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CDL Driver Pay Trends and Outlook

Can the Industry Afford Not to Transition to a Guaranteed Pay Model? Benchmarking Truck Driver Compensation Since 1995

The National Transportation Institute is the principal authority for truck driver and owner operator compensation in the trucking industry. We provide you with data that is critical to your company like per mile and hourly driver , accessorial pay, benefit costs, and best practices associated with company programs.

We offer original economic research for the transportation industry relevant to truck driver compensation. Benchmarking your driver compensation allows you to support, retain, and recruit professional truck drivers in your fleet. Knowing the competitive wages ensures your trucks are seated with appropriately compensated, happy, and safe truck drivers.

NTI sponsors our coveted Top Pay Carrier designation, an elite designation for carriers that provide top tier pay, health & retirement benefits, and carrier stability, that together make professional driving a rewarding and secure career choice.

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved NTI Tracks Results that Support Your Critical Decisions

The National Survey of Driver Wages Driver Supply & Demand The National -Centric/Intermodal Driver Pay Survey Gap between For-Hire and Private Fleets The National Fuel Surcharge Monitor Testimony National Transportation Alerts Custom Overview by Fleet/Trailer Type The National Major Fleet Benefit Report Consulting The National Student and Trainer Pay Survey Competitive Indicator by City The National Directory of Truck Driver Training Programs Driver Retention / Turnover The National Driver Index Best Practices to Recruit and Retain The National Private Fleet Survey Custom Presentations The National City-Centric Technician Pay Survey

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved What Makes For-Hire Driver Pay Move

Pay Model Description: • Green indicates strength, Red weakness and Yellow neutral conditions • Driver pay can not increase when freight rates are red • Freight rates act as a gatekeeper on driver income; no meaningful upward movement can occur unless freight rates are green • When driver supply is red, driver income cannot decline

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved 2018 Truck Driver Pay Conditions

Economic environment: • TL driver turnover is stuck near 100% • hits 50 year low • Capacity demand is out stripping supply, but lack • GDP growth averages 2.9% of qualified drivers is constraining expansion • Driver pay and freight rates continue to rise • Offers extended to applications ratio is on a five- year downward curve

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved 2019 Q3 Truck Driver Pay Conditions

Driver Turnover Freight Rates

Driver Income

Driver Supply Capacity Demand

Economic environment: • TL driver turnover is stuck in a range between 75% - 100% • GDP continues to grow, but a slump in and inventory • Well-qualified driver's remain in short supply leaving build made a negative contribution to growth marginally-qualified drivers to fill the seats at low paying carriers • Capacity has exceeded demand in many (not all!) markets • Offers extended to applications ratio improved from 2018 • While lower than 2018, freight rates viewed • Unemployment stays near full levels historically are reasonably strong, with continued pressure from shippers to drop as the spot continues to decline

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved BLS Says We Have Plenty of Drivers

● The U.S. has a systemic blue- § Inconsistent home-time collar labor problem § Increasing regulation ● The driver pool is shrinking § Greater pressure to conform to work models Truck driving jobs are considered ● § Loading, unloading inefficiencies and undesirable by many blue-collar congestion curtail earning potential workers ● Increasing use is reducing § Relatively low pay the number of blue-collar § Very difficult work workers qualified to work as § Lumpy pay Class A & B Commercial drivers § Irregular schedules >70+ hours ● Drivers are not fungible § Work week length doesn’t compare favorably to other blue-collar jobs

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Workers Testing Positive for THC 2015 vs 2017*

ü 10 States & DC allow the recreational use of marijuana ü 33 States allow the use of medical cannabis ü 13 states prohibit employers from some forms of discrimination against medical cannabis users ü New York City bars most business and non-profits for screening applicants for the use of marijuana ü No reliable test to measure the impairment or non- impairment of a marijuana user exists today ü Most current nationwide surveys show support for legalizing recreational marijuana in the 65% range 8

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved If Only We Could Attract Gen X and Millennials

• Baby Boomers are a retiring, aging work force, sharp decline in births 1965-66 • Gen X – 9M active duty Vietnam War 1964- 1975, Birth rates cratered; 60k didn’t have kids, the rest had fewer due to absence and later marriage • Based on age and trends, Millennials would just now be considering trucking is 2nd, 3rd, 4th career choice • Gen Z – not even accessible to us until after 2016, relative to age alone • Gen X and ongoing - Latino influx ignored by trucking

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Trucking Industry Average Age 54

Class A CDL Driver Ages

1994 2003 2013 2016 2018

30.00% 45-54 yrs., 30.30%

35-44 yrs., 23.40%

20.00% 55-64 yrs., 20.70%

25-34 yrs., 14.90%

10.00%

65+, 6.80% 20-24 yrs., 4.10%

0.00% 20-24 yrs. 25-34 yrs. 35-44 yrs. 45-54 yrs. 55-64 yrs. 65+

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Driver Wages vs. Inflation 2007 - 2018

18.2% For-hire Truck Driver W-2

23.3% Private Fleet W-2

21.8% U.S. CPI-U

47.1% Minimum Wage

113.6% McDonalds

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Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Lumpy Pay Isn’t Just Week to Week, it’s Year to Year

9.58% 10.00%

8.00%

6.00% 5.47% 4.26% 3.94% 4.00% 1.26% 0.40% 2.42% 2.66% 0.87% 2.00%

0.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

-2.00%

-2.43% -2.69% -4.00%

-6.00%

-8.00% -7.36%

U.S. CPI-U NTI For-hire Driver W-2 Private Fleet W-2

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Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Above-Average Pay is Only Step 1

Pay is simply the handshake that greets our drivers. Pay alone does not generate a new pool of highly qualified drivers … But it helps!

