Unvaccinated Turnover

Writing an article in the middle of an uncertain negotiation is a gamble. A lot can change in a couple of weeks, especially this close to a January 1st proposed deadline. Negotiations can change very quickly, in either direction. One thing for certain is… nothing is certain.

I’d like to comment on the impact of a potential double-digit drop in available trans-border drivers.

Canada went through a similar issue like this in May 2003 during the BSE outbreak (Bovine Spongiform Encephalopathy or Mad Cow Disease), albeit a micro impact. Virtually overnight, almost the entire cattle hauling industry was shut down to US traffic. Nobody knew how long it would last. Some waited while negotiations raged through the media and others took action to preserve their livelihood. Trailers were parked/sold, trucks changed over to the oil rigs, flat deck, reefer and dry van. The move was considered ‘temporary’ by drivers/operators who assumed the shutdown to be in effect only a couple of months. Of course, it dragged out for over three years. Interestingly, many who left livestock hauling never returned. Most of the drivers in livestock today entered post-BSE.

The first thing we learned was that drivers/operators are flexible. They adjusted to a changing market; they moved to where they could. Some operators sold their trucks and equipment, some did not. Though BSE was a microcosm compared to all truck freight crossing the US border, it does reflect the pliant nature of human resources. Demands will be met; holes will be filled. The only questions will be is at what cost and how long will it take to fix?

The CTA (Canadian Trucking Association) released an estimate that up to 38,000 drivers will not be available to cross the border. My estimates are not as high as their 19%+ drop in capacity; my estimate ranges from 10-12%. Those people who have declined the vaccine are somewhat geographically concentrated (spotted) rather than uniformly distributed, so there will be some jurisdictions and industries where a vacuum of demand will be intense, whereas other areas may be manageable/negligible.

One thing is for certain… rates will increase.

Vaccinated Operators: 

Congratulations! As of January 1st, 2022 (proposed) you have suddenly become very, very valuable. Therefore, expect a raise. It’s YOU the industry wants, not your truck, not a super high level of specific abilities or even your ability to work well with others. You can take a trailer across a border… period! You arrived at the right place at the right time in history. It is now your responsibility to take advantage of this. Negotiating a raise at a time of high demand can be very difficult for some people to embrace. Many service-oriented people struggle with a moral compass that is sensitive to implications of leverage or force. If you or those around you suffer from this tendency you must learn to place your loyalty ladder against the right wall. Your job is to take care of yourself first because if you don’t you will have nobody to blame for your future circumstances but yourself. Today, carriers right across Canada are looking to raise rates and they are raising rates for only one reason… YOUR SERVICES. Your skills/abilities are being auctioned off to the highest bidder. If you don’t accept your newfound value, it will be absorbed by the carrier you work for. It’s as simple as that. Now is your time. Act respectfully and with clear intent. Know what other carriers are offering and assume your worth. I recommend a US mileage rate bonus (as opposed to a universal rate increase) as the supply-demand is geographically initiated. It also assists carriers in the event legislation changes so the rate/wage adjustment can be amended reasonably without controversy.

A few words of caution. Advantages and disadvantages come and go in a free market economy. Being arrogant or abusive rarely pays long-term dividends. Always carry yourself as a professional. Require those around you to also act respectfully. If you don’t bring value to the carrier you drive for, eventually any advantage you have will be turned against you and your reputation will be forever tarnished. Focus on professional behaviour only.

Unvaccinated Operators: 

You fall into one of two possible categories: debt-free and debt-laden. 

If you have your truck paid for you obviously have more options for your truck than other non-vaccinated operators. Everything from selling/retiring/parking to doing local/Canadian hauling. Just remember, you are not alone. The local/Canadian driver market wanting to haul in Canada only just got flooded. Sacrifices may be forthcoming. But, of course, you have thought through all this already. The debt-laden unvaccinated have the most difficult situation to navigate. They are much more vulnerable in the short term than anyone else. Assume a glut of equipment for sale/lease, so depending on your level of debt you may be required to absorb a significant loss (but of course you too already know this).

One note on the impact to carriers. Success or failure in this market may not necessarily depend on efficiencies or history. There will be feast or famine based on criteria never before navigated. Some sound carriers may go bankrupt, some unexpected ones will thrive… Don’t make assumptions based on historical freight/customer models that don’t accommodate sustainable fleet border-crossing abilities. When rates elevate to extreme, sometimes entire markets dramatically change lanes or even evaporate. Low-paying freight may be a thing of the past but so may some entire markets. 

Personal Advice: Know what you use; secure essential stock. North America’s supply chain will be affected. 

How dramatically will not be clear for some time. This time it will affect more than just toilet paper. We will all learn to live with less options. For example, the US market has historically been accustomed to dozens of varieties of products. In Canada (for example) we typically have 3-5 choices of brand names… the US has 10-20 choices. It would be reasonable to assume varieties of items will diminish to half or even a third. People will simplify to reliable brands, or even just ‘whatever is available’. 

Expect price increases: Transportation is 12% of the North American economy. 42% of the North American economy is also dependent on transportation and its costs. Pricing on all products in Canada that require transportation from the US will increase. Locally supplied products/services may become more competitive and reliable. The longer the restrictions apply (or the low supply of drivers remain) the more pressure on prices there will be. It will be a life of uncertainty. Certain industries may ‘hold on’ for a year or two waiting for relief… then die a death of nuclear proportions… or not.

It may be a few months or a few years… but it’s doubtful if this crisis will remain permanent based on a single issue such as crossing a border.

If you are interested in this topic and would like to hear a more detailed discussion on the impact on drivers and operators; go to our website Making Your Miles Count (Media/Podcasts).

About the Author:
Robert D. Scheper is a leading Accountant and Consultant to the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His firm exclusively serves Lease/Owner Operators across Canada. His second book “Choosing a Trucking company” is the most in-depth analysis of the operator industry available today. He has a Master’s degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.

You can find him and his books at www.makingyourmilescount.com or 1-877-987-9787. You can also e-mail him at robert@thrconsulting.ca.

About Robert Scheper

Robert D Scheper operates an accounting and consulting firm in Steinbach, Manitoba. He has a Masters Degree in Business Administration and is the author of the Book “Making Your Miles Count: taxes, taxes, taxes” (now available on CD). You can find him at www.thrconsulting.ca and thrconsulting.blogspot.com or at 1-877-987-9787. You can e-mail him at: robert@thrconsulting.ca.