Andrew Puzder: Are things good enough in California?

By: Andrew Puzder

Appeared in Orange County Register on October 23, 2014


California has the world’s eighth largest economy, it nonetheless has our nation’s highest poverty rate.

California has become a very blue state. Democrats control both the governor’s office and the Legislature. With that power comes the responsibility to confront the problems facing the people of our state. In particular, Democrats are responsible for confronting our state’s increasing poverty, declining opportunity and significant income inequality – in other words, the problems Neel Kashkari is talking about. When Neel spends time as an unemployed 40-year-old looking for a job in Fresno, his point is that, despite all the gushing about a California comeback, our state government is failing to improve economic opportunities for those most in need.

Click here for En Español

Click image for En Español

The International Business Times recently noted that while California has the world’s eighth largest economy, it nonetheless has our nation’s highest poverty rate. According to the U.S. Census Bureau’s Supplemental Poverty Measure (SPM), for the three year period from 2009-11 (the bureau recommends the use of three-year averages to compare estimates across states), California had both the nation’s highest number (8.8 million) and percentage (23.5 percent) of people living in poverty. In the most recent report for 2010-12, the numbers were worse. While California still had both the nation’s highest number and percent of people living in poverty, there were more people (9 million) at a higher percentage (23.8 percent).

Gov. Brown refers to California’s poverty epidemic as “the flip side of California’s incredible attractiveness.” But, these are more than mere statistics. Behind these numbers are real Californians consumed by anxiety. Will there be jobs for them or their children? Will those jobs pay enough? Will they spend the rest of their lives dependent on government benefits? They struggle searching for jobs that offer dignity and self-respect, wondering whether their children will ever be able to support themselves or start families.

In July, California had the fourth-worst unemployment rate in the nation, at 7.4 percent. While that’s bad, it’s actually an improvement. Unfortunately, the big improvements have come in the wealthiest areas, particularly those affected by Silicon Valley’s high tech boom. July’s unemployment rate was 5.9 percent in the San Jose area and 4.9 percent in the San Francisco area.

Outside this enclave, it gets ugly. In Fresno, July’s unemployment rate was 10.8 percent; in Stockton, it was 11.1 percent; and, in Bakersfield, 10.4 percent. Once a beacon of opportunity, Los Angeles came in at a dismal 8.7 percent, which includes the low unemployment of the more affluent Westside.

Wealthy Californians in Silicon Valley and along our beautiful coast are prospering. For those less fortunate, those living in the other California, our state’s anti-business policies are depriving them of the jobs that could meaningfully improve their lives.

In Chief Executive Magazine’s 2014 survey of CEOs’ views on the best and worst states for business, California came in 50th for the 10th year in a row. It’s no surprise that Toyota moved its U.S. headquarters from Torrance to Texas or that even California-based Tesla Motors is locating its planned giant battery factory in Nevada rather than in California.

Small businesses fare no better. The Legislature just sent another round of bills for Gov. Brown’s signature that will further escalate California’s status as our nation’s most anti-business state and affirm the well-deserved “F” Thumbtack.com’s 2014 Small Business Friendliness Survey gave California for both small-businesses friendliness and overall regulation. Already struggling in the nation’s worst regulatory environment, California businesses, and those who desperately need the jobs they create, have little hope of assistance by way of veto from Gov. Brown.

Government regulations come at a cost. Noneconomic benefits may justify those costs but there are still costs. Rational governance would view regulations as investments in social benefits and resist regulations that fail to produce enough of such benefits or unnecessarily increase costs. California’s current leadership has failed to do so, resulting in poverty and income inequality.

According to an analysis by 24/7 Wall St. of Census Bureau data, California has our nation’s seventh-largest gap between rich and poor, the seventh-highest proportion of households earning more than $200,000 per year and the highest number of households earning less than $10,000 per year.

How can this be in a state dominated by Democrats, who proclaim their concern about income equality? It’s because California’s government has become so focused on regulating businesses and redistributing wealth that it’s forgotten that you can only redistribute wealth if you have it.

Gov. Brown points to California’s increased minimum wage and efforts to sign more people up for health care as examples of actions he’s taken to reduce income inequality. While government mandates and largess may sound like solutions, the only truly effective way to reduce income inequality is to encourage job growth and provide educational access that qualifies people for better jobs.

According to the Public Policy Institute of California, California’s poverty rate in 2011 in families headed by an adult lacking a high school diploma was 36.7 percent. It dropped to 19.9 percent for families headed by a high school graduate and 5.4 percent for families headed by a college graduate. Education matters.

Unfortunately, Education Week’s annual Chance for Success Index for 2014, which captures the importance of education in a person’s lifetime from cradle to career, ranked California a dismal 42nd. California’s school system needs dramatic and systemic change if young Californians are going to have a chance to lift themselves out of poverty.

Providing charter schools with the same level of funding and facilities as traditional schools and eliminating the cap limiting California to 100 new charter schools per year would end the public school monopoly and significantly improve our schools. These policies are part of Neel’s plan to transform California’s schools. But, how can Gov. Brown support meaningful changes with the teachers’ unions so essential to his gubernatorial campaign?

For example, in Vergara v. California, a Los Angeles judge recently struck down the state’s teacher tenure, seniority and dismissal laws, holding that they unconstitutionally trap low-income and minority students in failing schools and make it nearly impossible to get rid of bad teachers. The court characterized the Brown administration’s defense of this law as an argument that “the state has a compelling interest in” separating “students from competent teachers,” and in retaining “incompetent ones.”

The teachers unions, which are appealing the decision, contend that this ruling eliminates job security for teachers. Admittedly, for incompetent teachers, it does.

Neel praised the Vergara decision during a press conference outside a teachers union convention in Los Angeles. Commenting on this case, Gov. Brown said: “You haven’t heard from me because I haven’t said anything.” A governor reluctant even to comment on a case that so obviously puts students’ interests over those of the teachers unions can’t possibly initiate the systemic education reform California needs to create opportunity and reduce income inequality.

Californians living in poverty, suffering from high unemployment and forced to rely on underperforming public schools desperately need a governor like Neel Kashkari who understands the importance of government but also the importance of free enterprise, economic growth and a good education. He will be that governor if Californians ask themselves two simple questions: Are California’s current levels of poverty, unemployment and income inequality acceptable; and, will anything change if we keep doing what we’ve been doing?

Andrew Puzder is CEO of CKE Restaurants, parent of Carl’s Jr. and Hardee’s.