Sunday, April 24, 2011

How to Keep Businesses from Leaving California

Today's Sacramento Bee features an excellent op-ed from Andrew Puzder, the CEO of CKE Restaurants. CKE owns, among other chains, the ubiquitous Carl's Jr, and is headquartered (for now) in the Santa Barbara County town of Carpinteria. Puzder draws an explicit comparison between the business climates of Texas and California, and offers several recommendations for ways that California could make itself more attractive to employers.

Part of the difference in business climates between the two states is cultural, of course. Puzder recalls that, after recently expanding the number of restaurants the company operates in Texas, he received a personal thank-you call from Gov. Rick Perry; no California governor had ever made a similar gesture in his 10 years as CEO. Which makes sense: California politicians only value businesses as a source of tax revenue, whereas Texans tend to view business success as a critical part of a prosperous society. Puzder makes this clear: "California is the most business-unfriendly state we operate in. While we kept our corporate headquarters here, our company's real job-creating engine has already moved." Further,
Our current plans for domestic development are principally centered in Texas, where it is easier to build and operate restaurants. Each restaurant we open creates about 25 permanent jobs, not to mention the numerous outside jobs supported by our business. It's no coincidence Texas' unemployment rate remains below the national average while California has one of the highest.
So what can California do to make itself easier to succeed in? Well, Puzder has a variety of suggestions. For one, the state can reduce the costs and regulations associated with construction, which Puzder estimates add $200,000 to the cost of building a single restaurant in California. For another, it can simplify its rules regarding manager pay, working hours, and breaks, all of which are difficult to understand and erode productivity. He also recommends limiting the ability of lawyers to file frivolous class action suits. And, of course, lower taxes are an essential piece of the puzzle.

This, of course, implies that California wants businesses to succeed here.


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