Monday, December 12, 2016

US Labor Secretary-Nominee Exits California's Harsh Business Climate

By Joel Fox
Editor of Fox & Hounds and President of the California Small Business Action Committee
President-elect Donald Trump’s nominee as Labor Secretary, Andrew Puzder, heads a California company that decided to move headquarters to Tennessee. His reasoning: California’s suffocating regulatory business climate.

dept-of-labor-logoLabor and union supporters immediately attacked Puzder, head of CKE Restaurants that operates Carl’s Jr. and Hardee’s restaurants, when news of the pending appointment became public. Pudzer opposed California’s $15 minimum wage and has predicted that iPads and robots would soon take over some restaurant jobs.

However, Puzder has defended his statements in the past declaring that it is government policies that drive up the cost of labor to a point that employers must turn to automation to maintain the thin profit margins restaurants offer.

Puzder argues that government mandates are hurting the populations that those who pass the regulations are trying to protect. In his personal blog, Pudzer told of his interview on CNBC’s “Squawk Box” show after California passed the $15 minimum wage. “Jobs will disappear when minimum wage increases make the cost of hiring employees exceed productivity. I also told (“Squawk Box” Co-Anchor Becky) Quick that raising wages so drastically will price entry-level workers out of jobs and force businesses to automate.”

Puzder is not opposed to minimum wage increases but he said he wants them to be “rational” so as to have minimal impact to help preserve jobs. He favors earned-income tax credits to help low paid workers.

He also argues that government policies especially in California stifle the entrepreneurial spirit of immigrants and minorities who would move up to management and ownership of fast food restaurants.

When Pudzer announced the company’s headquarters’ move from Santa Barbara County to Nashville, Tennessee this past March he said the location of headquarters was unimportant. Where restaurants were building franchises and facilities is important and California presented too many business obstacles.

In a 2013 Wall Street Journal article, Pudzer said, “California is not interested in having businesses grow.” He cited as example that it takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia for one of CKE’s restaurants to get a building permit after signing a lease. But in Los Angeles it takes 285 days. Pudzer said, “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” a street named for Carl’s Jr. chain’s founder.

Beyond the difficult permitting process, Pudzer complained about labor regulations often required the company to battle class-action lawsuits in the state. He said over the previous eight years his company paid $20 million in damages and attorney fees fighting the lawsuits.

In discussing the debate over minimum wage, Pudzer said he is not a fan of automation at restaurants.

“There’s a personal element that you don’t get from machines, and I think you’re going to lose that.” Fast food is a “great level of job for people to enter the labor force. A high percentage of our employees, particularly in California, are immigrants.”

In a September Wall Street Journal piece Pudzer wrote, “At restaurant-industry meetings, my colleagues typically voice concerns about government mandates. I’d much prefer to hear them complain that labor costs are rising because companies are hiring and the growing market has made competition for workers stiff. A freer market would do much more to improve worker’s lives than the Labor Department’s new regulation.”


If he gets the Labor job he can do something about it.

This column appeared on Dec. 9, 2016 in Fox & Hounds Daily, which gave permission to republish, and can be found here.
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One focus of this blog has been to address California’s difficult business environment, as described in the study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.