Wages and Working Conditions of Truck Drivers at the Port of Long Beach-Research Report
IntroductionAs volumes of imports to the U.S. continue to grow, there is increased pressure on terminals, port drayage companies, and shippers to increase throughput at the nation’s ports. One key part of this vertical chain is the port drayage driver. At the ports of Los Angeles and Long Beach (which combined are the third largest container port in the world) the vast majority of these drivers are owner operators (drivers who own their own trucks).
There is very little known about these drivers. The purpose of this study is to use data from surveys of drivers at the Port of Long Beach to better describe this labor force, with an eye towards examining rates of pay, their worklives, and safety issues.
The survey of drivers working at the Port of Long Beach was conducted in April and May 2004.
Focusing on drivers involved in port drayage specifically is relevant from two perspectives. First, there has been great concern about security at the nation’s ports and some of this scrutiny has been placed on drivers.
Second, the labor market circumstances of port drivers, most of whom are nonunion owner operators (especially at the California ports) stand in sharp contrast to the labor group within the gates of the port – the longshoremen and clerks. The latter group is unionized and their wages are considerably higher than workers of similar skill level.
AbstractUsing data from a survey of drivers at the Port of Long Beach, models of earnings, waiting time, and safety are estimated.
Paid by the trip, there is little incentive for firms to use their time efficiently and a great deal of pressure for drivers to complete trips quickly.
We find that drivers who own their trucks have a higher probability of accepting unsafe chassis and taking them on the road.
We conclude that the inefficient use of drivers’ time leads to negative externalities of pollution and unsafe driving.
The Use of Owner Operators An overwhelming number (nearly 87 percent) of drivers in the sample self-classify as owner operators. The question is why this percentage would be so much greater than the percentage of owner operators for over-the-road drivers (25 percent according to the Sloan Trucking Industry Program Survey of Drivers; Belman et al. 2005) or among the total population of truck drivers (10 percent in the Current Population Survey, according to the author’s calculations).
By contracting with owner operators and paying them by the trip, drivers have the incentive to pick up and deliver loads as quickly as possible in order to maximize their income. Thus, “buying” services with appropriate contracting (eg. pay per load) aligns the interests of firms and drivers without the firms paying monitoring costs.
Contracting with owner operators also reduces the firms’ up-front capital costs. Firms do pay for the cost of capital – obviously drivers need to be paid enough to cover the cost of their trucks – however, they are paying for the cost of capital per load, not making an initial investment in a fleet. Firms are also somewhat protected from variability in insurance and fuel costs.
Owner operators must be paid an amount that will cover their costs, however, due to information asymmetries and lack of market power among drivers, there might be a lag between the onset of increased cost of insurance and fuel and the time where firms incorporate these increased costs into the rates charged to shippers (and the amount paid to drivers). There is also the possibility that driver’s mis-price their services due to lack of information (Peoples and Peteraf 1995).
There is some concern in the industry that owner operators are in fact employees who happen to own their own trucks (Hamelin 1999). Aside from the cost-smoothing reasons that firms might prefer owner operators, firms also avoid paying for benefits and never have to face collective bargaining problems with owner operators. The self-employed are not allowed to form a union under current anti-trust laws, though the Teamsters currently have a focused campaign to attempt to organize port drivers.
A Human Capital Model of Owner Operator Earnings at the Port of Long BeachWhile these studies focus on factors such as age and marital status, the decision to become an owner operator at the Port of Long Beach most likely is a function of the fact that truck driver is a job that requires little skills and does not require mastery of English. In fact, 92.9 percent of the drivers are Hispanic and 88.6 percent of drivers were born outside of the U.S.
The mean net income (income after deducting for truck-related expenses) of the sample was$29,903, with a median income of $25,000. While this does not appear an overly high income, one-third of the sample had less than a high school diploma and another 34.8 percent had a high-school diploma as their terminal level of education.
