticize the user of contract labor, but a lot of these contractors are independents who own their own truck or small businesses that own a few trucks and employ their own people.

Once again the free market finds new uses for labor rather than eliminating the net total number of jobs. It’s a wonderful thing!

Not sure if sarcastic but looking at the "net number of jobs" is a shallow analysis. Major trends are the appreciation of certain jobs for example in the IT industry (a nonexistant/tiny field until recently) and the devaluation of many others.

The next stage in automation is expected to make the work that most people are able to do completely obsolete, that's why many visionaries discuss basic income.

Another trend is the concentration of wealth, which may shape the economy, e.g. by providing lots of lowly paid "servant" jobs.

Even today the "free market" is augmented by huge welfare systems pretty much everywhere, including the US; suggesting that the free market alone can "find new uses for labor" and automatically create a functioning system is imo wrong and harmful.

> The next stage in automation is expected to make the work that most people are able to do completely obsolete, that's why many visionaries discuss basic income.

It is true: The Jacquard Loom has already replaced good loom working jobs. <s>

More seriously, I am with you on more wealth equality.

> Major trends are the appreciation of certain jobs for example in the IT industry (a nonexistant/tiny field until recently) and the devaluation of many others.

This is the natural progression of jobs. Auto mechanics were a nonexistent / tiny field that soon grew, devaluing the once noble buggy whip and horse-related professions.

> The next stage in automation is expected to make the work that most people are able to do completely obsolete

This is where I and many others fundamentally disagree. Work may be made obsolete, but new jobs will be created, just as they always have.

> suggesting that the free market alone can "find new uses for labor" and automatically create a functioning system is imo wrong and harmful

I am not only "suggesting" - this is actually the what our economy does every single day! The free market allocates labor, the government is not involved except around the margins.

My great great grandfather was a Cooper. He had friends in the carriage industry. When cars were starting to get big it was obvious what to do: take their years of experience making buggy cars, and now make automobile cars. I’m not so certain that the current pattern of automation is the same as the last. In the past, the automation shifted labor jobs around. The new automation is of labor itself. Asking people to exit the labor market & move to a new market is harder than I think your optimism merits.

> The next stage in automation is expected to make the work that most people are able to do completely obsolete

That would leave a large untapped resource of human labor.

I don't understand why capitalism would leave that unexploited.

Just taking a stab here but I think the idea behind automation is that the automation itself is more cost effective than the human resources, and in turn, yields the same or better results. Thus the human resource pool becomes inefficient when weighing the costs of paying all the humans versus weighing a machine.

There's only sense in exploiting a resource if the return is greater than the investment, and since automation replaces a workforce that doesn't require deep specialization, you end up with a resource pool that has little value. The big win for John Henry wasn't that he could keep up with the machine, but he actually exceeded it and was less costly, and demonstrated that a theoretical army of John Henry's were more efficient than an army of the railroad spike driving machines.

However, there's a lot of automation that while possible is still more expensive than having people do the work.

Flexible automation is far more expensive that fixed-task automation and for companies that do a mix of many different products/services, it's not unusual that people end up being more cost effective than robots.

And that frees up all kinds of labor for new jobs:

1. the movie/tv/music industry has expanded enormously

2. all kinds of jobs for people looking for sunken wrecks and graves of MIAs

3. restoration of old cars

4. personal trainers

5. artists/authors

And yet employment is higher than ever in the US.

If you want to assess the impact of truckers on economy, have a strike. Chile 1972 for instance.

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