Herman Cain's Distrust Of Minimum Wage Goes Back To Restaurant Days
WASHINGTON -- Questioning America's minimum wage has somehow become a rite of passage in the Republican presidential primary.
Michele Bachmann has said she wouldn’t rule out lowering it. Ron Paul has predictably said it should be eliminated entirely. And Rick Perry, in his book "Fed Up!: Our Fight to Save America from Washington", has rued the role the commerce clause played in "creating national minimum-wage laws" and "establishing national labor laws."
But when it comes to battling our $7.25-an-hour wage floor, these contenders have neither the vision nor the resume of current frontrunner Herman Cain.
In his plan for economic "Opportunity Zones," Cain offers a slate of proposals aimed at revitalizing depressed pockets of the country, including zero capital gains and payroll taxes within qualifying areas. Although it doesn’t say so explicitly, the Cain campaign's primer on opportunity zones also suggests the possibility of rolling back minimum-wage laws in impoverished areas.
"Minimum wage laws prevent many unskilled and inexperienced workers (i.e. teens) from getting their first job and prices them out of the market," the plan says, listing a number of potential "solutions" to urban poverty.
Asked specifically about Cain's stance on the minimum wage, Rich Lowrie, Cain's senior economic adviser, referred HuffPost to a study produced by Laffer Associates, a firm specializing in supply-side investment research. The study, Lowrie wrote, showed that "when the minimum wage is set above the marginal productivity of a low skilled or inexperienced worker it hurts employment."
Minimum-wage protections are an issue Cain knows intimately. In his work as the CEO of Godfather's Pizza and later as president of the National Restaurant Association, Cain worked diligently in Washington and in the media to see that low-wage restaurant workers could legally be paid as little as possible, as In These Times has noted. In fact, Cain's time in the restaurant business was marked by a long and largely successful battle against minimum-wage increases, and even today, some 15 years later, many of the nation's waiters and waitresses have Cain and the restaurant lobby to thank for a federal minimum wage of $2.13 for tipped workers.
By 1995, when Cain was at the helm of Godfather's, the federal minimum wage had already lost much of its purchasing power since the 1960s and 70s, and it hadn't seen a bump in five years. When then-President Bill Clinton and Labor Secretary Robert Reich proposed raising it from $4.25 to $5.15, Cain emerged as one of the leading opponents of the pay boost.
In his testimony to a joint economic committee in Washington, Cain, like many of his Republican colleagues today, claimed that the modest raise would destroy thousands of jobs and eliminate entry-level positions that serve as the first rung on a ladder toward prosperity. Even though the economy was strong, he warned of dire job losses.
"A minimum wage increase is an ineffective way to raise someone out of poverty," Cain told lawmakers in February 1995. "By shooting wide and hoping to hit the right target, you're taking a gamble with harmful side effects."
Around the same time, Cain was advocating for the rollback of a child-labor law that prevented minors from working past 7 p.m. on Friday nights, as well as pushing for the implementation of a "starting wage" that would pay entry-level workers even less than the minimum wage, according to a 1996 profile in the Omaha World-Herald.
Cain was always careful to couch his dislike of the minimum wage in aspirational tones. Raised in poverty in the South, Cain was the first in his family to attend college, going on to oversee 450 Burger Kings around Philadelphia before jumping ship to resuscitate struggling Godfather's. Drawing on his own Algeresque past, Cain argued that a low minimum wage would allow for more entry-level positions, which in turn would give more workers a shot at someday becoming successful business owners. But then as now, many of the lowest-paying restaurants were operating with 100 percent turnover rates.
In his crusade against raising the minimum wage, Cain could be somewhat contradictory. He once said that most restaurants already paid higher than the minimum wage due to market forces -- but that raising it would destroy jobs. He also acknowledged that the minimum wage wasn’t enough to live on.
"The minimum wage has never been a living wage, so the government's notion of helping workers is not logical or realistic," Cain once told the Birmingham News. "The best way to create a living wage is to let the marketplace dictate it, not government. With unemployment rates so low, most businesses have to offer more to attract employees anyway."
Congress passed the minimum wage hike pushed by Clinton in 1996, the year Cain took over the National Restaurant Association. Alas, widespread economic calamity did not ensue. While the raise may have appeared to be a loss for businesses, it was largely a victory for Cain's restaurant industry, as the legislation included a significant carve-out for tipped workers.
For years, the federal minimum wage for tipped workers had been set as a percentage of the standard minimum wage, with tips theoretically making up the difference. But with the 1996 legislation, the two wages were decoupled, with the tipped rate set at a flat $2.13 for waiters, waitresses and others who work for gratuity.
Fifteen years later, the federal rate for tipped workers still has not budged, even as the base wage for all other industries has been raised several times. The low minimum may not mean much to a waiter being tipped at a high-end city bistro, but it could make a big difference to someone working at, say, a Waffle House in Kansas. For low-wage worker advocates, the 1996 carve-out is still viewed as a pivotal -- and deeply problematic -- moment in the 73-year history of the minimum wage.
"It seems like an obscure, technical issue," says Paul Sonn, legal co-director of the National Employment Law Project Action Fund, which advocates for a higher minimum wage. "But tipped workers across America would be getting more money if the rate had kept pace" with the standard minimum.
Although many states have raised their rates for tipped workers, some states still have not, leaving the federal rate to prevail. According to Sonn, some businesses outside the restaurant industry appear to deliberately put certain workers on tipped employment so that they can pay them less.
Cain did not rest once the 1996 law was enacted. He continued to bemoan the hike when talking to the press, pushing some disputed numbers from his association claiming that "more than 146,000 entry-level workers lost their jobs because of the actions of Congress."
His lobby was happy to get involved in minimum-wage issues on the local level as well. When the citizens of Tucson, Ariz., considered hiking the city's minimum wage to $7 in 1997, Cain was there to pour money into an effort defeat the referendum, according to the World-Herald profile.
Jeff Imig, then an activist who pushed unsuccessfully for the Tucson hike, recalls being steamrolled by the national and state restaurant groups. After HuffPost reached out to Imig, he dug up the campaign finance reports from the minimum-wage battle. He says that trade groups and businesses amassed nearly a quarter of a million dollars to fight the referendum, while his own group netted a measly $9,900 to push it.
"A lot of their money came from the National Restaurant Association, state organizations and restaurants," says Imig. "I remember mailings that went out that threatened Tucson would become an economic wasteland and every business in town would pack up and leave. It had no basis in history."
After the 1996 fight over the federal minimum wage, it was roughly a decade before the wage was raised again. Despite many hikes on the state level, Sonn says industry groups like the one Cain headed have generally prevailed in these fights, leading to minimum wages that haven’t kept pace with the cost of living. Rolling back the minimum wage in depressed areas, he says, would only further hurt local economies and drive more people into poverty.
"There is a real jobs crisis," he says. "But it's flowing from underinvestment in urban communities. This idea of the minimum wage being too high is baloney."
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First Posted: 10/27/11 02:24 PM ET Updated: 10/28/11 10:39 AM ET