Why truckers are paid by the mile instead of by the hour: A Fleet Owner explainer
Editor's Note: One of the questions that many drivers ask us is why they aren't paid by the hour or with a set salary like other U.S. employees. Some surveys have shown that drivers, mostly over-the-road haulers, quit not because they believe they are being paid less than they deserve but that they cannot be sure how much they will earn during a week or month. Without knowing how much they will bring home, they find it difficult to budget. This is especially true for drivers whose routes often include high congestion, areas with poor driving conditions because of weather and those whose customers have extended loading and unloading times.
The story begins in the early 1930s when the United States was coming out of the Great Depression. Farms were producing a lot of food and the country needed many trucks to deliver produce and meat to consumers who were just getting back on their financial footing. There was no refrigeration in those days so truckers drove as much and as quickly as they could before the food spoiled. There was little regulation either, and drivers drove as many hours as they could, some driving to exhaustion before pulling over to the side of road and continuing their route after a short nap. Truckers were often paid by the mile, but they were fine with it because they made more money than if they were paid a minimum wage which came along in 1938 as part of President Franklin D. Roosevelt's New Deal.
In 1938, the Fair Labor Standards Act, also known as the Minimum Wage Law, mandated that employees, with a few exceptions, would be guaranteed a minimum wage per hour. This minimum wage would help put money in consumers' pockets, protect workers from unscrupulous employers and, more importantly, inject money into an economy that was still recovering from the Great Depression.
Everyone was on board with the idea of exempting truck drivers from the minimum wage laws. First, truckers themselves preferred it because they could make so much more money. In the 1930s, there weren't as many cars on the road as today especially in rural areas and outside big cities so, in some cases, trucks had much of the roads to themselves. Second, FDR favored it because there was a starving nation to feed. He wanted as many trucks on the road as possible. Third, the trucking companies were happy with the situation because they only paid when the driver produced. This lowered their business risk and maximized their profits because an idle worker did not have to be compensated. However, nothing in the rules prohibited carriers from paying by the hour, and some did choose to do so.
Fast forward to 1980, when, in an environment of deregulation, Congress passed the Motor Carrier Act which did away with the Interstate Commerce Commission (formed originally in 1887 to regulate railroad transportation among states) and deregulated the trucking industry. However, with this deregulation Congress did not remove trucking's exemption from the Minimum Wage Law. Truckers were still being paid by the mile, but there was a problem looming for drivers. New Hours of Service rules, which came along as part of the Motor Carrier Act and subsequent additions, essentially put a cap on how much a truck driver could earn by limiting their driving hours.
And that's where it stands today.
(Actually, The Interstate Commerce Commission promulgated the first federal hours-of-service regulations in the Motor Carrier Act of 1935. The regulations remained largely unchanged from 1940 until 2003, except for an important amendment in 1962. Prior to 1962, driver hours-of-service regulations were based on a 24-hour period from noon to noon or midnight to midnight. A driver could be on duty no more than 15 hours in a 24-consecutive-hour period. In 1962, among other rule changes, the 24-hour cycle was removed and replaced by minimum off-duty periods. A driver could “restart” the calculation of his or her driving and on-duty limitations after any period of 8 or more hours off duty. For more details, see the August 25, 2005 Federal Register.)
One of the arguments drivers make for being covered by minimum wage is that they should not be penalized for situations beyond their control. One comparison, for example, is that factory workers are still paid even if they're idled while a machine is being repaired. Office workers are also paid even if they don't have an immediate task to perform. Economists also argue, as did Adam Smith, the 'Father of Capitalism' in his 1776 book Wealth of Nations, that workers are not actually selling their labor to a company but their ability to provide labor when called upon.
Carriers contend that they should not have to pay a driver for non-driving tasks such as filling their fuel tanks and waiting at warehouses because drivers are paid to drive. This has changed for some drivers recently with compensation such as detention pay. Carriers also contend that in a capitalistic economy, workers are free to work where they please and that no one is forcing anyone to drive a truck if they don't wish to do so. They say the working conditions and pay-by-mile are well known to anyone who makes the effort to learn about the industry before they join it.
We thank former OTR driver Dave Ashelman, now a Phd. student at Carleton University, in Ottawa, Ontario for his insights. Ashelman studies 'precarious labor' from the economic side as well as the social side.
Shane Hamilton, author of Trucking Country: The Road to America's Walmart Economy and head of the International Business, Strategy and Management Group at York Management School (UK), also contributed to this explainer. His podcast, that offers more detail on the history of driver pay, is here.
