Hunt’s Historic Gamble on Driver Pay

One objection to raising truck driver pay to address what’s called a driver shortage is that shippers won’t stomach higher rates needed to support higher pay.

Shippers already are paying higher prices (than in 2009). Truckload rates were 7.2 percent higher in March than a year ago, according to Cass Information Systems.

Back in 1997, however, one truckload carrier was willing to buck the consensus with a massive driver pay increase some competitors warned was “lunacy.”

J.B. Hunt Transport Services didn’t think so. In February of that year, it raised its driver pay from as low as 25 cents per mile to as high as 41 cents per mile.

The increase in per mile pay depended on a truck driver’s years of experience and ranged from 24 percent to 48 percent. The average increase was 33 percent.

That may well have been the biggest single bump in truck driver pay in history, and it came when drivers were hard to find, hire and keep, as they are today.

Annualized wages at the Lowell, Ark., carrier shot from about $33,000 to as much as $46,000, according to articles from The Journal of Commerce and Traffic World.

The company set a bar for truckload pay that, while no longer the ceiling, is still with us today, with the average tractor-trailer driver wage only $39,830 in 2011.

Then-CEO Kirk Thompson said the company would shift from hiring and training entry-level drivers to recruiting experienced over-the-road veterans.

“We want the most experienced, service-conscious and safety-conscious drivers, and we feel to get that we should ante up and pay what it’s worth,” said Thompson.

Hunt fired that shot heard round the truckload industry without the promise of a single penny from a customer, hoping to save on insurance and recruiting costs.

It was a huge gamble at the time. “I think it’s a very gutsy and a bold move,” said Herb Schmidt, then senior vice president of operations at Contract Freighters.

“I can’t say whether it will or won’t work,” said Schmidt, who is now president of Contract Freighters’ successor company Con-way Truckload, Joplin, Mo.

(Con-way is experimenting with new driver pay plans today, including guaranteed pay — a groundbreaking concept for an industry that pays by the mile.)

Hunt made its pay hike before becoming the intermodal giant it is today. In 1996 and 1997, the company was much more a straightforward truckload carrier.

Hunt’s driver turnover rate then, 80 percent, was lower than today’s truckload industry average of 88 percent, as reported by the American Trucking Associations.

How did the decision to lead the truckload industry in driver pay work out for Hunt? Pretty well. 1997 proved to be a year of exceptionally tight truckload capacity.

Trucking companies such as J.B. Hunt and Schneider National, which also raised pay, didn’t have to park tractor-trailers that summer for lack of available drivers.

Back in 1996, J.B. Hunt reported a $22 million profit on $1.5 billion in revenue. In 2011, the company had a $257 million profit on revenue totaling $4.5 billion.

Eventually other carriers raised driver pay and pricing. The 37 to 41 cent per mile scale introduced by Hunt in 1997 is not uncommon or low in 2011.

With carriers still warning of a severe shortage of drivers, will some as yet unnamed truckload carrier be as bold today as J.B. Hunt Transport Services was then?

Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter @wbcassidy_joc.

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