Like Rail Workers, Truckers Are Also Feeling The Pain Of Predatory Systems

President Joe Biden and Congress, in a bipartisan fashion, moved last Friday to exercise their constitutional right to regulate interstate commerce and prevent a rail labor strike by imposing an agreement mandating increased pay and schedule flexibility for railway workers. The agreement was previously rejected by some railway worker unions, which deemed the move insufficient. Although lawmakers from both sides of the aisle hesitated to impede unions’ ability to negotiate freely, the alternative is far less desirable. A railway worker strike would have cost the American economy an estimated $2 billion daily, in addition to ravaging supply lines during the busiest time of the year.

The issues facing the railroad industry are not unique, and this act by Congress should serve as a warning sign for other areas of the supply chain. Like railway workers, truck drivers, too, have suffered from shrinking pay and grueling hours, issues made possible largely because most drivers work as independent contractors — not salaried employees. Problems ranging from rates of payment to crooked contract agreements to unsafe driving standards have resulted in a driver shortage, high turnover, and declining wages. To avoid similar interventionist measures becoming necessary in the trucking industry, the government needs to ensure that the legal distinctions between independent contractors and employees are more clearly defined.

To understand how this issue came to be, we have to go back to the Motor Carrier Act of 1980, which slashed much of the industry’s previous oversight and barriers to entry. Until that point, trucking was a decently lucrative field; the average truck driver in 1980 earned about $110,000 annually, adjusted for inflation. After the act passed, new, loosely regulated trucking companies flooded the market, which arbitrarily classified their drivers — drivers that functioned as employees working exclusively for one company according to its standards, hours, and routes — as “independent contractors.”

By doing so, these companies became exempt from paying for drivers’ Social Security taxes, FICA, and overtime or providing them with insurance and other benefits. Despite working longer and more grueling hours, truckers today make less than half of what they used to in real terms — capping out at around $48,000. As Larry Mishel, a distinguished fellow at the Economic Policy Institute, put it, “This was a conscious decision to make the trucking industry a dog-eat-dog industry. The prices of trucking got cheaper, but the ability to make a living evaporated.”

A staple of these modern independent contractor agreements is lease-purchase plans, under which drivers lease their trucks directly from the company, becoming quasi-owner-operators. Essentially, drivers pay their companies to use the trucks and all the associated maintenance costs, receiving a fee for the loads they deliver. They typically can’t take the truck home or use it for any other purpose. If they want to leave the company, they can end up indebted with no job and no truck. Unsurprisingly, this practice almost never works out profitably for the drivers. Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association,