• Can generate new interest when well-promoted • Can reignite folks that have a CDL or left the industry to return • Can improve retention if elevating pay to well-above-average or especially from below average to average Pay alone is not the only reason a driver selects a motor carrier or why they leave Increasing pay without adjusting other factors that impact retention is ineffective in the long run Home time Equipment failures Congestion Bidding for shifts at a private fleet Treatment when out on the road/customer sites Inward Facing Cameras Unproductive time when working Work/life balance Lack of (safe) parking with accommodations Ineffective management Highly physical/labor responsibilities

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved NTINTI Truck Truck Driver Driver Pay Competitiveness Pay Competitiveness

2017 2018 Q-3-2019 NTI Truck Driver Competitive Index Weekly Pay Weekly Pay NTI TDCI Blue-Collar Jobs Weekly Pay Utilities $1,660 $1,755 54.6% Mining & Logging $1,432 $1,506 63.6% Construction $1,135 $1,204 79.6% Manufacturing $1,051 $1,110 86.3% Oil Field Worker $1,605 $1,669 57.4% Blue-Collar Weekly Average $1,320 $1,449 All transportation workers $921 $958 66.1% For-hire OTR Class A Drivers $1,082 $1,181 86.8% Private Fleet Class A Drivers $1,494 $1,582 109.2%

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Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved GuaranteedNTI Truck Pay Driver remains inconsistentPay Competitiveness • Not one fleet has ever said, “We love our Sign-On bonus and it works,” yet the disparity between fleets committed to a Sign-On and fleets committed to Guaranteed pay is indicative of the industry’s reliance on the pay model i.e. “It’s the drivers’ responsibility to do more in order to earn more.

• Recruiters tell us Sign-Ons are passé, and that Guaranteed Pay and Transition Bonuses better reflect a driver’s value but too often Guaranteed Pay is too low, which doesn’t promote productivity for the folks in the truck, or in the office = Turnover!

• Guaranteed Pay remains reliant on the driver’s availability and willingness to work, and often even a minimum productivity. 15

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved ConflictNTI Truckbetween Guaranteed Driver Pay Pay and Sign Competitiveness-On Bonuses • It’s widely accepted that Guaranteed Pay is a proven solution to retain drivers, yet fleets are conflicted about committing to the concept.

• The current predominant pay model forces driver income to remain susceptible to productivity, weather, mechanical failure, congestion and even shipper inefficiencies.

• 55% of Flatbed fleets offer Guaranteed Pay, but 54% are a short-term guarantee – Transition Pay

• Only 15% of Tanker fleets offer guaranteed pay, but only 45% pay by the mile. The rest are per hour, per load and percentage .

• Findings prove that retaining drivers isn’t just about the minimum, but also about consistency. 16

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved TurnoverNTI Truck is expensive Driver and Pay we prove Competitiveness it daily!

New Hire/Partial-Year Driver actual pay outcomes are 26.29% less than a Full-Year Driver at the same fleet

Even if the truck is re-seated, fleet productivity is severely impacted by turnover.

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Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Winners in 2019

● Rapidly accelerating pay for trainees ● Guaranteed pay, which reduces turnover by up to 30% just in the periods administered. When continued as salary, can improve by 100% ● Shifting of responsibility of productivity to operations, not the driver ● Gamification to drive engagement and KPIs and to connect to pay outcomes ● Cell Phones or Tablets with ability to connect with loved ones ● Driver engagement via Podcasts, Facebook Live, Video Messages ● Predictive analytics to reduce accident severity and turnover ● Reduce unproductive time: App to identify trailer location, video learning, load matching, shift from irregular OTR to Dedicated ● Safe, paid parking with accommodations 18

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved NTI’s Driver Supply and Wage Expectations

● Overall the U.S. Labor Supply will stay very tight ● 2019 For-Hire Pay will remain flat while Private Fleets increase wages 3-5% ● Local, Regional and Dedicated are top-desired roles by applicants ● Package delivery, final-mile and local private fleet opportunities are growing ● In light of tightening labor supply, we’re competing with other industries who are now paying near our entry-level trainee wages for hourly/home-nightly jobs ● The number of fully qualified drivers will continue to dwindle as new entrant numbers remain low, as retirements, regulations and high turnover continue to take a toll on the driver pool. ● Driver Supply will become critical again (GDP, Trade deal, Regulations)

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Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved Thank You!

Leah Shaver Chief Operating Officer The National Transportation Institute 612.263.9983 [email protected]

Copyright © 2019: The National Transportation Institute www.DriverWages.com Reproduction in any form is prohibited without written permission. All rights reserved