Interviews

Connecticut raising minimum wage to $10.10 an hour by 2017

What impact will measure have on economy?

 

This is a rush transcript from "Your World," March 27, 2014. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, ready, set, hike, Connecticut becoming the very first state to increase its minimum wage to $10.10 an hour by 2017. And that's got to make the president very happy, but not so much this guy.

The guy behind Carl's Jr. and Hardee's says that it's pretty much going to bite for everyone else. Andy Puzder is the CEO of CKE Restaurants.

So, your concern is what, that it's going to cost jobs?

ANDREW PUZDER, PRESIDENT & CEO, CKE RESTAURANTS: Well, it clearly is going to cost jobs.

I had an article out with -- Art Laffer and I did an article in Investor's Business Daily in January that touched on this very subject. It will destroy jobs. It will particularly hurt minorities, who already have an unemployment rate in excess of 20 percent.

And the CBO came out and after our article and really confirmed what we said, said it would destroy 500,000 jobs by 2016 if we did it at the state level. Now, if we're going to do minimum wage, I think it's better to do it at the state level, because minimum wage in Connecticut or New York or California means a whole lot different -- a different thing than it means in Tennessee or Kentucky or Texas.

So if -- if -- if they're going to do it, do it on state-by-state level. And in North Dakota, we are already paying employees $12 to $15 an hour, because the demand for labor is so high, and the economy is doing so well. You can charge prices that justify that level of labor. So, if you're going to do it, do it on a state-by-state level. But it will hurt job creation in Connecticut.

CAVUTO: Now, the governor there, Governor Malloy, disagrees with that notion. He says that guys like you are forgetting the benefits of doing it, and that the people who get paid more will spend more, in fact, in that income range, they will spend virtually all of it.

So it actually helps the economy. What do you say?

PUZDER: Well, I -- I -- I think that the governor could use a course in economics.

If you -- when you raise the minimum wage, everybody who has to pay the minimum wage raises their prices to cover the costs of the wage increase. So, what they're buying costs more. And if -- so if you have got inflation in products and inflation in wages, you really don't end up in a whole lot different place, which is why every few years people are talking about increasing the minimum wage.

It misallocates -- this misallocates expenses. This is not something the government, particularly the federal government, is very good at when they're trying to set prices or trying to set the cost of labor. So, you can say that it does that. And I think politically it's probably a very good issue for people that support a minimum wage increase, because I think people feel very good when you say, look, we're going to lower -- we're going increase -- the next check, you're going to have more money.

You feel good about that. But you don't realize things are costing more, there's going to be fewer jobs, and those 500,000 people, if we did this federally, that won't have jobs, they're not going to have any wages. So it's -- it -- economically, it's just not a very good move.

CAVUTO: So, whether people will agree or disagree on that notion, that's certainly a pattern to what is going on here, the president of course now adding the pressure on your industry and other bosses to sort of say, all right, you have workers putting in more hours, you have got to pay them overtime, salaried or no.

Now, the argument is, well, if you're working overtime, you can't be slave labor, you should be getting paid for it. What do you -- where are you on this whole thing?

PUZDER: Again, I don't question the president's intentions on this.

I just think that again he is going to be hurting the very people he is trying to help, and that he -- that really the administration is ignoring the way that businesses compensate managers.

You don't -- you don't compensate a manager just with salaries. There's incentive compensation as well, like bonuses. You want them to have salary that is a base that they can live on during the live, and then a bonus based on how they run the business.

CAVUTO: Yes.

PUZDER: You want to incentivize these managers to run the business like they own it and to earn these -- to earn these bonuses, which is why you see so many people at the crew level or the line level that want to move into management positions.

Now, if you raise -- if you -- if you force businesses to pay for overtime, that money, again, has to come from somewhere, and it's going to come from the hours that people work, from the salaries they earn, or from their bonuses, which really takes away from opportunity.

CAVUTO: Yes.

PUZDER: Now, you can criticize businesses for doing that, for trying to control costs.

But, look, businesses, unlike the government, businesses have to make a profit. If they don't, they close, and those jobs are lost. So the point here isn't to -- to the extent we have an income inequality problem in this country, it's not from salaried managers with incentive bonuses. It's a much different problem. It's a problem that grows out of not having jobs.

So, the point here isn't to punish managers and make them work excessive hours and to do physical labor and not pay them overtime. The objective is to get people to do whatever jobs and work whatever hours it takes to run a business like you own it, earn that incentive compensation, earn your way up that ladder of success, and really make something of your life.

CAVUTO: OK.

PUZDER: This is a -- it's just a -- it's a bad policy.

CAVUTO: All right. I'm going to put you down on a maybe on what the president is proposing.

(LAUGHTER)

CAVUTO: Andy Puzder, it's always good seeing you. Thank you.

PUZDER: Thanks, Neil.

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