Tag Archives: driver shortage

Real cause of UK driver shortage is an obscure UK tax law

The author of this piece contends that a UK tax law called IR35 is responsible for at least part of the driver shortage.

In the past, UK drivers were allowed to choose whether to be classified as contractors or employees. But with the change in April of 2021, employers now must decide whether drivers they use are contractors or employees.

According to the author, since April, many trucking firms have chosen to classify the drivers they hire as employees, due to the tax law. This has resulted in lower take-home pay for drivers. Naturally, drivers are upset about that. They can easily decide to quit driving and choose another form of work.

I don’t know whether there is statistical evidence for this phenomenon in the UK.

In the US, drivers themselves choose how they are classified. And they can be chosen to drive by any firm. Some firms, through union arrangements, or by choice, may decide not to hire contractors. However, a firm may also hire a mix of employees and contractors. In the US, employers are required to pay benefits, which include health insurance, unemployment insurance, and other services. According to the ATRI white paper An Analysis of the Operational Costs of Trucking: 2020 Update, benefits represent 10% of total average marginal cost, and wages represent 32%. This is a large amount.

But they do not need to pay those benefits to contractors. In the US, rates received by driver contractors are piece rates, and often the drivers come out worse than they would as employees, because they must buy their own benefits.

Also, contractor drivers must pay the costs of their vehicle, including fuel costs and lease payments. According to the ATRI study, in 2019, fuel costs were 24% of total average marginal cost and lease payments were 16%. These costs would be assumed by trucking firms hiring employees rather than contractors.

But in the US a major concern for drivers are the specific requirements associated with loads, such as picking up and returning chassis and containers, a shortage of parking to meet hours-of-service rules, and delays loading and unloading at warehouses and port terminals. These working conditions can be changed at will by trucking firms, on a trip-by-trip basis, and cause loss of income and waste of time for drivers.

I believe that in the US, this ‘supply chain adaptation’ is making many drivers look for other work. It’s hard for a contractor to avoid these work conditions, and employees, though they may be compensated for some of the time, may find it unsatisfactory for lifestyle reasons. They’d be very tempted to try some other line of work. Anecdotally, construction work is an important alternative.

While the contractor-employee distinction is equally important in both countries, the reasons offered seem to be different. Unions in the US trumpet the value of making drivers unionized employees, and it often does result in greater benefits for drivers, as well as the right to grievance arbitration. But it also means the driver does not get to choose which load to accept. Drivers choose to be contractors because they can choose who they work for and which load they take, in an atmosphere of changing and disadvantageous handling requirements that are often imposed. Regularize that, and drivers would be happier to work.

By Richard Clutterbuck 29/10/2021

The real cause of the driver shortage crisis is an obscure tax law called IR35 – The Loadstar

Shadow inflation: Shipping costs are up way more than you think

This article gives lots of measures of factors contributing to supply chain cost. There are good graphs indicating the changes.

But these are contributing hidden costs to products, and those costs will be borne by consumers of the final products. That’s inflation.

It may be the first time that inflation is influenced by marine supply chain problems since the incessant wars on the seas in the 17th and 18th century. And in those days, frequent shooting wars guaranteed recessions; it was leisure goods like tea that had inflated prices. World Wars I and II also caused inflation, and shortages, but these were only partly caused by pillaging of marine traffic on the high seas. In most cases price controls were put into effect to resist inflation for ordinary people; and the extra goods were needed for the soldiers. We don’t have those now.

Somehow in the US and EU we need to find people to do the hard jobs in the supply chain to keep goods moving— warehouse jobs and driving jobs.

Greg Miller, Senior Editor Friday, October 22, 2021

Shadow inflation: Shipping costs are up way more than you think

Felixstowe congestion could lead to $2bn of stranded imports

Container shipping is all messed up in the UK. A recent report claims that shippers cannot get their container cargo delivered on time. And the reason is not the driver shortage, or is it?

Apparently there is also a shortage of space for empty containers, and the empties have to be taken to a different place from where they are delivered. Some ports are refusing empty containers.

When you put that with the ‘blanked’ sailings, where ocean shipping lines simply omit a port from their rotation for a given voyage, it’s impossible to predict when your cargo will arrive. The nightmare has arrived.

By Charlie Bartlett, European Correspondent 13/10/2021

Felixstowe congestion could lead to $2bn of stranded imports, says report – The Loadstar