Investigating the role of competing wage opportunities in truck driver occupational choice

Abstract

AbstractA perceived driver shortage causing difficulty in hiring and retaining qualified drivers threatens carrier productivity and profitability. Logistics literature concerning driver turnover has focused on three primary groups of factors contributing to the driver turnover: driver demographics, manager quality, and work environment. A key consideration, however, is that drivers have an outside option to work in other industry‐occupations. We leverage the Roy model of occupational choice to develop hypotheses regarding the effects of wages and tenure on workers’ occupational choice. To test our theory, we conduct a series of econometric studies on a panel data set we assemble from publicly available data sets. Our results show that relative wages strongly influence the choice of whether to drive a truck for a living. A particularly important finding is that the effect of relative wages varies significantly across industry‐occupations. In fact, contravening industry wisdom that wages are insufficient to attract qualified workers, wage elasticities are greater in trucking than in competing industry‐occupations, such as construction or retail. These results persist after accounting for a wage–tenure interaction. This indicates that the persistent “driver shortage” faced by the industry is the result of wages failing to keep pace with wage increases in competing industry‐occupations.