These arguments aside, there appears to be little reason that a recent immigrant could not find work as an employee driver at a local firm.
Two of the firm size variables have negative and significant coefficients. Drivers who haul for firms that contract with 25-99 drivers earn $6221 less over the course of the year than drivers at small (less than 25 drivers) firms. The wage gap is larger for drivers at firms with 100-249 drivers – these drivers earn $9903 less than drivers at small firms. The coefficient on very large (more than 250 drivers) firms is not statistically different than zero.
A Model of Waiting TimeOn average, port drivers report 48 percent of their trip time is spent waiting to get in and out of the port. A model of the determinants of waiting time is developed. As in the case of the wage model, the econometric model is fairly parsimoniously specified, with a focus on the key correlates of waiting time. The dependent variable is the ratio of waiting time to total time of the last trip. The explanatory variables are tenure, experience, race, and ethnicity, and firm deadlines.
Though tenure is not statistically significant, there is a negative relationship between experience and waiting time, providing support for the hypothesis that drivers who have been in the occupation longer find ways to circumvent inefficiencies. Drivers at the largest firms (250 or more drivers) have less waiting time, supporting the hypothesis that these firms may use labor more efficiently. Finally, there is evidence that those born in the U.S. have less waiting time that those born outside of the U.S. This suggests that the lower wages earned by Hispanics may not be due to discrimination, but somewhat attributable to language skills.
Chassis and Road SafetyThe issue of chassis safety is topical in intermodal drayage (Swan 2004). Though chassis are not owned by the drivers or drayage companies, in most states the drivers are held responsible for the chassis they operate on the roads.
In 2002 California enacted a chassis law that puts the responsibility for chassis safety on the chassis owner. As drivers have little time to inspect equipment and economic incentive to get in and out of the port complex quickly, it is not unusual for drivers to take unsafe chassis on the road. Half of the drivers in the sample stated that they had been offered an unsafe chassis in the 30 days prior to the survey.
Drivers in the survey were asked what they had done the most recent time they had been offered an unsafe chassis. Twenty-two percent reported that they had taken the chassis on the road.
Drivers at firms with 100-249 drivers are more likely (0.23) to take an unsafe chassis on the road than are drivers at small firms. Drivers who report receiving a moving violation are 0.09 more likely to report taking an unsafe chassis on the road. This is undoubtedly a combination of risk-taking behavior and the willingness to report such behavior in a survey. Finally, drivers who own their truck are more likely (0.10) to report driving with an unsafe chassis.
ConclusionDrivers at the Ports of Los Angeles and Long Beach are critical to goods movement within Southern California and provide a key link to trade between the region and the rest of the country.
The driver survey conducted at the Port of Long Beach provides insight into the wages and working conditions of these drivers, most of whom are owner-operators and many of whom are not native to the United States.
These self-employed drivers bear the risk of fluctuations in diesel prices, insurance costs, and capital expenditure, allowing drayage companies to operate with significantly lower fixed costs.
The drivers work long hours (on average 11.2 hours per day) and spend nearly half of their time involved in non-driving work (such as waiting at the ports). Their pay, while comparable to national figures on workers with a high school diploma at $29,903, involves working 33 percent more hours than a typical full-time worker. It is also notable that these drivers are paid substantially lower than the national average for owner operators and employees. A model of net annual earnings for port drivers finds no returns to education, experience, or tenure.
The pay and work of these drivers raises questions about the way in which this labor force should be utilized to improve port efficiency. Currently delays at the port cause problems for shippers and truckers, while the terminal operators and longshoremen are insulated financially due to high volumes of trade. A model of trucker waiting time finds some preliminary evidence that language (proxied by birthplace) leads to longer hold-ups for drivers at the ports, further lowering their earnings. Given the inability of drivers to collectively bargain, and the apparent inability of port drayage companies to contract for higher rates with ocean carriers, there is little incentive in the current system to use drivers’ time more efficiently.
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